Originally posted by KazetNagorra There is never a "guarantee" that bubbles burst. Also, bubbles may burst quite slowly if the commodity is only moderately overvalued.
What do you mean by "over valued"? What is the true value of gold? What is the true value of the US dollar?
By your definition of "Bubble" surely any product with significant investment is permanently in a "Bubble". Or am I misunderstanding?
Originally posted by twhitehead What do you mean by "over valued"? What is the true value of gold? What is the true value of the US dollar?
By your definition of "Bubble" surely any product with significant investment is permanently in a "Bubble". Or am I misunderstanding?
The "true value" of gold depends on its practical applications in industry and for jewellery, and depends on the degree people can change their currency back to gold (I'm not aware of any currency which still uses a gold standard though). The value of gold is largely determined by speculators so you could indeed say that there is often a bubble in gold, however for practical purposes you can regard a relatively low amount of speculators, compared to historical trends, as the absence of a gold bubble.
I don't know what the "official" definition of a bubble is (or whether there is one at all), so feel free to ignore this.
Originally posted by twhitehead What do you mean by "over valued"? What is the true value of gold? What is the true value of the US dollar?
By your definition of "Bubble" surely any product with significant investment is permanently in a "Bubble". Or am I misunderstanding?
We wont truly know if its a bubble or not until it bursts.
But it has the hallmarks of one, namely high volume trading and rapidly increasing price. The problem is that bubbles are fuelled to the most powerful force known to Man: GREED
For gold to reach it's inflation adjusted high it must go up to nearly $2300.00 an ounce.
That is another $1000.00 higher.
That is based on the assumption that our government has been reporting the CPI accurately. It has been suggested that our government has been less than honest with those numbers.
If Krugman is right and we are headed for a third depression gold could go much higher. If the economy improves gold could go lower, but I don't see that happening anytime soon.
Originally posted by KazetNagorra The "true value" of gold depends on its practical applications in industry and for jewellery, and depends on the degree people can change their currency back to gold (I'm not aware of any currency which still uses a gold standard though). The value of gold is largely determined by speculators so you could indeed say that there is often a bubble in gold, ...[text shortened]... " definition of a bubble is (or whether there is one at all), so feel free to ignore this.
In tame economic times what you say is true. However, the rise in gold price is not because of greater demand for rings, bracelets and gold plated electrical contacts. The current rise in price is caused by desire to protect wealth from precipitous drops in currency value. It will continue to be used as a safe harbour until nations regain a rational debt to GDP ratio.
Originally posted by MacSwain In tame economic times what you say is true. However, the rise in gold price is not because of greater demand for rings, bracelets and gold plated electrical contacts. The current rise in price is caused by desire to protect wealth from precipitous drops in currency value. It will continue to be used as a safe harbour until nations regain a rational debt to GDP ratio.
Which is pretty awesome, because that currency needs to circulate, and gold is not something most people really need. If printing currency gets the rich to start spending money buying shiny metal it's a good idea.
Originally posted by KazetNagorra The "true value" of gold depends on its practical applications in industry and for jewellery,
But gold jewellery too is often seen as an investment and so a large proportion of that must also be removed.
I think you would find that gold is so plentiful that if it stopped being used as an investment its price would drop to a tiny fraction of what it is now. Of course industry would probably start using it a lot more if it was cheaper as it is a remarkably useful element.
Originally posted by Metal Brain For gold to reach it's inflation adjusted high it must go up to nearly $2300.00 an ounce.
That is another $1000.00 higher.
That is based on the assumption that our government has been reporting the CPI accurately. It has been suggested that our government has been less than honest with those numbers.
If Krugman is right and we are headed for a thi ...[text shortened]... her. If the economy improves gold could go lower, but I don't see that happening anytime soon.
For the Nikkei to reach its high it must go up by about 300%. Get those Sony shares now!
Originally posted by KazetNagorra I just realized tulip bulbs are way below their inflation-adjusted high. I just bought a few crates. Million dollar mansion, here I come!
How high can gold go?
19 Sep '10 22:08
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