Saturday , 23 September 2017


Gold & Silver Are Nowhere Close to Bubble Territory – Here Are 5 Reason Why

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Kranzler goes on to say, in part:

Reason #1: There Has Been No “Blow-off” Move Higher Yet

We have yet to see the typical “blow-off” move higher, where investors chase the price of gold higher at all costs. In fact, those who remember the last time gold behaved in “bubble” fashion, 1979-1980, also remember that there were lines of people going out [to] coin shops all over the country and around the block as buyers lined up to chase the price and supply.

Reason #2: “Cash-for-Gold” Businesses Are Still Flourishing

Furthermore, the “cash-for-gold” business is still proliferating and profiting handsomely from people taking their gold/silver jewelry and other sundry “junk” items and selling it for a pretty big discount to the spot price. If gold were exhibiting the traits of a bubble asset, the cash-for-gold business would disappear and we would be seeing ads all over the place for businesses trying to sell into frenzied demand.

Reason #3:  Investment in Gold Is Still Less Than 1%

As it stands now, globally institutions have less than 1% of their assets invested in gold:

Given that in 1980, U.S. institutions had 6% of their holdings in gold, it is arguable that the gold bull market has yet to even cycle through the typical second stage of a bull market (1. smart money, 2. institutions, 3. public/blow off bubble) and, based on conversations with numerous national coin dealers, maybe 2% of the public has started to buy physical gold and silver (obviously, they are still selling).

Reason #4: Demand for Gold Is Not Yet Universal

Probably the best the indicator that gold is not even remotely close to being considered in a “bubble” state is this chart below I sourced from King World News, from Chartsrus.com (the black box edits are mine):

(click to enlarge)

The chart [above] shows investment and jewelry demand segmented, for the most part, into eastern and western hemisphere countries. As you can see, since the gold bull market started, western hemisphere demand has declined almost every year since the 2002 peak by a stunning 60%. Concomitantly, the demand in eastern hemisphere countries has increased almost every year. If the gold market were truly in a bubble, that blue line above would be rising at least as fast as the red line and probably faster.

Reason #5: Gold/Silver Mining Stocks Are Currently Oversold Not Overbought

The gold/silver/mining stock market has corrected to the point at which it can be considered technically oversold. The mining stocks particularly represent compelling value right now:

(click to enlarge)

From a fundamental standpoint, the mining stocks, as represented by the HUI Amex Gold Bugs Index of unhedged mining stocks, are as cheap relative to the price of gold as at any time over the last three years. This is actually true going back 10 years. As you can see from the above chart, the HUI/gold ratio chart has consolidated just above a 3-yr low, after testing the 3-yr low twice. To reinforce the potential bullishness of the mining stocks, the momentum indicators represented by the RSI and MACD are moving higher from an “oversold” condition.

Conclusion

Because of the deteriorating fiscal condition of the U.S. and the acceleration in global Central Bank money printing, I expect gold and silver to stage a significant rally starting in early 2013….

*http://seekingalpha.com/article/1086301-gold-in-a-bubble-seriously

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gold-bars4

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gold-bars4

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One comment

  1. I’m not surprised that the red “Asia, Middle East and India” line is going upward compared to the Blue (no pun intended) line since all the Blue Countries with the possible exception of Australia are having Fiscal problems which have started to affect their citizens in a very big way! The shrinking middle class in the USA is just starting to come to grips with this reality as ever more “once middle class” folks are now joining the new poor.

    Thanks to the Gov’t. bailout of the wealthy BIGS, which has done nothing positive for the rest of the Country, even America’s future is looking grim for the 90+ % that are not Wealthy…

    A good indicator of this is the 1.7% COLA those on Social Security got for 2013 while their Medicare costs increased 6 to 9%.

    Even those once not too concerned are now getting the message that the Gov’t. is gaming the calculations to make things look far more rosy than they really are; and that realization will encourage ever more to invest in Precious Metals, if they now have anything left to invest with.