Gold IS NOT in a Bubble & Here's Why I Believe So ...

BigRick

A few months ago (fairly soon right before silver CRASHED), I posted what I believed was an incdication that silver was in an overheated bubble situation due to the fact that you couldn't buy ANY silver CALL options at ANY strike for ANY expiration date for under $1,000 or so (I was right btw).

LINK To Other Thread

For those thinking that gold is in a bubble or ridiculously overheated consider the fact that you can STILL get NUMEROUS strikes/expirations of gold CALL options (I'm talking about the big COMEX contract not the GLD) for merely the minimum tick of $0.10 (or $10 per contract).

I, for one, say that gold IS NOT in a bubble and has LOTS more room to run (not that I'm NOT selling calls I feel are overvalued anyway - OCT 2900 anyone???).

Another Interesting Thread

stevek

With all due respect, and you may turn out to be correct, I can't believe forecasting a bubble could be this easy based on that consideration which if you know about it, then "everyone" else worth anything trading gold knows about it as well...and that info would already be digested into the current price of gold.

I hope I'm not being too sacastic when I say the fact that the watermelons in my backyard garden were growing extra large this year, indicated that the gold price would go up extra large as well, when obviously it was just a random correlation.

That being said, if you've discovered the "holy grail" of gold and silver bubble forecasting then more power to you, and thanks for sharing it with us.

jmski52

With all due respect, and you may turn out to be correct, I can't believe forecasting a bubble could be this easy based on that consideration which if you know about it, then "everyone" else worth anything trading gold knows about it as well...and that info would already be digested into the current price of gold.

I would have to posit that there is a similarity here to the Heisenberg Uncertainty Principal.

the fact that the watermelons in my backyard garden were growing extra large this year, indicated that the gold price would go up extra large as well, when obviously it was just a random correlation

I was disappointed last weekend when I looked at my watermelon plant, in that it had some blooms but I couldn't see any melons. After I got back from a trip this week, I found a couple of them that were already bigger than my biggest ones from last year, and it rained last night too. From this, I can almost conclude that gold is going to explode. Will advise in a few more days....

BigRick

Steve,

Are you saying that gold IS in a bubble? I'm saying it is not.

Also, I was trying to point out (mostly in my original thread) that ONE SURE indication of the PRESENCE of a bubble is an explosion in option price volatility (and the commensurate SHARP increase in call option prices).

I'm NOT saying (& sorry if I stated it as implying as much) that the ABSENCE of same is a contra-indicator, merely that its absence is a lack of THIS PARTICULAR confirming factor (& how I might have more appropriately phrased it).

Put simply, the LACK of the option price explosion leads me to believe that EITHER we're not yet in a bubble OR that (if we are - in the early stages e.g.) it is not going to burst any time in the VERY near future (as I predicted silver was about to).


fyi: Here is what I said back on 4/28:

"Thursday April 28, 2011 8:32 AM

Option Volatility Has Gone THROUGH THE ROOF & you can't buy a call option AT ANY STRIKE FOR ANY EXPIRATION for less than about $1,000 (for a Dec '11 120!).

With the excetion of the above (i.e. Dec 120 Call) you have to shell out AT LEAST appox $2,000 for any other strike/expiration for just ONE call option.

There is currently NO OTHER commodity with the option vol so high &/or where you can't buy SOME call at SOME exp for a tiny fraction of $1,000-$2,000,

This is much like the frenzy in Cotton a few months ago before the vol crashed (along w/the option prices).

This is a GREAT TIME to sell calls if you have the stones!

Current TOP STRIKE Call Quotes (Bid/Ask) - multiply numbers by 5000 for dollar amount:

Jun 60 - .405/.461 (Exp 5/25)
Jul70 - .380/.400 (Exp 6/27)
Sep 80 - .377/.550 (Exp 8/25)
Dec 100 - .300/.320 (Exp 11/22)
Dec 120 - .079/.190 (Exp 11/22)"

pmcollectour

<< <i>Steve,

Are you saying that gold IS in a bubble? " >>

roadrunner

BigRick, that silver call in last April was good information. Too bad more didn't heed it.

Please continue to offer up your research when you get gems like that.

roadrunner

gsa1fan

stevek

<< <i>Steve,

Are you saying that gold IS in a bubble? I'm saying it is not.

Also, I was trying to point out (mostly in my original thread) that ONE SURE indication of the PRESENCE of a bubble is an explosion in option price volatility (and the commensurate SHARP increase in call option prices).

I'm NOT saying (& sorry if I stated it as implying as much) that the ABSENCE of same is a contra-indicator, merely that its absence is a lack of THIS PARTICULAR confirming factor (& how I might have more appropriately phrased it).

Put simply, the LACK of the option price explosion leads me to believe that EITHER we're not yet in a bubble OR that (if we are - in the early stages e.g.) it is not going to burst any time in the VERY near future (as I predicted silver was about to).


fyi: Here is what I said back on 4/28:

"Thursday April 28, 2011 8:32 AM

Option Volatility Has Gone THROUGH THE ROOF & you can't buy a call option AT ANY STRIKE FOR ANY EXPIRATION for less than about $1,000 (for a Dec '11 120!).

With the excetion of the above (i.e. Dec 120 Call) you have to shell out AT LEAST appox $2,000 for any other strike/expiration for just ONE call option.

There is currently NO OTHER commodity with the option vol so high &/or where you can't buy SOME call at SOME exp for a tiny fraction of $1,000-$2,000,

This is much like the frenzy in Cotton a few months ago before the vol crashed (along w/the option prices).

This is a GREAT TIME to sell calls if you have the stones!

Current TOP STRIKE Call Quotes (Bid/Ask) - multiply numbers by 5000 for dollar amount:

Jun 60 - .405/.461 (Exp 5/25)
Jul70 - .380/.400 (Exp 6/27)
Sep 80 - .377/.550 (Exp 8/25)
Dec 100 - .300/.320 (Exp 11/22)
Dec 120 - .079/.190 (Exp 11/22)" >>



Believe it or not I was trying to help ya, and others here, to realize and understand that we have no more real clue about predicting short term fluctuations in commodities or stocks, or when/if a bubble will burst or keep going, than does the man in the moon. I've been studying "bubbles" and finance and commodities and stock market trends since I was around ten years old, it just always fascinated me, and one incontrovertible conclusion i've come up with, is that it is impossible to predict herd behavior...not hard or difficult...impossible.

I do think it is possible with the right analysis to somewhat accurately predict long term trends...that isn't impossible, but it is still very difficult to do. So while it is fun and interesting to try to guess the market right, my advice is don't get caught up in some numbers or system or "correlation" which you may believe you magically discovered either thru luck or hard work, because it all doesn't matter, and in fact could be very dangerous to your bank account when guessing wrong, and suddenly that correlation isn't correlating...and the beneficiaries of your money windup being the brokerage houses which get their fees and commissions from the short term trading, day trading and such.

In any event, I'm not rooting against you or anyone else here, and if you pursue your "system" or whatever ya wanna call it, I hope it works out well.

MoneyLA

I wouldnt call the rise for gold a bubble either. But I think it is only based on fear and what worries me is that silver is not keeping pace.

I would be more comfortable with the price rise for gold if silver were also moving up in record high territory, but silver is still 15% below its high and 15% is significiant.

Just a little turn of the screws on gold margins and we might be surprised to see gold prices drop a bit too much.