Gold: Not a Bubble 39 comments
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Is gold in a bubble?
One of my colleagues hasrepeatedly asked me this question. I am quite clear on the answer: “NO”.
How many people do you know who actually hold GLD? How many people do you know who are actually buying gold? How many people do you know actually buy mining shares? The answer all too often is close to zero.
A bubble is ALWAYS easily recognizable (unlike the shameful Greenspan who claims that it can only be seen hindsight). The participation rate will be quite high, so that you are bound to hear about it in news REPEATEDLY, and enough that it will be always the “topic of the party”. A bubble is a collective ignorance or rather frenzy, and there is always a disconnect to reality.
In fact, gold is looking extremely good technically, forming the bottom of the cup in a cup and handle chart. The next rising up is usually pretty substantial.
At $1000 just a month ago, the gold bull is faithfully shaking off the Indian and Arabic participants. However, the Asians will be piling in due to competitive devaluations of their own currency. Asians have always recognized both gold and silver as the money. They will never hesitate to protect their own wealth in the real money.
So are you onboard?
Unfortunately, for the smaller investors, physical gold is pretty much out of reach. With a minimum order of 20 ounces, that is about $20,000. The only current buyers are from institutions and people who have money to put away. These are smart investors buying in, while the middle class is selling out their last portion of gold jewelry for cash. Who will be right?
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This article has 39 comments:
You can also buy in 5oz lots at seekbullion.com. I've bought it in smaller lots from Bulliondirect, Apmex and USAGold and they all have immediate delivery, although all three of those are often low on inventory. I would never recommend Kitco because of their reputation for long delays.
So, no, gold is definitely NOT out of reach for small investors.
And any investor can buy physical gold in any quantity they want. What the author probably meant to say is that smaller volumes will incur higher premiums.
* 1.5 trillion budget deficits
* ZIRP for the US
* ZIRP for the rest of the world
Everybody is inflating and running deficits. If inflation rears it's nasty head, I can't see people not falling back to the yellow metal as a place of safety.
I've been looking at what's happening with the banking sector & FDIC and increasing my holdings of coins as a precaution.
> And any investor can buy physical gold in any quantity they want.
> What the author probably meant to say is that smaller volumes will
> incur higher premiums.
>
Agreed. But as I said in my earlier post in the this thread, if you buy small quantities from a higher premium source you can probably sell it for a higher premium on EBay.
On Mar 15 08:11 AM tcs wrote:
> So, where do you buy the $20,000 worth of gold....and how do you
> sell it when you want to? Thx. tcs
On Mar 15 08:11 AM tcs wrote:
> So, where do you buy the $20,000 worth of gold....and how do you
> sell it when you want to? Thx. tcs
The statement that you have to buy twenty ounces at a time is just so wrong I don't even know what to do with it.
I agree with the author's comments on a gold bubble. While it is getting a lot of attention from counter indicators like Cramer, I don't see a bubble at this time. We haven't really started that phase of the Gold Bull Run.
It isn't true that you need $20,000 to hold physical gold. Just find your local coin shop. Chances are that they sell American Eagle gold coins as well as other gold coins.
I don't think investors should bet it all on gold. Use it as an insurance policy. Think about holding 10 to 20% of your portfolio in gold, silver, gold mines and some physical gold and silver.
Disclosure: Long GDX, GLD, SLV.
tinyurl.com/5z9pus
No Mass Mania for Gold Yet
Less than 1% of Public in Western World Have Invested in Gold
The notion that gold is in a bubble and soon to fall is entirely bogus and peddled by many of the same suspects who have gotten us into this mess with their "don't worry, be happy" brand of economics and personal finance advice.
It is likely that less than 1% of the public in the western world (probably as low as 0.5%) has invested in gold and/or silver and we are a long way from mass mania and the mass participation associated with market tops (as seen in stock and property markets in recent months).
.....When gold is featured on a daily and even weekly basis in the newspapers and there are supplements dedicated to investing in gold and precious metals then it will be time to sell or at least go underweight gold and silver.
********
Does anyone see the masses BUYING gold like there is no tomorrow the same way they did when beanie-babies or dot com stocks were all the rage?
Are there newspaper, TV and/or radio advertisements offering to SELL gold to anyone who wants to buy?
I don't see anything like that happening so I have to be sceptical whenever anyone says Gold bubble.
> I don't think investors should bet it all on gold. Use it as an
> insurance policy. Think about holding 10 to 20% of your portfolio
> in gold, silver, gold mines and some physical gold and silver.
>
Where else to put it right now? I would say don't put more than 20% in physical metals but I see nothing wrong with putting more in more liquid forms (such as CEF, GTU or GDX, all of which I own). As long as you keep on top of things you can easily liquidate them if you see a turndown. The 20% physical can then be held very long term as an insurance.
For those seeking some gold exposure and don't have the money or the inclination to deal with the headaches that come with being in physical gold, shares of GLD make a good option. Those seeking to diversify their portfolio's while adding some metal exposure might take a hard look at Harry Brown's old brainchild the Permanent Portfolio Fund (PRPFX). Its held up tolerably well in the worst market since the Depression and has significant holdings in metals as well as high end US and Swiss Bonds with about 30% in equities.
> What is the premium vs physical possession if you're long GLD?
> I was under the impression that GLD was the same as having possession
> of the real thing. Other than the ETF fee, what's the difference?
