Gold / Silver dropping - your thoughts?

[Zippyjuan]

Would you say that gold was NOT in a bubble? (price quadrupled in just a few years and today is one third down in price from its peak (as high as $1900- down to $1250 today)- pretty typical bubble activity). People started jumping in more simply because the price was going up as it went higher. I think in behavior they are pretty similar. I would not say they were identical- no two bubbles are alike- but it is definately another bubble.

 

[Acala]

Would you say that gold was NOT in a bubble? (price quadrupled in just a few years and today is one third down in price from its peak (as high as $1900- down to $1250 today)- pretty typical bubble activity). People started jumping in more simply because the price was going up as it went higher. I think in behavior they are pretty similar. I would not say they were identical but it is definately another bubble.

I think the word "bubble" gets thrown around a lot without precision. In my mind there are two types of bubbles. The first is caused by the government and banks pouring fresh credit money into the market causing localized inflationary price increases. The housing bubble is a perfect example. The second type is caused by speculators trying to make a profit by following swift price increases not based on sustainable fundamentals. The housing bubble had some of this as well, particularly at the end, but the type is better represented by the beanie baby bubble or the classic Tulip mania. Bubbles have the characteristic of rapid price increases with no rational basis beyond the price increase itself followed by rapid drop off.

Clearly the price increase in gold was not a "type one" bubble. There WAS some of the "type two" bubble in it, but that has mostly fallen back out. Certainly the price movements in the last few months look nothing like the price movements when housing collapsed. I think the current price of gold represents a combination of inflation that has already occurred and inflation anticipated for a variety of sound reasons.

 

[Zippyjuan]

Thanks for the comparisons. Both include specualtors- it is the speculation which drives most bubbles once prices get started moving. The causes of the initial movement may vary but it is the speculators who fuel it- people buying with simply the idea of making money off buying it and selling it- not the idea of wanting to actually own it. True that gold has not had as dramatic of a decline as housing but it is still off significantly from its high (34%). And as I added while you were thoughtfully composing your post, no two bubbles are alike anyways.

We are arguing over the cause and shape of the bubble- not asking if it is a bubble or not in the first place which was my point.

In terms of percent changes in prices, the movements on the upside and downside of the gold bubble are actually greater than the rise and fall of the housing market.

 

[PRB]

I think the word "bubble" gets thrown around a lot without precision. In my mind there are two types of bubbles. The first is caused by the government and banks pouring fresh credit money into the market causing localized inflationary price increases. The housing bubble is a perfect example. The second type is caused by speculators trying to make a profit by following swift price increases not based on sustainable fundamentals. The housing bubble had some of this as well, particularly at the end, but the type is better represented by the beanie baby bubble or the classic Tulip mania. Bubbles have the characteristic of rapid price increases with no rational basis beyond the price increase itself followed by rapid drop off.

Clearly the price increase in gold was not a "type one" bubble. There WAS some of the "type two" bubble in it, but that has mostly fallen back out. Certainly the price movements in the last few months look nothing like the price movements when housing collapsed. I think the current price of gold represents a combination of inflation that has already occurred and inflation anticipated for a variety of sound reasons.

a bubble is anything that is overpriced, overvalued, and then suddenly loses its overspeculated value. causes and how fast it rises and falls are different questions.

 

[PRB]

Thanks for the comparisons. Both include specualtors- it is the speculation which drives most bubbles once prices get started moving. The causes of the initial movement may vary but it is the speculators who fuel it- people buying with simply the idea of making money off buying it and selling it- not the idea of wanting to actually own it. True that gold has not had as dramatic of a decline as housing but it is still off significantly from its high (34%). And as I added while you were thoughtfully composing your post, no two bubbles are alike anyways.

when government inflates a bubble, it's not speculation, it's causing it, fulfilling its own prophecy.

 

[Lucille]

Will Gold Still Go to $5000?
http://armstrongeconomics.com/2014/09/02/will-gold-still-go-to-5000/

Yes – to answer a lot of questions. We still see the future rally in gold reaching the $5,000 level.

http://armstrongeconomics.com/2014/09/10/international-precious-metals-report/

 

[oyarde]

I have no idea , but think we may be at the bottom on commodities . I continue on with my regular investments .

