Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold Real Time Bubble Data

Commodities / Gold and Silver 2011 Feb 08, 2011 - 03:01 AM GMT

By: Chris_Blasi

Commodities

Best Financial Markets Analysis ArticleI would like to share some hard data pertaining to one of the most critical characteristics associated with an investment bubble. Even though the usual cheerleaders for paper assets and the "debt is wealth" mindset would most likely dismiss the evidence as anecdotal, the uniqueness of the data set should give it extra weight, in my opinion. The consistent element I am referring to is retail investment participation. Why the information forthcoming is of particular worth is not only does it underscore the low participation rate of retail investors in precious metals, but the source of the information comes from an investment environment that renders meaningless the typical excuses for investors to not have taken a position in gold and silver.


The bull market cycle that never was

It has been well documented for over a decade that many of the most savvy international investors, assorted sovereign wealth funds and numerous central banks have been building considerable positions in gold. Additionally, a host of analysts, who coincidently had the faculties to foresee danger in the dot.com, derivatives, and real estate market, have been advocating the acquisition of gold and silver throughout the same period. I will not go on to list these various individuals and institutions as it would be redundant for those tuned into the goings on of the precious metals market and easy enough for newcomers to learn with the ease of a Google search.

Even though it would appear simplistic to point out that big investment successes are hallmarked by entering a particular bull market cycle early and exiting before it tops out, this most basic of action plans is consistently lost on the emotionally driven masses who historically pile in at the end. While there is no question that a minority of the financially astute have taken steps to fortify their portfolios with precious metals, by no means have a large majority of financial professionals entered the trade, let alone a significant percentage of individual investors. Because of this absence of a substantial percentage of investors in this gold bull market, I question the validity of those calling a top in gold and silver, despite prices for both having risen greater than 400% this past decade.

Hard facts, not hearsay

There is plenty of commentary in the precious metals world about investor behavior particular to this gold bull run. These observations are coming from seasoned precious metals professionals whose gut instinct and historic perspective provides valuable insight. The consensus view is that a significant enough percentage of retail investors have yet to embraced precious metals as would be typical at market tops. Contrary to crowding into the precious metals market in a quest to ride gold and silver's unparalleled price appreciation, the vast majority of individual investors have dismissed the entire market sector as if taking direct cues from the mainstream financial media. Following is a sampling of excuses that individual investors are often heard to make regarding their reluctance to consider precious metals:

  • I did not know I could buy precious metals.
  • I do not know how to buy precious metals.
  • My advisor said precious metals are too volatile.
  • My other investments are down and I am waiting for them to come back.
  • I have no money to buy precious metals.
  • I did not have time to open an account to buy precious metals.
  • I would buy precious metals but I might need the money for other things.

Targeted analysis of a unique data set

To really measure the degree of investor apathy and antipathy toward precious metals to date, I sought to mine data from an environment that nullifies legitimate reasons for pushing back on acquiring this time tested form of wealth preservation. The statistics forthcoming have been extracted from an investment environment meeting the criteria desired. Let's call this a "no excuse" environment. In the end, I believe you will concur that the results unequivocally bolster the views espoused by most precious metals professionals. Namely, investor behavior and sentiment has not emulated that which is customary at a market top.

Gold and the self directed IRA

To help me gauge the extent of non-participation by individual investors, I contact Carl Fischer, President of CAMA Plan (www.camaplan.com). CAMA Plan is a long established administrator of self directed IRA's. For those not familiar with self directed IRA's, these plans allow for the purchase of many IRS approved investments which are not made available to clients of traditional investment firms. A few examples of the alternative investments available to owners of IRA's with a firm such as CAMA Plan are: real estate, notes, tax liens, private placements, and precious metals.

Why do I consider self directed IRA accounts "no excuse" accounts? Because:

  • Funds are in place and available to invest.
  • The account is established, no need to transfer from another firm.
  • Monies in place are for long term investing.
  • Holders of the accounts are made aware of the precious metals option.
  • Virtually all competing investments, including those in most IRA's, have grossly underperformed in comparison to gold and silver over the preceding decade.

Now, from data provided by Carl, let's see how the so-called "gold bubble" manifested itself over the course of the last decade amongst the owners of self directed IRA's.

Check Point 1 - Beginning of gold bull market

Gold closing price on December 31, 2000: $274.24 per oz Overall percentage of investment assets in precious metals (aggregate of all accounts): < 1%

Check Point 2 - Eight years into the great gold bull run

Gold closing price for 2008: $869.75 per oz Gold per oz dollar gain from 2000 close: +$595.30 (+217%) Overall percentage of investment assets in precious metals (aggregate of all accounts): 1%

Note the following:

  • The amount of new investment dollars into precious metals was even less consequential than illustrated since the majority of the increase in the overall percentage was achieved by the gain in value of the existing precious metals investments.
  • In calculating overall percentage of assets in real estate, most "notes" and "private placements" are secured by real estate thus bringing investor participation in real estate related assets to greater than 60%.

2008 Pie Chart

Check Point 3 -Ten years into the great gold bull run

Gold closing price for 2010: $1,405.50 per oz. Gold per oz dollar gain from 2000 close: +$1,131.05 (+412%) Overall percentage of investment assets in precious metals (aggregate of all accounts): 2%

Despite an approximate decrease in real estate values of approximately 25%+, the overall amount of investment assets (Real Estate, Private Placement, and Notes) allocated to real estate remained constant since the real estate sector's collapse. This would indicate that new money continues to pour into real estate in the belief that the debacle at hand is a buying opportunity.

Conclusion

Coming from a professional background that included time with a Wall Street broker dealer, merchant banker, and M&A firm, I have seen several investment manias first hand. If this great gold bull market were to wither away now, without the traditional blow-off top characterized by a flood of new participants feverishly bidding up the spot price, it would be a historic anomaly. More likely, analysis seems to indicate that only a minimal number of investors have benefited from the rise in gold and silver so far. Further, this strongly suggests that the bullish trend for precious metals remains in place, and there is still room for substantial appreciation over the long term.

By Chris Blasi
www.NeptuneGlobal.com

Email: GroupDirector@NeptuneGlobal.com

Neptune Global Holdings LLC is a boutique precious metals research and trading firm headquartered in Wilmington, DE USA. The firm has differentiated itself through independent analysis of market fundamentals and the development of investment solutions unique to the physical precious metals market.

Proprietary research is provided to select institutional clients and financial professionals. Assessment of the global precious metals market is calibrated through ongoing analysis that encompasses a broad spectrum of macro economic and geopolitical factors. The firm�s investment offerings are true to its core convictions related to the time tested value ascribed to physical precious metals.

Specialized investment assets are made available in conjunction with other internationally traded forms of gold, silver, platinum and palladium.

© 2011 Copyright Chris Blasi - All Rights Reserved

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Neptune Global Holdings LLC (Neptune). The author has made every effort to ensure accuracy of information provided; however, neither Neptune Global Holdings LLC nor the author can guarantee such accuracy. This article is strictly for informational purposes only and a sampling of diverse editorial opinion.  It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Neptune Global Holdings LLC and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  Neptune does not act as, nor offer the services of, an investment advisor. Individuals should conduct their own due diligence before making any investment choices.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules