Sprott addresses claims of a Gold Bubble
derryb
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Gold doesn’t really work as a commodity because it doesn’t get consumed like one.
"Gold is the base currency with which to compare the value of all government-sponsored money. Investors can incorporate it into their portfolios as ‘central bank insurance’, or ignore it entirely. Either way, we believe gold will continue to track the total aggregate of the central bank balance sheets of the US, UK, Eurozone and Japan."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
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JC
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Gold Demand and Supply – Full year 2012
Knowledge is the enemy of fear
I knew it would happen.
Knowledge is the enemy of fear
cohodk, do you know who is buying US Treasuries these days? Just askin'. Having the Fed buying Treasury Debt is only a shell game. Do you really think it can go on that way?
Bond prices aren't parabolic? Bond prices aren't the issue here. The debt being sold IS parabolic. When the bonds are being sold to offset TBTF bank losses, of course you won't see the price react, only the debt (which keeps piling up). The phenomenon that we have right now is the socialization of private banking debt, not much more than that.
They can't afford any rise in interest rates now without breaking every promise made to every social security, medicare and welfare recipient. We are approaching terminal velocity. When rates bump, the system collapses.
The debt bubble will pop because the math is there and so is the physical real world. History is full of examples. This is no different.
The result is an endless ZIRP. Zero Interest Rate Policy. Jim Willie is pretty good at explaining what happens because of ZIRP. The upshot of ZIRP is that capital dies. If there is no time value to money, there is no reason to save it. There is no reason to loan it. There is no advantage in investing if there is no time value to money. There is no driver or incentive in being smarter or working harder if money is free. Think about it.
Fortunately, or perhaps unfortunately human nature always reasserts itself when the food runs out.
I knew it would happen.
Corporations, individuals, govts, endowments, mutual/hedge funds are just a few of many that purchase US debt everyday. Yes, the FED is buying, and I get your point, but they are not the only institution/entity.
They can't afford any rise in interest rates now without breaking every promise made to every social security, medicare and welfare recipient.
So what? Advances in medicine broke these promises decades ago.
There is no driver or incentive in being smarter or working harder if money is free
I disagree. I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never.
Knowledge is the enemy of fear
Not a lot of smart buyers of a USD at 1.7% for 10 years. There's always a few scared enough to buy some but man, those yields in USD are a joke.
<< <i> disagree. I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never. >>
Cheap money only increases the incentive to take greater risk. Most people (and banks) learned that in 2008. Obviously our financial leadership learned nothing.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i> disagree. I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never. >>
Cheap money only increases the incentive to take greater risk. Most people (and banks) learned that in 2008. Obviously our financial leadership learned nothing. >>
Money was not cheap in 2008. The 10yr yield was 4%. Today 1.7%
And those that dont take risk sit on their a$$ lamenting about the bad economy. And those that do take risk become the 1%. Where do you wanna be?
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i> disagree. I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never. >>
Cheap money only increases the incentive to take greater risk. Most people (and banks) learned that in 2008. Obviously our financial leadership learned nothing. >>
Money was not cheap in 2008. The 10yr yield was 4%. Today 1.7%
And those that dont take risk sit on their a$$ lamenting about the bad economy. And those that do take risk become the 1%. Where do you wanna be? >>
Pre 2008 real estate was driven by cheap money. Calculated risk is one thing, giving away money at the casino entrance is quite another.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Extrapolate the charts and predict what will happen next
Liberty: Parent of Science & Industry
So what? Advances in medicine broke these promises decades ago.
In my world, both parties to a contract must fulfill their promises, not just one side. That's what. Why did they continue taking my money? And yours?
I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never.
I hope you do well, and the new guy too. There is a reason that I don't hire any employees.
I knew it would happen.
Can you overlay interest rates and money supply onto those charts for me, please? Then I can offer some opinions.
I knew it would happen.
<< <i>Extrapolate the charts and predict what will happen next
Can you overlay interest rates and money supply onto those charts for me, please? Then I can offer some opinions.
throw in a line for money velocity and one for FED balance sheet while you're at it.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Gold, Oil, and the Dollar Index
Still looking for the ones you requested, also searching for correlations of bubbles with phases of the moon, women's skirt lengths, and whether or not "westerns" are popular movie genres
Liberty: Parent of Science & Industry
<< <i>They can't afford any rise in interest rates now without breaking every promise made to every social security, medicare and welfare recipient.
So what? Advances in medicine broke these promises decades ago.
In my world, both parties to a contract must fulfill their promises, not just one side. That's what. Why did they continue taking my money? And yours?