In a famine which would you prefer? A sack of beans in the pantry or a piece of paper which promises to sell you a bag of beans. The latter is useless unless there are beans in the store.
Search SA for articles which question whether GLD actually holds the metal. Even if those articles are not 100% correct I think it is a risk which is not worth taking.
Storing physical gold is not really a big risk: you can store $10,000 worth of old gold coins in a coin tube designed for modern dollar coins. Place that in a safe, or even a strong metal box concealed in the house and you have no worries.
> Be careful on ebay... I paid for 10 oz and got NOTHING.. It took
> me 2 months to get a paypal refund..... Additionally, don't forget,
> during the Dec 1979 and Jan 1980 run up to 850, not a dealer around
> would buy your gold back at spot...they were paying well under spot...
> good luck to all
Maybe, but EBay was not around in 1980, and people will buy anything on EBay. Plus, if you bought at $1000 and spot is $2500 then you don't need to sell at spot to make a healthy profit. That profit would probably be more than investing in an index fund.
On Mar 15 11:15 AM Sakata wrote:
> On Mar 15 10:35 AM @TexasER wrote:
On Mar 15 01:58 PM Sakata wrote:
> On Mar 15 01:06 PM mr freddo wrote:
On Mar 15 02:12 PM Mark123 wrote:
> Be careful on ebay... I paid for 10 oz and got NOTHING.. It took
> me 2 months to get a paypal refund..... Additionally, don't forget,
> during the Dec 1979 and Jan 1980 run up to 850, not a dealer around
> would buy your gold back at spot...they were paying well under spot...
> good luck to all
Sorry, can't give you any advice on selling as yet, since I am still very long on gold!
On Mar 15 08:11 AM tcs wrote:
> So, where do you buy the $20,000 worth of gold....and how do you
> sell it when you want to? Thx. tcs
Metanor Resources MTO.V on the canadian board is one that currently trades at .50 cents, has just started about 6 mnths ago producing ( 20,000 oz since getting their mill up to 800 tpd ) has a $140M infrastructure, over 1M oz, currently producing from an open pit, has excellent management and will produce 50K-60K oz gold annually and it currently has a marketcap of less than 40% of infrastructure value alone...discounting known oz in the ground !!!!! Cash Cow !!!
good read miningmarketwatch.net/...
Mr kenmeister, your workplace friends turn there nose to it because vast amounts of money cant be made from it. (vast amount being relative to their income) Only true value can be secured with gold and silver.
What happened to all the old bloggers who used to argue about the virtues of buying and holding gold? I guess they got tired of the same old arguements, cant blame them.
these financially shakey times. Look at gold as an
insurance policy no more no less.
Go ahead, open an Ebay account, and try to sell one of your coins on Ebay. You will find out FOR SURE if you have a two way market or not, and then you can move forward. For me, I do not like to give away more than 20% round turn, and I average much less than that. You have to have a parameter, or walk away. Stop fooling yourself, get 5 - 10% of your assets in physical gold and or silver, and sit on it. If hell breaks loose, at least you have a cushion, if hell is diverted by the ideas being regurgitated in Wash DC, then fine, you do not have too much involved. Worse the outlook is, more gold and silver you should have. ETF's I would be real wary except for day trading. I get the distinct feeling the markets have a lot more paper going around than physical, and if hell hits, you will get a very nicely worded letter of apology that the ETF is defunct. Then a 2nd letter from Dewey, Screwem, & Howe regarding the 1/2 cent you will get on your invested dollar after you win your class action suit.
Bottom line,have you ever heard of someone mad because they own silver or gold...?
If/when SHTF, I wouldn't want to have to travel to any big city in this country or abroad carrying a certificate that says "I own some gold and I want it now".
Anyone can buy 1 oz. gold coins, starting at about $1000.oz on eBay, or smaller coins for less. You can also take delivery on COMEX gold bars at spot, but like the article says, it's $20K and up.
Only suckers sell jewelry to predators for half of melt price. There are some companioes that even tell you to mail it in, they'll decide what it's "worth," and mail you a check, in due time-- LOL!
GLD is not 100% backed by gold. READ the prospectus. They are behind on bringing it physically in, may be shorting gold and using options, maybe even "leasing" out some of the gold. Better yet, buy CEF, GTU or IAU. Best is to buy actual metal and have it in your possession, or insured 3rd party storage. Gold stocks will also provide good future returns.
Beware of gold futures/options, unless you are a highly skilled trader. Almost everyone loses money on these on their own.
Gold is an insurance policy plain and simple.
Despite the plethora of criticism that has emanated from these pages towards Dr. Bernanke, we must admit that he is a man who follows through with his promises. Long before ascending into the most powerful job in the world, during his time in the Ivory Tower, Bernanke penned many a paper regarding the Great Depression. In these writings, the Fed Chairman made clear that to combat a deflationary depression, a Central Bank must "print" as much money as is possible. Sure enough, throughout the current Predicament, Bernanke has remained true to his principles, and has now appeared on natinal television to espouse his views. The message we take from the interview is clear: The Fed has, and will continue to expand the money supply, at an exponential rate of increase if necessary.
The winners under this scenario are the Government, as well as certain recipients of Fed backing/funding. The losers, of course, are those who have saved their money, and the Government's creditors. We would speculate that the Chinese Premier's call for "assurance" from the US Government was purposely delivered on the eve of a public pronouncement from the Fed Chairman. Nevertheless, we hold that given the global currency risks that currently abound, Gold should maintain its status as Preserver of Wealth.
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