Gold prices settled at a new record high yesterday, as unrest in North Africa and the Middle East pushed the safe haven currency to $1,435/oz. Silver surged to new 30-year record nominal highs at $34.74/oz. Prices surged in dollars and all major currencies and look set to reach record highs in other currencies (click to enlarge images):
Given the continuing strong fundamentals and the concerns of geopolitical instability spreading to Saudi Arabia and other autocratic oil producing nations, gold and silver look set to challenge $1,500/oz and $40/oz in the coming weeks.
Gold’s all time record nominal high yesterday was barely reported in most of the mainstream business and financial press today - slightly more online but there was little or no coverage in print.
This is an indication that gold and silver remain far from the “bubbles” that some have suggested. Speculative manias and bubbles are characterised by mass participation and widespread enthusiasm and “irrational exuberance” by all sectors of society including the media and particularly the retail investor and the “man in the street”.
As seen today, this is clearly not the case at the moment as there continues to be little or no reporting (let alone analysis) about gold and silver – even when they reach record nominal highs.
While the specialist financial press such as Bloomberg, Reuters. Dow Jones, the Wall Street Journal and the Financial Times did report the record highs; it was unreported in the mainstream press in most western countries.
In the UK and Ireland, none of the main papers (including the Times of London, The Guardian, the Daily Telegraph, The Irish Times, the Irish Independent, and the Irish Examiner) reported the record highs.
The Financial Times print edition reported the news with one sentence saying that “concerns were underlined by gold rising to a three-month high”. In fairness to the Financial Times, they do report on the gold market far more than most media outlets.
The media’s continuing non-coverage of gold and silver is a clear indication of the lack of animal spirits in the sector. It is proof, if any were needed, that the mainstream media and the man on the street remains far from bullish on gold and silver.
Indeed, recent years and recent months have seen many so called “experts” warning about the dangers of the gold “bubble”. They have been proven badly wrong and it would be interesting to read a story about how wrong they got it.
The majority of investors and savers in the western world do not know what gold bullion is and could not tell you the price of an ounce of gold or silver in dollars – let alone in pounds, euros or other local currencies.
The majority are unaware of the huge developments in the gold markets (only reported by specialist financial press) such as China’s emergence as one of the largest buyers of gold in the world (see our video) and the fact that central banks and astute hedge funds are some of the largest buyers of gold in the world today.
A bubble only takes place when entire societies , including many - if not the majority - of journalists and media become convinced that you “cannot go wrong” with a certain speculation or investment and it is a risk free way of making returns.
This leads to gushing reportage and commentary about the “sure thing” that is a certain stock, bond, commodity or property market. It is characterised by widespread commentary and a belief not just in the financial press but in the mainstream media (day time radio and television etc) that one must speculate or “invest” by buying a certain security or asset class – whether that be tulip bulbs, Nasdaq, Apple or property in London.
Greed and buying motivated to make a profit or quick buck becomes widespread. This has not happened in the bullion markets as the majority of bullion buying has been safe haven buying for wealth preservation purposes rather than accumulation.
Concerns about a bubble in gold may be justified when it reaches its inflation adjusted high of $2,300/oz. Similarly with silver, concerns about a bubble may be justified when it reaches its inflation adjusted high of $130/oz.
Concerns about a bubble in gold will be justified when gold is covered in a regular manner in not just the specialist press but also in the mainstream. When vested interests selling gold regularly appear in mainstream media advising people to but all their money into gold because it is a sure thing, it will be time to become very cautious about the sector.
Near the top of the gold market (when the price is likely trading at thousands of dollars, euros and pounds per ounce) we are likely to see front pages in the business press (such as Fortune, Business Week etc) devoted to gold and snappy front page positive headlines about how “Gold is King”, “Why Gold is a Must” etc.
When that happens it will be time to be wary of the gold bubble and reduce allocations to gold and silver.
The lackluster, negligent media coverage of gold’s record highs yesterday suggests that we are a long way from there yet.
Gold is trading at $1,432.88/oz, €1,036.59/oz and £878.10/oz.
Silver is trading at $34.73/oz, €25.13/oz and £21.28/oz.
Platinum Group Metals
Platinum is trading at $1,836.25/oz, palladium at $818.00/oz and rhodium at $2,350/oz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.