Amid the increasing talk of a “gold bubble” these days (and with many investors not likely caring too much that the “bubble” they now see isn’t all that impressive as compared to the “bubbles” they saw two years ago, four years ago, and six years ago as noted in this item earlier in the week), putting a real gold bubble from 1979-1980 up on the same chart with the more recent moves seemed like an interesting exercise. The result is shown below.
Depending upon where you start the 1979-1980 move, it could be made to look even bigger. It is shown above, somewhat arbitrarily, beginning in May of 1979 at about $250 an ounce, though, one could argue that starting in the low $200 range earlier in the year or below $200 an ounce in 1978 would be more appropriate.
For convenience, the chart above is also shown below without the green curve where the blue, red, and black lines look much more menacing with a 75 percent reduction in scale.
Clearly, the 2005-2006 move along with the surges in both 2007-2008 and 2009-2010 look quite different in the two charts and, when you think about it, you have to wonder: a) what the recent fuss is all about, and b) how much higher the gold price might go someday.
It looks like the dollar strength we saw yesterday is quickly fading as more and more Federal Reserve officials talk about the urgent need to print more and more money. Don’t be surprised if, at some point, we again see something like the 1979-1980 surge – that would be an excellent time to cash in and think about doing something different.
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
A better comparison might be 1972-81 against 2001-10. A two year period is inherently a pretty arbitrary segment.
Yes, the move up from $35 was even more impressive in percentage terms, but I wanted to show a move of about the same duration as the ones over the last six or eight years.
why not 1970 – 1980 your arbitrary removal of the first 300% lift seems equally simplistic……. also you must realise that this time gold will get stuck at higher levels due to the total failure of fiat money globally. however , however , however, i will be purchasing long dated puts after the bubble truly appears to buy insurance on my bubble gains.
If it’s not asking too much, could you create a chart that starts at $35 and runs to $850 in 1980 and put that up against the move from $275 in 1999 to today? I’ve seen that elsewhere, but can’t remember where.
Obviously, the 2400% increase back then will dwarf what we’ve seen in the last ten years, but that’s also misleading because the $35 price in the early 70s was very artificial, so, in a sense, what you’ve shown above might be a better representation.
There is only one bubble in the world the past 2 decades. It is called the U.S. Reserve Note.
Well said and exactly the point. Here’s the issue I have with this article: The definition of a bubble is that it ‘pops’ and things are reset just like a balloon does. The exception is that you’re left with a piece of rubber that you can’t even use any longer.
What you are comparing in this article when referring to the historical ‘pops’ in gold and silver prices are very simply the dollar getting stronger for short periods of time. Typically when the economy grew and the fed kept it dirty hands out of things. Basically you are comparing short respites in a ever expanding bubble which in reality is the devaluation of the American dollar.
This mega-bubble WILL pop and we will be left with a tattered and un-usable dollar when it is done. And THAT will be your bubble and not the piddling little drops and spikes you are comparing.
Gold and silver do NOT lose value in general. The fiat currencies that we use DO!
This mega-bubble will pop VERY soon. China knows this. The banksters know this. The fed reserve knows this. But there’s nothing they can do to stop it.
So get ready for the ‘pop’ heard around the world my friends!
From the world’s largest Gold trader – Jim Sinclair – a great new book
http://www.apocketbookofgold.com
Looks like the correction is over. Damn! Missed it again.
Jones, stop looking fo a correction. Just keep buying!
A question I have is this…. When I sell part of my silver and gold, what paper trash do I buy and will there even be a paper trash to buy?.. I think I know the answwer but I want to talk to others…..WHAT IS THE END RESULT?
p.s, Jones, I meant no disrespect to my reply…. Silver under 50 is a buy!!!!!!!!!!!!!!!!!!!!!!!!!
No disrespect,
There’s no paper trash to buy, so keep buying gold.
foodstuffs and energy, looks like maybe rare earth element (REE) as China is quickly turning off the spigot to the US.
when gold and silver stops its run up, treasury notes might be as high as 15 % interst return. in the 80’s run up, many gold investers went right into treasury bonds.