I wrote a few weeks ago that I never had so much debt. And I just bought another truck and hired another worker this week. I am financing 100%. Why, cuz money is cheap. I think there has never been a greater incentive to work hard. Never.
I hope you do well, and the new guy too. There is a reason that I don't hire any employees. >>
Actually he is a contractor.
Yes, they took your money, and you will receive benefits. Maybe not quite the return on investment you were expecting, but the promise is being fulfilled.
Knowledge is the enemy of fear
My rough interpretation is that prices of most assets are within normal valuation relationships. Hard to find a lot of relative value in those charts. Keep stackin'----US dollars.
Knowledge is the enemy of fear
<< <i>100 year gold and silver charts (adjusted for inflation)
Extrapolate the charts and predict what will happen next
Why would any part of this chart in which Au/Ag prices were fixed be relevant? Serious question since the majority of the chart contains years were PM prices were pegged to specific values in the United States.
<< <i>
<< <i>100 year gold and silver charts (adjusted for inflation)
Extrapolate the charts and predict what will happen next
Why would any part of this chart in which Au/Ag prices were fixed be relevant? Serious question since the majority of the chart contains years were PM prices were pegged to specific values in the United States. >>
The chart is of London (England) prices, which, last I checked, is not in located in the United States.
And, yes, the prices of gold were at times "fixed" in the USA, at, say, $20.67, or $35. This attempt to Fix the price of the metal caused all sorts of disruptions, panics, booms, depressions, chaos, and misery, which are sometimes romantically viewed in hindsight as "the good old days before the Fed wrecked everything and ruined America forever."
Liberty: Parent of Science & Industry
<< <i>
<< <i>
<< <i>100 year gold and silver charts (adjusted for inflation)
Extrapolate the charts and predict what will happen next
Why would any part of this chart in which Au/Ag prices were fixed be relevant? Serious question since the majority of the chart contains years were PM prices were pegged to specific values in the United States. >>
The chart is of London (England) prices, which, last I checked, is not in located in the United States.
And, yes, the prices of gold were at times "fixed" in the USA, at, say, $20.67, or $35. This attempt to Fix the price of the metal caused all sorts of disruptions, panics, booms, depressions, chaos, and misery, which are sometimes romantically viewed in hindsight as "the good old days before the Fed wrecked everything and ruined America forever." >>
Good thing price of gold is "fixed" these days.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Glad your a fan of The Fed. Hope you get what you deserve.
I think you mean "you're"
when logic fails, attack the messenger
Liberty: Parent of Science & Industry
<< <i>Glad your a fan of The Fed. Hope you get what you deserve.
I think you mean "you're"
when logic fails, attack the messenger >>
or the messenger's logic.
joking aside, no need to attack any member because they are wrong.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Liberty: Parent of Science & Industry
<< <i>
<< <i>Glad your a fan of The Fed. Hope you get what you deserve.
I think you mean "you're"
when logic fails, attack the messenger >>
or the messenger's logic.
joking aside, no need to attack any member because they are wrong.
Yes, "you are".
And it is true, no attack is warranted. Each have their own ideas and should be free to voice them. Mea culpa.
Many of us won't live to see the results of our current, twisted form of crony capitalism unwind as it could easily take 2 or 3 decades to play out.
There was a post elsewhere in the forum the gist of which was, "Our patience won't outlast a downturn in PMs". For most of us that's true.
<< <i>Not sure about the "gold bubble claim" If so, they are 2 years behind the curve.
Gold Demand and Supply – Full year 2012 >>
The gold supply and demand data is missing those central banks that don't report. China hasn't reported their inventory increases in over 3-4 years.
When they last reported they had 1054 tonnes of gold, or about 500 more tonnes than anyone expected. Therefore, their additional demand was not included in the
annual surveys. China is probably adding 500-1000 tonnes per year to official reserves....none of it reported yet. That skews the demand equation quite a bit. There
are others not reporting as well. During the years that the EU was selling 400-500 tonnes of gold, it was dutifully listed in the annual supply. But since 2008 the CB's went to
net buyers, the GFMS surveys failed to include that additional 400-500 tonnes of buying demand. And if that kind of buying comes from the transfer of existing gold stocks rather
than from fresh mining supply, there's no way to account for it....until the CB's eventually report it. And we already know that any western central banks leasing out gold
to bullion banks still count it as if they owned it....even though it's gone and likely won't ever be back.
<< <i>Anything that increases in price 10 fold in 5-7 years is in a bubble. Anything. >>
Glad to see you state that gold and silver have never reached bubble stage in the past decade.
Silver was $5.50 exactly 7 years before it's 2011 peak. Would have needed a 10 bagger to make it to $55 to achieve offical "bubble" status.
