Is gold in a bubble?
I agree that the price has started to move disturbingly quickly, and this feels like it could be a bubble. (Some, like Peter Schiff, would argue the bubble is in U.S. Treasuries.) But how do we really know? And if it is a bubble, are we at the beginning, middle or end stages?
If we were to use the NASDAQ bubble (a classic speculative frenzy) of the 1990s as a guideline, today's gold bull market has a long way to run.
The chart below compares the final 10 years of the NASDAQ bubble with the last 10 years of gold prices (both indexed to 100 for comparison purposes). It's clear that today's gold bubble is running far behind. In fact, gold must rise to $3205/oz (from August 18th price) to match the height of the NASDAQ peak.
[Click to enlarge]
Of course, not all bubbles are alike. So the current bull market in gold doesn't have to a rule book to play by. The bull run could end next decade, next year or next week. But when compared with one of the last great speculative manias, the rise in gold so far looks tame.
Disclosure: I am long gold bullion.