July 28, 2008

Will gold see a "mania" stage?

26 comments:

Anonymous said...

I've not seen it yet. Gold bounced from $800 to $1000 and has been mostly @$900 for awhile now.

Although I guess it really just depends on how bad things get. Word is that we've only seen $300B of $1 Trillion in losses, with at least one analyst calling for $2 Trillion in losses.

Basically, it depends on how things play out. I think the only way that gold goes significantly higher is if the dollar goes to $2 and/or we see money market funds "breaking the buck" - which essentially happens when the value of a money market fund falls below $1.

There's a ton of assets backing mutual funds that mostly appear safe at the moment, but if there because even the slightest serious doubt that a few major money market funds might have trouble keeping their value at $1, gold will be flying off the shelf.

The Housing Bubble Ate My Balls said...

I don't know if we are there just yet. Seems like there needs to be more blood in the water and panic for gold mania.

I am still not sure the oil bubble has completely popped. If you discard the ideas that oil slid because
1) W. said "Lift the Ban."
2) Congress said "We are going to get those speculators."
Which is pretty easy...

Then that just leaves oil sliding on decreased demand, why decreased demand?
1) $4.00+ Gal Gas and a shit economy killed many summer vacations and killed the U.S. summer driving season.
2) Increased fares and fees combined with route and schedule cut backs and idled planes for airlines.
3) Weak dollar and soft economy generally just being a wet blanket.
4) To some degree China has been steady idling and limiting cars and factories at an increasing percentage in hopes of the air cleaning up before the Olympics for the last month maybe two.

That is all fine and good, China what ever the effect is temporary. Same with the summer.

We are coming up on fall and winter soon. Demand will rise for heating oil and I think oil will creep (or shoot) back up.

You can curtail your driving and flights all you want, in the winter you can only turn the thermostat down so much.

As for gold, it will probably get above $1000.00 I don't know if he is right about $2000.00. If it does or if you believe it will, then other metals is where you should put your money.
If gold is at $2000.00 you can bet on two things.
1) The government will confiscate yours for the "public good".
2) Industry is going to use allot less of it and start figuring out ways to use cheaper metals in it's place.

The Housing Bubble Ate My Balls. said...

I know this is about gold mania but, I mentioned oil earlier and I think the price of oil has a direct impact on gold.

Seems the Washington Post feels the oil price slide isn't going to continue either.

I am not a huge post fan but, this 4 pager is very detailed and makes some good points.

OIL SHOCK
This Time, It's Different
Global Pressures Have Converged to Forge a New Oil Reality
By Steven Mufson
Washington Post Staff Writer
Sunday, July 27, 2008; Page A01
http://tinyurl.com/6s9ong

Gotta love the "This Time, It's Different" but, in this case they don't mean in the way bubbles are defended as different.

If 4 pages is too much for you, then there is this.
http://tinyurl.com/6q7lfv

It's just damn funny, and considering it was made 2 years ago, even better.

Ok, Back to gold again... Pre-Open trading is up $3.40. See what you did Keith, you started the mania!

Anonymous said...

As the 'supply siders' continue to roach the USD through excessive printing, Gold must respond accordingly.

ohhahh said...

for all we know, folks are buying and selling naked gold.

Anonymous said...

It might not get to mania, but everything swings too high and then swings too low.

Gold is simply a proxy for inflation and the dollar dropping in value.

If you think deflation is going to happen (in areas other than houses and stocks) then Gold is obviously a bubble.

If you think inflation is where we are going then Gold is still reasonably priced.

If you think hyperinflation in the US is an option, than Gold is really cheap.

Of course given US history if you suspect hyperinflation has any chance of occurring you aren't going to be holding gold in the US, since the government will just steal it and give you some losing value by the minute paper. You'd keep it in a free country, which doesn't have a history of the big-daddy government confiscating private assets...

Anonymous said...

Most Americans are still in the denial stage, with true financial panic coming in the months ahead. We will see gold and silver at multiples of their current price before this is over.

Anonymous said...

The only bubble is in US$. There is an unlimited supply because The Fed can create an unlimited amount of money with the push of a button.

Matt C said...

Third hour (show 3b) of Jim Puplava and Eric King discuss this. Jim's point is that we are probably at the start of phase 2 in a three phase bull market in gold. Good listen: FinancialSense.Com

In the words of JS: This is IT. IT is NOW. The answer is NOT. Have you taken the steps? The formula is at work!
JSMineSet.Com

Matt C said...

Also interesting development this AM: Gold is down but gold stocks (HUI) are up a lot. PM stocks leading the metal is a very bullish sign. See if it persists...

Anonymous said...

Industry is going to use a lot less of it and start figuring out ways to use cheaper metals in it's place.

"Industry" doesn't use much gold now. All told things like teeth, electronics, etc. are less than 15% of annual production. Jewelry (hardly an essential use) is fully 70%. The rest of the demand is for "investment"; yep, investment demand is 66% higher than industrial!

This demand picture has been true for decades; I think it's safe to say that there's enough gold in the hands of investors to meet industrial demand for a century even if mine production went to zero.

Chart

Contrast this state of affairs with, say, oil.

tabasco said...

It sure will see a mania stage. Exhibit A: 1979-1980. We're at about 1975 right now.

Anonymous said...

"Will gold see a "mania" stage?"