There is certainly no lack of demand for USTreasury bonds when the too big to fail banks have $250 TRILL in otc derivatives that are directly linked to TBond purchases.
If one wonders where all that demand came from over the past 10 yrs, look no further than otc interest rate contracts that are currently marked to model.
When interest rates started rising sharply towards the end of 2010 and into 2011 what did the big banks do? They added $100 TRILL in otc derivatives where 80% of those
were interest rate contracts. Rates were driven right back to all time lows and surprised the heck out of Pimco who was on the wrong side of the treasury bet. Amazing what
$80 TRILL notional in IRC's can do to the markets within 6 months. That little operation was a QE unto itself...even using a mere 1-3% of those IRC's as the real market value.
Your chart is only a price chart and doesn't show how the price of gold or silver relates to anything else. How can you consider a spike in price to be a bubble without any context?
My suggestion to correlate the prices of gold & silver to the action in interest rates and money supply bears no similarity with your quest for a correlation of bubbles with phases of the moon, women's skirt lengths, and whether or not "westerns" are a popular movie genre.
Baley, as much as I like a good debate, if you won't take a serious debate seriously I'm afraid that I'll never be able to meet the requirements for residence in Baleyville.
I knew it would happen.
<< <i>Interest Rates
Gold, Oil, and the Dollar Index
Still looking for the ones you requested, also searching for correlations of bubbles with phases of the moon, women's skirt lengths, and whether or not "westerns" are popular movie genres >>
I'm not so sure of the value of historical Libor charts now that we know the banks have rigged that over the past 5 years or so.
The dollar index is not anchored to reality, but just to other floating currencies that are constantly depreciating. No useful comparisons can be made. Phases of the moon
would be a more reliable indicator since it is a physical entity that markets actually seem to respond to. If we truly had a fixed "basket" of consumer goods or a true fixed monetary
standard we could make some useful comaparisons. Until then, we'll just have to wait until this fiat regime runs its course.
First graph in this article shows previous currency regimes.
Sheesh...even the incarceration rates rose when we came off the gold standard in 1971.
<< <i>Still looking for the ones you requested, also searching for correlations of bubbles with phases of the moon, women's skirt lengths, and whether or not "westerns" are popular movie genres
Your chart is only a price chart and doesn't show how the price of gold or silver relates to anything else. How can you consider a spike in price to be a bubble without any context?
My suggestion to correlate the prices of gold & silver to the action in interest rates and money supply bears no similarity with your quest for a correlation of bubbles with phases of the moon, women's skirt lengths, and whether or not "westerns" are a popular movie genre.
Baley, as much as I like a good debate, if you won't take a serious debate seriously I'm afraid that I'll never be able to meet the requirements for residence in Baleyville.
I've posted charts of gold vs the 10 yr US treasury yield and of the Yen vs the 10yr yield. The trurh about gold lies within.
And to steal jmski's signature line and direct it at vanhalen, this is precisely the mindset I predicted 6 months ago. All investors go through it. Its the feeling when a " sure thing" investment-especially one based on emotion-- doesn't pan out. Have patience vanhalen, silver will shine again, but not until maximum pain has been dear to the bull. Most bubbles don't end until a 70% price decrease has occurred. And yes roadrunner, silver did bubble. But even a reflation of that bubble can take years and years. The NASDAQ still hasn't reached its old high after 13 years. Oil is still down 35% from its bubble high in 2008. Real estate prices are still down 50% or more in the most bloated areas. The Japanese stock market is still just a third of its value 20 years ago. But some of those examples may be of extreme bubbles and I font think silver went extreme. So you might only have to wait another 5-10 years to be made whole and show a profit.
Knowledge is the enemy of fear
<< <i>Nice website Baley.
My rough interpretation is that prices of most assets are within normal valuation relationships. Hard to find a lot of relative value in those charts. Keep stackin'----US dollars.
Unless I read the chart wrong it said the prices reflected were based on January 2012, this is not an acurate period of time to read a chart on PM's going back to the early 1900's.
<< <i>Glad your a fan of The Fed. Hope you get what you deserve.
I think you mean "you're"
when logic fails, attack the messenger >>
Why wouldn't all of us here trust the people who print the money, have they ever led us astray???
<< <i>Anything that increases in price 10 fold in 5-7 years is in a bubble. Anything. >>
You may be right, but gold has not done that. Since 2005, gold has increased from $400 to an absolute peak of ~$1900 in 2011. That's less than a 5 fold increase over those 6 years. There's no need to exaggerate - the gold run is remarkable on its own merits without inflating the data.
