Is the Gold Bubble About to Pop?
History doesn't always repeat but it often rhymes.
On one side, you’ve got a viable view that it’s the only true store of value in a world full of fiat currencies. It’s a safe-haven, a place to hide.
On the other, in the words of Warren Buffett, “It has no utility. Anyone watching from Mars would be scratching their head.” He’s got a point; we dig it up, turn around, and bury it in our back yard.
What’s clear is it’s a great trading vehicle and it goes without saying that it’s been a snazzy investment over the last decade. It was also, for lack of a better word, my salvation coming out of a particularly chilly streak in 2003. "Buy energy and metals, short tech and financials and open a taco stand in Costa Rica," I said at the time, sending shivers through the culinary ranks in Central America.
I felt like a hero in the Summer of 2008 when I abandoned the gold camp and shifted my long-term bucket to 100% cash. “All roads lead to deflation,” I said at the time, pointing to the Internet as the most deflationary invention of all-time. That was before Shock & Awe was injected into the veins of the markets, an infusion that shifted the DNA of capitalism.
Stay humble or the market will do it for you, indeed.
Be that as it may, I've updated our Bubble Comparison Chart (weekly, from 1985) and the picture, as they say, speaks 1000 words.
Click to enlarge
When I posited this vibe on Facebook and Twitter, and the feedback was pretty one-sided.
"It really is different this time," said a very smart friend.
“There's no place left to go," chimed Zach Mayo.
"It's the only safe investment in the world!" screamed a self-proclaimed television pundit.
They may be right. If I’ve learned anything in this business, it's that trends tend to last longer and go further than most people expect.
I will simply say this; if you've got some gold as a hedge, please remember that you always want to lose money on your hedges.
If you own it as a pure speculative play, consider yourself officially informed. History doesn't always repeat, as Mark Twain famously said, but it often rhymes.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.