Not bubble
tokyogai
4/27/2011 9:29:51 AM
It is an interesting analysis that shows that the current rise in gold prices is not a bubble, however silver seems to be more like a bubble. Things could change very rapidly if the Treasury actually starts with a strong dollar policy ( a e=real one, not the current retoric). On the other hand, a rapid rise in inflation could make things go the other way fast.
An intersting perspective.
Re : All That Bubbles Is Not Gold
yalanand
4/27/2011 1:15:58 PM
Fred,
Thanks a lot for your analysis. Do you think gold will reach 2000$ in near future ?
Regarding silver, if you look at gold to silver ratio we are at about 38:1. Historically, the ratio has been set at 15 : 1. Do you think this factor will help to keep the silver rally alive ?
Re: Re : All That Bubbles Is Not Gold
Fred Goodman
4/27/2011 1:54:24 PM
The value of 15 ounces of silver was set equal to the value of one ounce of gold in the 18th century when both metals were used as money. However, the ratio of the two has averaged 56 since 1973. It dropped as low as 16.2 in 1980 and was as high as 98 in 1991, but it has not been below 31.5 since 1981.
The ratio fell to 32.5 last Friday and while it may go lower, it is already very low based on its range in the last 40 years. It is no easier for me to predict the ratio than it is for me to predict the eventual high that gold may reach.
That said, if the current Federal Reserve policies are maintained, and if the United States continues to print money and spend it like a drunken sailor, there is no price too high for gold to reach in terms of the dollar.
In my view, owning some gold is vital as long as current fiscal and monetary policies are in place.
Really insightful charts, Fred. It's amazing how pedestrian the current rally looks (so far) when framed agains the 1970s/1980. That's why I think things are going to get a lot more wild.
Are you sure Inflation is really that low?
back2basicz
4/27/2011 2:25:24 PM
Goodman,
Great post!!!
My only question to you is this-
Do you believe the Inflation numbers put out by the Govt?
In my humble opinion those numbers have been manipulated beyond all comprehesion.
If you follow John Williams Shadowstats-The real rate of Inflation is closer to 8%+.
And frankly that is a number which makes more sense to me.
As for Gold,I look at it as Money-The only way to maintain my wealth and purchasing power as the Govt continues to print and print like crazy.
Regards
Ashish.
Re: Are you sure Inflation is really that low?
Fred Goodman
4/27/2011 2:52:46 PM
Thank you Ashish. I record and chart data on over 50 economic indicators each month from industry and government, simply because I do not feel comfortable relying on the data or its interpretation, regardles of who puts it out there.
Clearly inflation is higher than the published figures if you focus on food and energy. The price of oil alone has increased by 43.5% in the last 12 months. However, as bad as it has been, it is likely to get a lot worse before it gets better.
Good comparison of Bernanke and Volcker
Value Hiker
4/27/2011 2:58:50 PM
To be frank, I was fooled by Bernanke from right beginning. If you read all Bernanke's papers before he became Fed Chairman, it is so obvious that this guy supported strong dollar. But after he took the Fed Position, he seemed to be a total stranger to me, he flooded the market with tons of cheap money, and brought down the valuation of dollar faster than any of his predecessors.
Maybe Bernanke was just paying lip service to strong dollar when he was young.
Re: Good comparison of Bernanke and Volcker
Fred Goodman
4/27/2011 3:28:43 PM
Yeah, and when Alan Greenspan started I believed that he and Milton Friedman had something in common.
Regrets
AskAsa
4/27/2011 6:48:42 PM
I dismissed urgings to invest in gold nearly 40 years ago when prices were low...and you see how prices soared, I saw them tumble back then and said it'll never go as high again,,,and it did. Then I stalled in the early 2000s...and look where prices are now. Gotta stop being so gold-shy!
My history is not much different from yours. I was certain gold was going higher in 1978 and actually bought one contract (I was poor at the time). I got scared just before Thanksgiving, sold it at a small loss, and never bought another one.
This time though I do own some SPDR Gold Trust shares (NYSE: GLD), and so do my clients.
The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
|
 |
Latest Blogs
Telecom-equipment maker Ciena is a stock trader’s dream, as long as the timing is correct.
The FTC is offering a $50,000 cash prize to the person or group that can come up with a solution to those annoying robocalls.
Akamai is in the middle of four significant tech trends.
John Malone of Liberty Media will be taking over Sirius XM satellite radio when the existing CEO Mel Karmazin steps down. What's it mean?
Demand for students of the humanities exists, despite widespread aspersions on the discipline.
IU Education
Resources to help you become a better investor
Investor Uprising on Twitter
25 market-moving companies we're tracking
|
Tweet This