Saturday, Jun 20, 2009
The mother of all bubbles
Times: The five worst ways to buy gold
And now that also US treasuries have burst wait for the last bubble to pop. Fear ignorance and VIs. "The tripling of the gold price since 2004 has predictably led to something of a stampede for the metal among private investors. But in their hurry to gain a slice of the precious metal, they do not always take the most sensible route, says Adrian Ash, of BullionVault, the gold bullion exchange"
Posted by confused76 @ 08:23 AM (747 views) Add Comment
13 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Enuffznuff said...
The posted comment
"The way forward is property, not gold. Prices for the former will recover within a year or so (and continue to rise sharply), whatever the Red unwashed may say/hope."
hahahahahahahahaha
2. drewster said...
Gold is looking a bit frothy, but I suspect this bubble has a way to go yet. This article is just Adrian Ash's standard advertising for his company BullionVault.
Love the comment at the bottom:
The way forward is property, not gold. Prices for the former will recover within a year or so (and continue to rise sharply), whatever the Red unwashed may say/hope.
3. hpwatcher said...
Ah, Mr confused76 how the devil are you?
4. uncle tom said...
With all investments, one has to balance the upside possibilities against the downside risks.
On the upside, there is no pressing reason why the gold price should now take off. If the recession was going to send the price into orbit, that would have happened already. As drewster says, the market is getting frothy, with a lot of discussion about gold investment in the non-financial media. However, despite that, the price is not steaming relentlessly ahead, and is in fact much the same as a year ago.
This brings us to the downside. If the price is not rising when gold investment is in vogue, what happens when it becomes yesterday's news?
Then there is the issue of central bank reserves. You don't hear Moody's saying that they are down-rating a nation's sovereign credit rating because they havn't got enough gold, or hear that a nation's currency fluctuations are due to a lack of yellow metal stashed away.
Gordon Brown was villified for selling much of the Uk's reserves, not because we needed the metal, but because he sold at the bottom of the market. Around the world, central banks are sitting on immense reserves, while they struggle to borrow to cover their deficits. What better time to sell than now?
So my considered view is that anyone holding gold at the moment would be well advised to sell or hold, but not buy. The risk that the gold price might halve, or worse, is real; so I would strongly advise against holding the bulk of your savings in this form.
5. little professor said...
Let me say again:
6. Sharpe said...
- could you show the graph back to 1973 for gold also - taking it down to zero on the y axis.
pick changes a bit hey.
7. drewster said...
Little Prof,
It looks even worse when measured in Pounds Sterling. In fact you could say we're already on the way down.
8. quiet guy said...
Little Professor & Drewster,
Matt the Hat made an interesting observation yesterday about gold prices. See comment no. 8 at
http://www.housepricecrash.co.uk/newsblog/2009/06/blog-usgold-or-property-23990.php
Anything to say in response?
9. little professor said...
quiet guy - matt was suggesting that the rise in gold price could be due to the corresponding rise in M3 money supply, i.e. just an indicator of general inflation [which has been kept artificially low in the official government figures due to uber-cheap imports from China].
But that wouldn't explain why other commodities have not followed the same path as gold. If you look at the copper price for example, you can se that we have already had the bubble and the subsequent crash. Gold is just waiting to go pop.too.
(sorry for the funky x-axis, it goes from 1998 to 2009)
10. quiet guy said...
@Little Professsor
Perhaps you're right but I'm not entirely convinced by the comparion with an industrial metal.
(what else would a gold bug say?)
11. denzil said...
Observing people jumping into gold at the moment reminds me of watching the plebs jump into BTL right before the market went belly up. For at least the last twelve months the gold bugs have been banging on about the impending rush into gold and jump in now. When the market fell drastically last Nov the gold bugs then stated it was purely govt manipulation. There have certainly been some good times to buy into gold over the last twelve months but it doesn't look like that time is now. It looks very bubble like.
12. hpwatcher said...
There have certainly been some good times to buy into gold over the last twelve months but it doesn't look like that time is now. It looks very bubble like.
Surely then by definition, it can't possibly be a bubble then, if it looks bad?
Bubbles always look great until they pop, that simply isn't happening in gold; it's gone down, but can well go up in the next few months.
13. denzil said...
>>Surely then by definition, it can't possibly be a bubble then, if it looks bad?
It all depends on whether you go with the herd. The "herd" thought BTL was great before the bubble burst. The smart money had long gone.
>>"Bubbles always look great until they pop, that simply isn't happening in gold; it's gone down, but can well go up in the next few months."
Over the last 12 months the return on gold has been about 1-2%. Less than some savings account. Gold is holding its value because at present people are worried because most other investment returns are shite.. When people realise the return on gold is so hopeless they will then flee and the gold bubble will burst.