Is Gold in a Bubble?

Hello All,

Ed Bugos here.  Jeff is busy preparing the October issue of The Dollar Vigilante, set to hit our subscriber’s emailbox on October 1st and so I am filling in on Blog duties today.

I received an email from an associate today enquiring whether or not I thought gold was in a bubble.  Below is my response to him, I thought you may find it of interest:

We are still at the foothills of a bubble in my opinion… the real bubble is in gov’t bonds today.

Tomorrow’s bubble is in mining shares.

BUT, there is a small bubble in short term expectations about QEII that is playing out in all things, and which could cause turbulence for gold if confidence in the economy returns as a result.  It would be healthy to see a $100 pullback.  In fact, if it doesn’t happen then yes maybe we’ve entered bubble mode already.  But a bubble in gold is not like any other bubble.  It is far more dangerous because in those other things it’s a bubble ground in optimism more or less.  In gold it is an end game bubble…based on fear about the value of reserve currencies, which could feed on itself since their value is ultimately based on subjective factors.  If you get hyperinflation winds it is difficult to stop.  That’s why “bubble” is not even the right term for gold.  It is only a bubble IF the authorities were to abandon their inflationist monetary ideologies tomorrow AND it’s not too late.  There is a point at which it becomes too late –when the demand for money starts dropping as a result of the mounting loss of confidence after inflationary expectations have long been entrenched.

I don’t think we’ve crossed that line yet, but we’re well on our way, and the political will required to forestall it is nowhere in sight because people generally feel entitled to your wealth, and think the  government can guarantee them all the essentials of life…FREE!

So, I still stick to my belief that we are only in the foothills of a bubble.  But even just in the early stages returns have been excellent.  Almost all of our stocks in the TDV portfolio are well into double digit returns just in the last few weeks.

When we reach the mania stage of the “bubble” in gold and gold stocks we very well could see stocks doubling and tripling overnight and day after day. 10,000%+ returns are completely possible in this environment and these type of returns were achieved by many stocks during the last gold bull market that ended in the early 1980s.

If you haven’t yet subscribed, try our no-obligation $25/month full subscription to receive our insights into the best precious metals stocks to get positioned in for these potentially massive returns.  Or, if stocks aren’t your thing and you just want information on how to protect your assets and information on expatriation and survival during the collapse of the Dollar system, try our $15/month Basic subscription.  Or just subscribe to our free list if you want to get your feet wet in this whole process.

Jeff should be back tomorrow with his usual insights into the rapidly changing world financial, political and social systems.

Best,

Ed Bugos

Senior Analyst

Ed Bugos

Mr. Bugos is the Dollar Vigilante's Senior Analyst and founding partner. He is an Austrian economist and has been a dedicated investment professional since 1989, having started his career as a stock and futures broker on Howe Street at one of Vancouver's leading brokerage firms. Ed retired in 2000 warning clients about the tech bubble, and launched an online digest forecasting gold's revival and bull market when it was just $285. He saw the value in bitcoin as a potentially sounder alternative to the present fiat currency system as early as 2011 before many of his Austrian peers. Ed has built a career record of being early on major economic trends, bullish and bearish.

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