I suppose it could happen. As deflation wipes out real estate, debt & the stock market, gold is one way of insuring that something will be left when everything is said & done.

Kenduffelsniffenspotzen

Lady Di said...

Absolutely.

And guess who's going to cash in on it?

People like me, who have been buying since $300.00 an ounce.

Life is good.

Anonymous said...

To those who think the govt. will confiscate your gold:

Please explain how the govt. can confiscate ETFs?
GLD etc.

Anonymous said...

Of course gold will see a mania stage, but right now, it's undervalued and suffers from naked shorting by those not interested in seeing it rise.

SILVER suffers from having many times more PAPER short interest than long interest based on physically existing silver. Gold probably is in this situation to some extent as well.

When there is lots more available gold that demand for it, watch for a bubble mania. But we're nowhere near this situation today.

The continuing insanse creation of US dollars and credit will drive many commodities much, much higher...at least if you're talking about their price in ever-more-worthless US dollars.

Now that this idiotic bailout has been approved, you'll see a whole new level of US dollar devaluation.

Understand this and understand it well, or you'll be devoured.

Don't be a lumpen. THINK.

Anonymous said...

It sure will see a mania stage. Exhibit A: 1979-1980. We're at about 1975 right now.

____

We're in a far, far different situation now, though. The government has lost control but continues in its absurd, self-destructive plans to pour more gasoline on after having lit its own house on fire...more fake money and credit to bail out banks that failed because too much fake money and credit were created! Banks ARE failing. BIG banks, plus two "Government Sponsored Enterprises" (Fannie Mae and Freddie Mac) that have more than half of the country's mortgages. The US is essentially involvent, but the powers that be are working desperately to hide that fact, even though they CAN'T hide it from anyone who is paying attention.

Our country's finances are royally screwed. Any semi-literate person who bothers to look at reality can see this.

No matter what anyone says or does, gold WILL climb much, much higher than current levels. It will do so in fits and spurts, with plenty of pullbacks (buying opportunies) between fresh legs upward.

Wake up and smell the coffee!

THINK!!!!!!

Anonymous said...

Gold at $2,000?

That'll happen for sure, and it'll be mild stuff compared to the other things that'll happen.

Lost Cause said...

Gold is the refuge of last resort. The price of it should tell you how dire the situation is.

Anonymous said...

Gold is the refuge of last resort. The price of it should tell you how dire the situation is.

_____

I disagree. If the price of gold reflected how dire the situation really is, its price would be much, much higher.

Gold is a sweet buy at current levels.

LoneLibertarian said...

I agree with a lot of things on this site but I disagree with your WAMU prediction.

I do not believe WAMU will fail. I think as it hits around 2-3 bucks a share it is a buy time.

Just my 2 cents.

Miss Goldbug said...

I believe gold will be higher~over
1,000oz this time next year. And it will stick.

A little story....

I was at the bank a few weeks back, talking with an account executive, we starting discussing the economy. I mentioned gold as an investment in these times and he just replied there was nothing to invest money in right now...

Relatives mostly think buying gold is very scary - (must have been burnt in the last gold bull market) even gold stocks scare them.

I have been seeing local commercials and internet gold buying companies advertising they buy broken gold. This did not exist two years ago. Around town, a couple of jewelry stores advertising they buy gold.

The masses are asleep...for now. I really don't see a mania in gold for at least another a few years.

Anonymous said...

Yes! The mania will come. It will be in silver and gold.

Anonymous said...

"Please explain how the govt. can confiscate ETFs?
GLD etc."

Easy, make a call to the local swat and dhs team. They go into the etf funds NY office with a warrant. There is the gold! They grab the fund manager by the neck and haul out the gold into a large black truck. Then they drop bags with dollars into the vault and one bonus bag for bathroom. They then pick up the phone and call Ben. Ben, you can print now? Hangs up. They put the fund manager down and leave.

ETF investors find out. The ETF craters, instantly.

Have a nice day.

Anonymous said...

tabasco:

"It sure will see a mania stage. Exhibit A: 1979-1980. We're at about 1975 right now."

I believe if you actually looked up the information, you would agree that it is at 1980, not 1975. But why should anyone actually expect an HPer to have facts behind them?

http://tinyurl.com/e5s1

don_oc said...

Lots of microanalysis here, which is bound to confuse everyone.

Gold has no potential for growth whatsoever, however troubled monetary and financial system has plenty of potential to a relative decline.

Given massive deficit, derivative plays and fundamental problems in the US economy, in pure US dollar terms, gold will probably overshoot $10,000 before pulling back to $3000 - $4000 (which will be new $250 back from the '90). If you think, this is funny, it's not.

It's amazing how people tend to cling to positive outlook in the mid term.

Long term we will have sound economy and a strong dollar (or whatever). However, that day is nowhere near.

If you read this post in 2015 for example, all of this will be very easy to see in retrospect.

It doesn't take crystal ball or a genius to see that currencies not (at least in part) backed with gold will suffer greatly from nearly 40 years of maniacal credit expansion.

Given all of this is very political, gold will be very volatile, but long term will simply stay the course of impartial observer of greed.

Gold is not money, but it does look at it from the orbit, whereas the rest of 'financial instruments' are crawling in the dust biting each other. That game has nowhere to go because it can't beat laws of nature....