how you know Gold is NOT a bubble

Discussion in 'Commodity Futures' started by Optional, Dec 14, 2009.

  1. Ratio of Gold/CRB Spot Commodity Index, Log Scale.

    Compared to a broad basket of commodities, Gold is more "expensive" today than it was at the 1980 peak, yet I keeping hearing how cheap gold is. If Gold is cheap then all the other commodities must be dirt cheap.

    [​IMG]
     
    #21     Dec 15, 2009
  2. Gold is not a bubble because it just bursted.
     
    #22     Dec 15, 2009
  3. promagma

    promagma

    The answer is $647

    My data starts at 1975
    Gold = blue, spot average = red

    [​IMG]
     
    #23     Dec 15, 2009

  4. I am not an expert, but I believe the correct answer is above.

    Price always 'is'. "Should' is a very bad word in this environment.
     
    #24     Dec 15, 2009
  5. promagma

    promagma

    The correct answer is $647

    Agreed
    But this enviroment = speculative bubble betting on future hyperinflation (or some kind catastrophe where you want to hold physical gold).
    I am not shorting gold. Like someone said earlier, recognizing a bubble doesn't give you an edge in trading it.
     
    #25     Dec 15, 2009
  6. You are right. Gold is a commodity. There isn't really any intrinsic value other than price which is based on supply and demand.

    Is the supply of gold increasing?
    Is the demand shrinking?
    Is there any substitute investment?
    Is there any urgency to buy this commodity?

    Those are the questions for which the answers are reflected in price.
     
    #26     Dec 15, 2009
  7. Excuse me, I meant 'trading' environment, the business of.
     
    #27     Dec 15, 2009
  8. promagma

    promagma

    Just pointing out the fallacy that gold is rising to keep up with inflation.

    Or that gold is cheap relative to inflation.
     
    #28     Dec 15, 2009
  9. Couldn't agree more, it's all a bunch of non-sense. Doesn't mean gold can't go to $50,000, but let's skip the fundamental rationalization.
     
    #29     Dec 15, 2009
  10. dfwgal

    dfwgal

    I think Gold is going to 2k...anyone with me?
     
    #30     Dec 15, 2009