Is Gold a bubble?

On December 16, 2010, In Bubble, By Chuck Ponzi

15 Responses to “Is Gold a bubble?”

dafox says:

December 18, 2010 at 11:35 am

So Chuck, how far along do you think we are? Do you agree with his ~1/2 way estimation?
- Chuck Ponzi says:
  
  December 20, 2010 at 2:04 pm
  
  Yeah, I think we’re more than halfway there.
  
  Unfortunately for the plebians, the big gains are already in. If you’re getting in now, take your gains as soon as you have them and stay liquid; everyone else will too and it always falls faster than it rises.
  
  Chuck
Sean Newton says:

December 21, 2010 at 5:17 pm

…patiently sits out, waiting for the new bottom…
aksteve says:

January 6, 2011 at 2:16 pm

I cannot find any hard stats on the percentage of US gold bullion owners/investors. The rumors I find out there are 1-5%. This number includes hedge funds, etf’s and physical holders. The biggest holders of physical gold is government/central banks. How could it be a bubble when a very small percentage of the population is buying it?

Now lets switch gears our of the US. China, India, Russia and Brazil (the BRIC Bloc) have always considered gold and silver as money and that still stands today. AND, there are literally billion’s of them on the sidelines waiting to get in as their quality of life improves.

So if there is any kind of a bubble, it is just starting IMO. As the Fed see’s money printing as a solution to the so called US recovery and are at war with deflation, the gold rise can only continue even if slow at times.
- Chuck Ponzi says:
  
  January 7, 2011 at 11:33 am
  
  Steve,
  
  I see the real problem as anyone seeing gold as “money”. If it is, it’s a very poor money. Very few people would use it as a medium of exchange.
  
  If the argument is that gold is a store of value… well history doesn’t bode well for that either.
  
  Anyone buying gold is speculating. Nothing wrong with that, but it’s the same as buying a house expecting it to go up in value… except that it has a worse track record than housing or pretty much any other commodity. It’s just not a necessity; it’s a cultural invention.
  
  Gold, from an outsiders perspective, is of little value compared to other commodities. But, I dont’ let my personal opinions get in the way of my investing. If there is money to be made, I’m there. Investing in bubbles is both highly lucrative, and highly risky. Just don’t drink the kool-aid.
  
  Chuck
  - aksteve says:
    
    January 8, 2011 at 9:50 am
    
    To say gold has no value, and then cutting down a tree, turning it into paper, putting ink on it and calling it valuable is another argument in itself. The difference is that gold has by far beat the value of any fiat currency in history. Gold was legal tender only 40 years ago. Its value is cyclical, the US and other countries go on a gold standard and off again, repeating the cycle. It just seems foreign to those of us that did not own money during a gold standard (I was 1 years old when we went off last).
    
    The “bubble” in price is not because of a frenzy of buying. No frenzy, no bubble. Nobody is selling and the central banks are buying outside of the US. Currency devaluation is causing it as well. They only speculation I see is that those of us that are buying believe the US dollar will collapse. Kool aid drinking, or believing history will repeat itself?
    
    I am not buying to get rich, but more to preserve wealth.
    
    As for the commodities argument, commodities rise when the currency is devalued. The problem with other commodities are you cant carry a bushel of wheat or a barrel of oil in your pocket.
    
    Also anyone that thinks that they are going to get rich buying numismatic gold coins are mistaken. That is very risky.
    
    Even the most conservative financial advisors say 5-10% ownership of PM’s is prudent.
    
    And lastly, if gold is not valuable, then why do US and foreign central banks stockpile it? The New York Fed and Fort Knox hold 6% of the world stock of gold (but that is arguable since no one has audited Fort Knox in decades).
    - Chuck Ponzi says:
      
      January 10, 2011 at 8:54 am
      
      Steve,
      
      Don’t put words in my mouth. “Gold is a poor store of value” is light years away from “gold doesn’t have any value”. Get it right or I delete posts; I didn’t allow trolls during the housing bubble, and I won’t allow trolls during the gold bubble.
      
      There is counterpoint to the gold argument that gold bugs don’t want to hear, the same way there was counterpoint to housing that housing heads didn’t want to hear.
      
      I don’t “invest” or speculate in gold. It’s too risky for my tastes, but I don’t begrudge you your right to do so.
      
      Chuck
      - aksteve says:
        
        January 10, 2011 at 7:06 pm
        
        Wow Chuck, this started of as a “Is Gold a Bubble?” headline. I put out my 2 cents as to whether I thought it was or not and why, nothing more. I do not understand a reason as to delete my comments while adding to a point counter-point that was completely related to the title of the post. I did not insult anyone and then you respond suggesting that I am a Kool-aid drinker.
        
        I took that lightly and now you suggest I am a troll and putting words in your mouth by slight difference in the context of a phrase.
        
        I thought your site was good source of information for some compelling banter, but maybe not. I can think of better things to do than get in a heated argument with someone I dont even personally know.
        
        If you delete this reply, I will get your message.
      - aksteve says:
        
        January 10, 2011 at 10:56 pm
        
        Oh, sorry, you didn’t say gold has NO value. You said it had “little value” compared to other commodities.
        
        And “Store of Value” vs. Value? I guess there was no point taken with my sunken ship analogy.
        
        So what asset would you consider good store of value?
      - Chuck Ponzi says:
        
        January 11, 2011 at 4:44 pm
        
        Steve,
        
        Many use the analogy of an alien visiting our planet would be bewildered by our obsession for a yellow metal.
        
        It is shiny and malleable, but does not feed us, warm our homes, or clothe us. It is ornamentation and its value is based on its scarcity.
        
        I don’t think that’s a very good reason to make it our money. Others disagree.
        
        Chuck
  - aksteve says:
    
    January 8, 2011 at 10:33 am
    
    And history does bode well for gold. OK, History does not bode well for paper money Chuck.
    
    Go fish an old sunken ship. Do you want the gold or the paper money inside?
joe can says:

January 7, 2011 at 12:09 pm

DZZ for those interested in shorting gold without the worries of margins
- aksteve says:
  
  January 8, 2011 at 10:31 am
  
  If you are looking for a good bubble to short, try the bond market. Its demise is already staring us in the face. Guess what happens to paper dollars when that happens?
  - Chuck Ponzi says:
    
    January 14, 2011 at 9:59 am
    
    Steve,
    
    Personally, I don’t think we’ve hit the shorting point for gold just yet, we’re in the earlier phases. When we hit the blowoff phase (when everyone is in, and prices are going up every day of every month), then I may short it.
    
    chuck
OC Appraiser says:

February 3, 2011 at 5:16 pm

I think we have definitely seen the gold craze start, I’m not sure about half way or if we’re further in then that. But there are so many “cash 4 gold” companies popping up in every neighborhood and strip mall it’s ridiculous. I haven’t personally invested in gold since early 2000′s, and I wish I would have put more in then!! But now I’m very cautious about it and not sure about how it will act in the next 2 years.