Still, it's worth adding that the bulk of that run has been since 2009, where gold roughly doubled to its peak. Has anything else doubled in over a similar period? The obvious answer is equities. So why isn't the identical run-up in equities being called a bubble as well?
These questions aren't directed at you necessarily cohodk, but they are questions that are worth asking.
<< <i>
<< <i>Anything that increases in price 10 fold in 5-7 years is in a bubble. Anything. >>
You may be right, but gold has not done that. Since 2005, gold has increased from $400 to an absolute peak of ~$1900 in 2011. That's less than a 5 fold increase over those 6 years. There's no need to exaggerate - the gold run is remarkable on its own merits without inflating the data.
Still, it's worth adding that the bulk of that run has been since 2009, where gold roughly doubled to its peak. Has anything else doubled in over a similar period? The obvious answer is equities. So why isn't the identical run-up in equities being called a bubble as well?
These questions aren't directed at you necessarily cohodk, but they are questions that are worth asking. >>
Are we limiting the bubble definition to a short double or a 10x+ since 2008? The whole market is a bubble++++ if that is going to be the rule of conversation.
Another link to "gold bubble" predicting $1200 by year end
Liberty: Parent of Science & Industry
People make the mistake of confusing a worldwide deflationary spiral with a gold bubble. QE only staves off the deflationary spiral so that the system remains intact. It has nothing directly to do with gold. There is a deflationary spiral occuring as bad banking debts continue to be monetized by the US Treasury - what's even worse is that virtually all governments are pumping more fiat into the system in an ongoing currency/trade war that isn't helping anyone. The main goal has always been to bail out the bankers who screwed up the entire world economy through greed, malfeasance and incompetance - and that's totally what QE is about.
A deflationary price spiral will take stocks down hard when QE stops. QE won't stop until the banker balance sheets are repaired sufficiently for FASB to re-enact its own accounting standards. At that point, the big banks will have all the capital they need to buy whatever assets they want at depressed prices. Since over 90% of "money" is electronic, a massive capital destruction can be instantaneous. That's why it might be good to hold some significant cash.
Gold isn't the intended recipient of QE - and in fact gold is being suppressed illegally via naked shorts from the bullion banks and lack of enforcement by cftc - mainly to give markets the impression that all is well in the stock markets and in government finance. If gold were allowed to react to real market forces, it would be a clear indication that something is terribly wrong, and a massive stock liquidation panic would be a possibility (in my opinion). This would be a self-fullfilling viscious cycle, and that's what the government can't afford to have happen (yet), because it would wipe out every 401K and IRA in the country. Pure and simple.
Once the banks are fully capitalized through QE's "free money for bankers program", they will have no qualms about pulling the rug from under stocks and then waiting to buy them up, cheap. There will still be an underlying company beneath the wreckage, even after stock prices are destroyed. That's their method, and it works every time. Unfortunately - this time around, there won't be enough equity left in the US for anyone to ever make it back to a middle class way of life. You'll work for anything if you have to.
The biggest problem for tptb in our own government - is that many foreign governments are getting out of the petrodollar cycle. This leaves US finances, the Fed & the government bureaucracy only one remaining source of wealth to tap. Everyone else is "out". Can you figure out who's next? (see "obamacare"). The target is anyone in the middle class with any remaining money and not quite enough money to buy a Senator or Representative, or at least a yacht full of assets that can make it to Panama.
Sorry if this sounds like a downer, but I don't see much in the way of positive developments in our legislative, executive, or even the judiciary at this point. I don't see the legal system working to protect anybody who happens to be honest. The laws only apply to the little guys and are totally run by special interests. Long live Big Pharma and High Tech!
I knew it would happen.
to doing in this bull market. By summer of 1976 most pundits and economists were calling the gold market dead...right arount the time it bottomed.
<< <i>It could be 1975-1976 all over again. Everyone called PMs in 1974 a bubble as well. And rightly so. Both gold and silver doubled within 6 months, something gold hasn't come close
to doing in this bull market. By summer of 1976 most pundits and economists were calling the gold market dead...right arount the time it bottomed. >>
Unfortunately natural market forces can no longer be used to read and predict future price movement. It has become a crap shoot in the short term.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>It could be 1975-1976 all over again. Everyone called PMs in 1974 a bubble as well. And rightly so. Both gold and silver doubled within 6 months, something gold hasn't come close
to doing in this bull market. By summer of 1976 most pundits and economists were calling the gold market dead...right arount the time it bottomed. >>
I wasn't around for that, but the current sentiment for PMs is definitely terrible. A local coin/bullion dealer here told me silver is totally dead and he doesn't think it will resume its bull run any time soon.