 

[DFF]

Silver's on the bottom of it's range of $21-$18 ounce for the past year. Excellent time to buy at a discount.

As far as what gold could eventually go to, $5000 is possible, but it wouldn't surprise me if the price went even higher.

Gold futures are leveraged 100-1, meaning for every 99 paper ounces, there's only 1 ounce of the real thing.

There's not enough gold to satisfy demand if there's a stampede to take physical delivery -- which there will be.

 

[PRB]

Silver's on the bottom of it's range of $21-$18 ounce for the past year. Excellent time to buy at a discount.

As far as what gold could eventually go to, $5000 is possible, but it wouldn't surprise me if the price went even higher.

Gold futures are leveraged 100-1, meaning for every 99 paper ounces, there's only 1 ounce of the real thing.

There's not enough gold to satisfy demand if there's a stampede to take physical delivery -- which there will be.

yikes, another dip.

well, without a few thousand dollars, just because market price says $18.50 doesn't mean you can buy it $3 less than what it was when it was $21.50 yet. So hopefully this dip lasts.

 

[helmuth_hubener]

Helmuth, how do you like this one? This guy really gets specific!

I don't feel any need to spend an entire 30 minutes with Harvey Organ and his thoughts, but he says that the price of gold and silver will go way up by the end of the year. Come January, chances are good he will have to:

1. Admit to his customers he was wrong.
2. Explain to them why the Martian spaceships threw off the market.
3. Claim that actually, what happened was yet another verification of what he's been predicting. One more feather in the cap of his stellar track record.

Actually, the chances of 1. happening are very low. Fortune-tellers are delusional, or they think they must pretend to be. He will not admit he was wrong. Anathema! He will be on USA Watchdog again in 2015 explaining how everything he ever said has been totally correct and sharing more secrets on what's inevitable to happen next. Just look at Shanghai! Inevitable, I tell you!

If this guy really knew what was going to happen, if he really was smarter than the market, he wouldn't be wasting his time web-cam chatting with USA Watchdog.

Look, you are not going to listen to me. I am not going to convince you. You like listening to these guys. Great. They tickle your ears by telling you exactly what you want to hear. Wonderful. But here's my advice to you, and to all of you:

If you feel bullish on something -- let's say, oh, gold for example -- take the time to listen to the opposite outlook. Find someone who is bearish on the thing you're bullish on, and furthermore make it someone you can respect so that you can really consider their opinion and the reasons for it. You owe this to yourself. If you only hear one side of the fortune-telling story 24 hours a day, you are liable to feel an extreme urgency and have a distorted perspective, both of which are liable to lose you a lot of money.

This doesn't mean the bear is right. Doesn't mean the bulls are right. It just means that you should get a full range of perspectives to alert you to possible futures which you may not have considered. If you only hear one perspective asserting over and over that one particular future is inevitable, you may come eventually to take that assertion seriously!

And you shouldn't. You really shouldn't.

 

[Original_Intent]

Buy fear and sell greed.

If you are afraid, buy!
If you are feeling greedy, sell!

This honestly has worked well for me. I have lost a lot doing the opposite, and made a lot following it.

Oh yeah, BTFD FTW.

 

[Zippyjuan]

I don't feel any need to spend an entire 30 minutes with Harvey Organ and his thoughts, but he says that the price of gold and silver will go way up by the end of the year. Come January, chances are good he will have to:

1. Admit to his customers he was wrong.
2. Explain to them why the Martian spaceships threw off the market.
3. Claim that actually, what happened was yet another verification of what he's been predicting. One more feather in the cap of his stellar track record.

Nah- he will just say he was wrong on the timing. I still stand by my early guess that by the end of they year we will be much closer to $1000 an ounce than $2000- let alone $5000. I think even Peter Schiff doesn't say $5000 an ounce anymore.

Actually looks like he may still be saying $5000 as well. This was in April:
http://www.marketwatch.com/story/peter-schiff-reckless-fed-may-push-gold-to-5000-2014-04-25

Q: Before this year began, what were your expectations for gold prices and how does that compare with the metal’s performance year to date?

Schiff: I thought that the selloff in 2013 was completely out of touch with reality, so I expected the price to rise this year. In this, I was virtually alone in the financial community. Just about every major investment house had predicted even more losses for gold in 2014.

