Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The No. 1 Reason Gold Could Enter Mania Phase Soon

Commodities / Gold and Silver 2010 May 08, 2010 - 05:41 PM GMT

By: DailyWealth

Commodities

Best Financial Markets Analysis ArticleOn February 18, 2009 the Financial Times published one of the most important articles nobody read.

The article's headline was Gold primed to become "mania asset."


The gist of the article was something I've been telling people for a long time: Gold – more so than any asset right now – has the potential to experience a mania phase... one like we saw in Internet stocks from 1997 through 2000.

A mania phase is a period in an asset's lifecycle marked by leaps of 10% or 20% in a month... 100% or 300% in a year... and 500% or more over the course of several years. Get in early with a big position on a mania phase, and you'll make a fortune. Remember one Internet-mania darling, JDS Uniphase, climbed more than 30-fold in about two years... which would have turned a stake of $20,000 into $640,000.

As that little-read article mentioned, an asset must have one key ingredient to enter mania phase: It must have the "new era" factor... a set of conditions folks can point to and say, "This time is different... The old, conventional methods of valuing assets are useless in this case."

Take Internet stocks. In the late '90s, Wall Street analysts chucked classic valuation measures – like price-to-cash flow and price-to-book – out the window. The Internet was growing too fast for these old measures, they figured. Instead, they used crazy metrics like web traffic (and often pure fantasy) to justify valuations. Companies with little chance of turning a profit sported market caps of hundreds of millions of dollars simply because they had good stories... and because that time was "different."

Now let's get to gold. As we've noted many times in DailyWealth, you can make a good case that this time is different. Never before has the nation with the world's reserve paper currency – which is backed by nothing but faith in a bankrupt government – promised so much to so many people (Social Security, Obamacare, unlimited military commitment).

We're funding many of these promises with borrowed money... so crushing interest payments are on the way. The U.S. government could pay as much as 20% of its tax revenue to service the national debt in just three years. Imagine working your tail off just to pay the interest on your credit cards.

For a picture of what could happen, consider that Europe – which in aggregate has made the same crazy promises... and is under a similar debt load – is watching its paper currency union experience a slow-motion train wreck. The chart below shows what gold's action looks like in the eyes of a European. It's looking a lot like a mania phase.


How high can gold go? I can't say. Nobody can.

Despite what many gurus will tell you, we simply cannot properly value gold. It's not a stock, so you can't say, "I'll pay 10 times cash flow for this." It's not a rental property, so you can't say, "I'll buy this for eight times annual rent." Gold's chief use isn't in the manufacturing process, like copper and iron ore.

Nope... gold is the odd man out in the asset family.

Gold represents real, intrinsic wealth. Greece can't debase it. The U.S. government cannot debase it. There's no way to know what people will pay for gold in a big crisis. This is precisely the reason it is a candidate for mania phase. People can tell themselves, "This time is different. It's a new era of currency crisis, so gold can and should trade for $2,000... $3,000... or $6,000 an ounce."

I'm no "the world is going to hell in a handcart" guy. I simply look around for assets with extraordinary potential to rise. I'm indifferent to whether it's gold, stocks, homebuilders, uranium, or Malaysian palm oil.

I'm not saying a gold mania will happen next week... or even six months from now. I actually believe gold needs to pull back and "catch its breath." I am saying gold is an asset folks can justify paying any price for.

The same sort of analysts who claimed the Nasdaq would go to 50,000 are the same sort of analysts who will claim gold will go to $25,000 an ounce. The sober among us will be shouted down... because "this time is different."

This is the chief requirement of a mania. It is in place for gold.

Good investing,

Brian Hunt

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2010 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

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


Comments

bayou1477@atvci.net
28 Jul 11, 14:33
gold purchases

As a former pawnbroker who owned a pawn shop for 20 years, i have seen gold as low as $320/oz and now to look and see it today is unbelievable. Wish i had kept all my gold back then i would have been what you would call rich. Now thinking about getting back in the gold market like a lot of other people I know. Seems everybody is buying it right now---adds all over the place about buying scrap gold, gold chains etc. Most don't realize that if they have 10kt gold items it only has .450 gold in the item and the rest is some kind of metal such as copper or nickel, so for a 10kt gold piece weighing 10 grams they they would only get paid on 4.5 grams of gold in the item. Lots of shysters out there who are paying a lot less. Locate a gold formula that will give you base gold weight for an item of 10kt, 14kt and 18kt gold to know the real value before you go in to sell your items to someone or go to a reputable dealer to sell it, not some fly by night who is here today,gone tomorrow.


Post Comment

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