Eric Sprott on the "Recovery" and Gold!

In a few paragraphs, Eric Sprott fillets the notion of a recovery.  U.S. housing?  No.  U.S. employment?  No.  European solvency?  Not even close.

Then he goes on to detail the incredible rising demand for physical gold (Am I the only one that feels silly needing to say 'physical' in connection to gold?) in the rest of the world.  Odd then, that gold prices seem to be an "immovable object" lately.  As I read Sprott, we may soon see an "irresistible force."

"We have written at length about the disconnect between the paper gold price and the physical gold market. If the demand changes stated above applied to any other market, the investing public would lose their minds. "

And when they lose their minds, gold can be expected to go parabolic.  THAT is when we reach bubble territory, and when it's time to consider liquidating your precious metals and converting them to. . .

Will gold enter a mania phase?

As I've said before, DailyWealth.com is often a good read.  In this entry, Brian Hunt explains why gold may explode to much higher prices.  Interestingly, he feely acknowledges that the highest prices we see in this cycle are likely to be irrational.

As we've noted many times in DailyWealth, you can make a good case that this time is different. Never before has the nation with the world's reserve paper currency – which is backed by nothing but faith in a bankrupt government – promised so much to so many people (Social Security, Obamacare, unlimited military commitment).

Think we're already at the mania phase?  Maybe, but take a look at Brian's chart showing gold as priced in euros.  If I'm right, gold will also spike in dollar terms, and I expect it to leave the area of the chart and climb at least 3-5 paragraphs up the page.  Of course then the question will be, "When do I sell?"


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"Cash for Gold" as proof of no gold bubble?

The National Inflation Association, for whom I have a great deal of respect, offers this video as proof that we have no bubble in gold.  I suppose that the rationale is that there must be many gold sellers to support all these gold buyers.



OK, so there are quite a few buyers in Atlantic City.  Still, I have some serious doubts about exactly what this situation, in this location, means.

For example:

It looks like few, if any of these businesses buy gold "full time."
Who is selling anyway?  Down on their luck gamblers or investors?   I have a guess.
Is anyone selling coins or bullion, or is this all jewelry?

Bottom line is this.  While I agree with the NIA's premise, that gold is not in a bubble and has a long way up to go, I don't think the evidence in this video offers any type of proof.  And I still can't wait for their next video.



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Is gold in a bubble?

"Tex Norton" writing for Whiskey and Gunpowder has some interesting thoughts on that subject.

Is gold in a bubble? Possibly, but if so, it still has a long way to go before the top is reached. The top will make itself known if you simply watch the market actions. In the meantime, what else can you do, if not invest in gold, to help protect your accumulated wealth?

Indeed, what else can you do?  Shorting stocks might be one reasonable possibility.   It just makes me very nervous.  How high can stocks go when the money supply is potentially unlimited?

Another idea that I'm currently considering is the purchase of 2 or 3 leveraged inverse ETFs.  The idea is appealing.  These ETFs are designed to achieve a return of 2 or 3 times the opposite of the benchmark they are based on.  (FYI, I'm considering small investments in EUO, SRTY, and TBT.)

I really don't like the idea of leverage.  Truth be told, I think these leveraged ETFs are built on the house of cards that is our financial system.  I wonder though, if a person whose investments are largely weighted towards precious metals might be well served to have a small (maybe 10%?) investment in one or more of these.

If you decide to, please be sure to research thoroughly before you invest.  Even the people at Proshares include this warning, among others:

ProShares ETFs may be appropriate if you intend to invest in them as a portion of a portfolio, not as an entire portfolio.

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George Soros is buying gold?

Well, sort of.  Documents filed with the SEC show Soros is a buyer--big time.  On the other hand, we've got his famous quote to consider.

In other gold news, SEC documents show that George Soros doubled his gold investment during the end of 2009, while publicly calling gold the “ultimate asset bubble.”

So, do you suppose Mr. Soros is buying because he wants to be in this "ultimate bubble?"  It might make sense.  Clearly anyone who expects a massive spike from currents prices would be comfortable buying now.



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