re: "But, it is the largest bubble ever in this asset."
I don't think it is a bubble at all. There isn't very much gold, but it is the logical alternative to fiat money. And there is a HUGE amount of fiat money.
I consider the chief requirement for a bubble to be IRRATIONAL pricing. Not that a commodity, stock or market has risen in price, but that it has risen irrationally. If, in fact, the world's fiat money backed economy is failing, gold is a highly rational thing to accumulate. It is generally presumed to be an OBVIOUS backing material for future currencies.
The second requirement I'd set on a bubble is that it attracts gamblers. There are a lot of gamblers out there. We talked to them every day on RB when the Dot-Com bubble was inflating. They went nuts.
How many people do YOU actually know who have gone nuts about gold? The only people I know who have bought a significant amount are members of my family, and people I personally persuaded. I know a few on the internet, of course, but that is reflective of where I spend time - on gold forums and Bear boards.
Third... gold has been running for about a decade. Conveniently for this purpose, so did the Nasdaq. How do the two compare? Gold has risen about half as much.
If gold rose as the Nasdaq did, it would be trading today for about $3,200 per ounce.
And, remember - unlike the Nasdaq, gold was beaten to a pulp in the twenty years prior to 2001. A considerable recovery was unavoidable, simply because it was horribly oversold.
Take THAT into account, and gold's "bubble" has inflated only a quarter, perhaps, as much as the Nasdaq's did.
Fourth... sentiment. Before its collapse, practically EVERYONE thought the Nasdaq was a BUY. The whole reason for the collapse, in fact, was that everyone who had money to invest had already put it into the markets. There was no more investable money!
Same for the housing market. Everyone was bullish. People were buying houses like crazy - five, six, seven houses. The term 'flipping' had to be created. And when there was no one else who wanted a house, *boom*.
The sentiment about gold just isn't the same. There is no exuberant buying. On my bear boards, I've ALWAYS been encountering nearly as many who think it's time to sell as who don't. And that's on a board of pessimists!
In the case of the Nasdaq, the peak came in March, 2000. After its first 10 percent decline, the average market exposure among the market timers most analysts followed actually INCREASED 20 percent - because the bullishness was at such a fever pitch that the selloff was widely viewed as such a buying opportunity.
That sentiment... that stubborn bullishness... is just the opposite of what we're seeing right now in gold. As the selloff progressed, lay-people ran for the exits and lightened their exposure.
Guess what? That's bullish behavior.
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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