Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Buy that Parabolic Move in Gold

Commodities / Gold and Silver 2012 Dec 15, 2011 - 05:45 AM GMT

By: Aftab_Singh

Commodities

Best Financial Markets Analysis ArticleIt may be just me, but it seems like the majority of market participants are terrible at dealing with one of the rudiments of life as a human being; time. It is almost as if the herding man lives in constant contempt for his former self and dogmatic surety about his current convictions (whether they relate to past, present or even the future). If this hunch happens to be true, then it doesn’t take much to see the folly – for surprise surprise; as time passes the much-loved present conviction joins the realm of past regrets. So to thwart the arrogance of the gold bubble-top callers and the long-for-the-sake-of-being-long speculators here I outline why you, they and — hell — I might just buy that forthcoming parabolic move in gold.


Apologies if I sound like a broken record – but nothing about the future is obvious. However, given that the typical 21st century futurologist has a tendency to look at the past to guide his actions – gold may be regarded as particularly perplexing. For whereas equities have never (ever) met the widespread expectation that characterises its top (i.e. a ‘permanent plateau’ of abundant delight – a cornucopia), gold has frequently met the widespread expectation that envelopes its market top; hyperinflation. Gold, widely regarded as the objectification of worriment, has no precedent of not meeting the expectation held at its market top. Unlike most other assets on the radar of the speculator, the currency price of gold has often never returned to the levels traded on the eve of its bull run.

So regardless of your current convictions about your future self, I suspect that the great question that will haunt you will be this; what if this is one of those times? Pictorially speaking; will it be this:

The gold price's ascent and descent during the 70s & 80s.

Or this:

The paper mark price of gold... still waiting for it to come back!

The man who takes the time to peruse the history books has the comfort of knowing that the expectation associated with stock market tops has never before come to pass. However with gold there is no such luxury!

The Point:

So why do I mention this? And why now?

You may have guessed the reason but nevertheless I’ll spell it out – recent price action in gold may invite premature I-told-you-so’s from the gold-skeptics:

Daily Gold Futures Chart as of 14 December 2011 - Click to enlarge. Source: FINVIZ.com

Consider the musings of the gold top callers — after a decade of popping bubbles they’ve made a note to themselves and said ‘ Aha! I know how this works now! All I have to do is call a bubble whenever the price of a financial asset rises!’. I would argue that they have no idea about the environment that characterises a bubble-like top in an asset like gold. With the usual irony that is witnessed in the speculative arenas of life; they seek signals that do not correspond to the reality that they deal with (or so I presume). As I mentioned above – the future is not obvious. One implication of this is that it is never ’easy’ as such to accurately call the top of a bubble! To call a bubble top right now really has few consequences – prices today aren’t wildly different from yesterday and all you might miss out on is opportunity. This kind of thinking may make a little sense when you’re shuffling paper titles to assets – but I would argue that it doesn’t apply so strongly to gold. Try calling a bubble when the implication could be that you lose virtually everything just by owning the ‘risk free’ asset; cash!

The arguments of the gold bubble callers aren’t the only ones that are contemptous towards gold – another set of peculiarities comes from the ‘long-for-the-sake-of-being long’ speculators. Some bizarre communities of investors (MMTers ahem!) really don’t believe that central bank balance sheet expansions debase currencies. But that’s not all – they nevertheless are friends (or perhaps ‘frenemies’) with the long gold trade. The reasoning goes that others foolishly believe in the fairytale that fiat currencies can be debased, so therefore its good to buy gold just to front-run them. While I admit that the degree to which the market discounts the debasement of fiat currencies (via the bidding up gold) can be extreme – I scarcely acknowledge the premise! Anyhow, leaving this strange mode of thinking aside for a second, the implication is that these people think that they’ll just ride the bull market to the top and then get out. As I said above: – try doing that when you would really (really!) pay for that decision.

And now let me mention the final reason why I’m posting these thoughts right now: these attitudes may have the platform to gain ground over the coming months. We may have reached an inflection point in one of the indicators that people consider to be very important when dealing with gold (note: we don’t necessarily agree 100%) — the real interest rate:

An upward move in the real fed funds rate? - Click to enlarge. Source: St Louis Fed

Of course the longer-term picture remains unconvincing for positive real rates on the short-end of the curve

Aftab Singh is an independent analyst. He writes about markets & political economy at http://greshams-law.com .

© 2011 Copyright Aftab Singh - All Rights Reserved
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.


© 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