Monday, January 17, 2011
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Is gold/silver entering the 3rd "Mania" phase of a bull market? (LINK)
Extensive article and research on the price behaviour of gold/silver leading from the Bullion Baron:Is Gold/silver entering the 3rd phase of a bull market?
Please read in full, as it gives great insight into bubble like behaviour.
Consider this much quoted chart of bubble behaviour:
Although gold recently corrected from its all time high to $1365 or so (look at the bottom of this blog for a series of 24 hour charts and link to Kitco - my favourite precious metals trading/investing site for longer term data and analysis), this maybe another retracement point for serious buyers (speculators) to re-open or add to positions.
2011 is going to be an interesting year - the two main "events" being the continued European debt crisis/minefield and the continued ridiculous $1 trillion plus fiscal deficits of the US.
The interesting point with gold is this: its worth is extremely highly correlated with central bank set interest rates. Will gold's value plummet like it did in the last bubble of the 1970s because central banks are forced to raised interest rates due to a lack of buying of government bonds and/or to put a damper on monetary-stimulus induced inflation? (e.g Volker in the early 1980's)
The paradox is if they do raise rates, governments around the world will struggle to actually service that debt (i.e Japan, the US, most of Europe) and need either more borrowing (selling of bonds) or more money printing. Both of these act as a floor under gold - as it cannot be borrowed/printed into existence.
Please read in full, as it gives great insight into bubble like behaviour.
Consider this much quoted chart of bubble behaviour:
2011 is going to be an interesting year - the two main "events" being the continued European debt crisis/minefield and the continued ridiculous $1 trillion plus fiscal deficits of the US.
The interesting point with gold is this: its worth is extremely highly correlated with central bank set interest rates. Will gold's value plummet like it did in the last bubble of the 1970s because central banks are forced to raised interest rates due to a lack of buying of government bonds and/or to put a damper on monetary-stimulus induced inflation? (e.g Volker in the early 1980's)
The paradox is if they do raise rates, governments around the world will struggle to actually service that debt (i.e Japan, the US, most of Europe) and need either more borrowing (selling of bonds) or more money printing. Both of these act as a floor under gold - as it cannot be borrowed/printed into existence.
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