So far this year, gold is the best-performing asset class, but I think the pullback we have seen over the last few weeks is just another indication of how much negative sentiment remains. Ultimately however, the fundamentals will prevail. The Fed will keep printing [dollars] and gold will keep rising.

Q: In a recent interview with CNBC, you said the Federal Reserve’s quantitative-easing program will push gold to $5,000 an ounce. Could you explain that a bit further? What’s your time frame for that forecast? [Watch: Gold bear takes on bug: ‘You’re miles off base’]

I believe the consensus expectation that the U.S. recovery is real and that the Fed will end its [quantitative-easing] program and normalize interest rates is wrong.Over the past few years the Fed had become [a] serial mover of goal posts, delaying the decision to end stimulus more than anyone would have predicted. When the Fed has to admit that its forecast of a sustained recovery is wrong, it will come to the aid of a faltering economy with even more QE. When that happens, gold will rally.

Last year’s selloff was based [on] the expectation that a strong recovery will lead to tighter monetary policy, which would then undercut the reason for buying and holding gold. That is a false assumption.

He has been saying his timing is off since 2011- it is still coming. Promise. Buy gold from me and be protected.

First off, Schiff’s gold forecast isn’t brand new. The author of “The Real Crash — America’s Coming Bankruptcy” has talked about the possibility of gold hitting $5,000 or higher since at least 2011, when prices for the metal topped $1,900 in intraday trading. Schiff reiterated his call on the potential for $5,000 gold and beyond during a heated debate with Paul Krake of View from the Peak on CNBC’s “Futures Now” episode posted on April 15.

Gold is still falling today- as of right now below $1240 an ounce.

 

[NorthCarolinaLiberty]

Gold averaged around $275 a little over 10 tens years ago. It now hovers around 4-5 times that amount. I don't know anything about anything, but I really don't think it will ever go back to that $275 mark.

 

[TheCount]

If you feel bullish on something -- let's say, oh, gold for example -- take the time to listen to the opposite outlook. Find someone who is bearish on the thing you're bullish on, and furthermore make it someone you can respect so that you can really consider their opinion and the reasons for it. You owe this to yourself. If you only hear one side of the fortune-telling story 24 hours a day, you are liable to feel an extreme urgency and have a distorted perspective, both of which are liable to lose you a lot of money.

Well said. It seems to me that for a lot of liberty-minded people, market expectations are now completely decoupled from market reality. Instead, ideology is the main factor driving expectations. I believe X, therefore the market must do Y. Works great if X is the only factor in the economy, but real markets are vastly more complicated than that.

It's almost the exact opposite of the dot-com bubble, actually, where hope and belief replaced rational investing. Just replace hope with doom.

 

[Brian4Liberty]

Gold averaged around $275 a little over 10 tens years ago. It now hovers around 4-5 times that amount. I don't know anything about anything, but I really don't think it will ever go back to that $275 mark.

Everything is going down! Gold will be $275. A gallon of gas and a gallon of milk will be $1. A Whopper or Big Mac burger will be $.99. The size of a box of cereal will grow. Budweiser will be $5.99 a 12 pack. All is well.

Am I doing it right Zippy?

 

[Brian4Liberty]

BTW, silver is close to breaking through to the downside.

 

[NoOneButPaul]

Everything is dropping on dollar strength including oil. I do not think it will not last and Gold and Silver will go up from here.

 

[NoOneButPaul]

BTW, silver is close to breaking through to the downside.

We've been going back and forth at these levels since the April 2013 smashdown.

Think about this... we've touched these levels in November 2013, December 2013, January 2013, May 2014, June 2014, and now September 2014.

Back and forth it goes the banks make the market and keep burning the specs back and forth. This has been going on forever and it's pure market manipulation. I'm loving these levels and i'm still stacking. Who cares what they smash the price to we're at sub 19 and that's damn cheap.

 

[Brian4Liberty]

Silver broke through the 2014 low, closing at 18.70 today.

18.61 was the beat-down low of 2013.

 

[PRB]

Silver broke through the 2014 low, closing at 18.70 today.

18.61 was the beat-down low of 2013.

it's all iPhone's fault.