Now that’s an article about people are so scared of the Gold price collapse.
The intervals shown in 2000-2010 period represent the front end of the 1979-80 period spread over a longer time period. We havent got to the crack-up boom phase shown for 79-80 when we need to sell gold. I am thinking thats still 5 years away. When the slope of the up spike matches the slope of the 79-80 spike, thats when we need to sell. It will probably happen in a short period of time. Most people will probably react too late; I hope I am not one of them. It may be impossible to sell when free fall occurs.
I love the charts! GREAT perspective.
” that would be an excellent time cash in and think about doing something different.”
Very optimistic thinking. The IMF and World Bank-ers behind the UN have plans to remove most of the value of the US dollar via dilution. This will effectively wipe out America’s middle class. This is intentional since the middle class is historically the only group that will ever overthrow a corrupt government. In our case, government works fine — it’s just that it has been purchased by central bankers. The bankers need to be thrown out, as they were never elected to such positions of power. Their power depends on the the general population’s ignorance of what I have written, above.
In any case, you will want to hang onto your precious metals as they will serve as a convenient form of barter when the time comes. Junk silver coins will be most useful.
This is no longer about making money. It’s about preserving wealth. Preserve your wealth to some degree and you will be a king in the land of ignorant, poverty-stricken citizens that know nothing about how to self-educate, as they were bred for obedience by their masters, who bought the school curriculum…
Yep!..great charts and good responses. I’m really looking for some deeper insite on this transfer of wealth. With all paper headed for default things are not looking good. I could see the world banksters stepping in after the next big crisis and assuming the world trash debt and defalting the system back to the 50’s kind of world and backing the world credit system [the new money] with gold once the dow drops to the price of the gold comex or the gold comex climbs to the dow. Of course there are many other scenario’s. If these ass rapers want the world to consent they can’t have a world revolt. We indeed live in amazing times!… Keep looking up, today could be the day!!!
http://www.youtube.com/watch?v=ou8vj_-YsPE&feature=related
Folks, I wish people would stop with the political diatribes. The US has lost the will to do real research & development, a long time ago. That was the engine of growth throughout the post-war era, not financial services. And from the political side, tax cuts alone don’t generate new industries; real technology, however, does.
Starting in ‘88, the NSF put out articles on an impending shortage of scientists/engineers but strangely enough, big supercollider projects were cancelled, R&D labs (both public & private) started downsizing during the 90s, etc. Somewhere in this time period, offshoring to Asia began. By 2000, many newly minted stateside scientists/engineers were looking for business programming IT work in the IT sector (since the R&D shortage was a myth) and then of course, that bubble collapsed with Nasdaq 5K.
Now, it’s the year 2010, a lot of damage was already done and people are suddenly asking themselves… what happened? and decide that it’s the govt’s fault when it’s been poor business practices (esp in finance), lack of R&D focus and planning and the USA core business destructive policies of global labor arbitrage all in effect.
If we had these discussions back in the 90s or early 00s, then I might have believed that something could be done but now, it’s too late. Once core research is in the Pacific Rim, the real wealth will move there. That’s just the way it is; you can’t stop half the world’ population esp once they’re motivated and trying to beat what was formerly an American stateside mainstay ,,, Bell Labs, Xerox, DuPont, GE, etc. And speaking of GE, today, it’s mainly a financial company. Imagine, Edison’s former company, called *General Electric*, isn’t making its bread/butter from electronics but from trading bonds.
Too much easy money made it more ‘profitable’ to do financial engineering (i.e. theft) instead of real engineering. This is the root cause of the malinvestment in education and training. It’s never too late to change. But if not change, then we are toast if unable to find new areas to plunder, since that is how we have chosen to specialize.
A corollary. Ending the Fed ends the gravy train for financial engineering and people/resources will mostly be redirected back to creating real value.
‘m still going state that it’s too late.
Here’s why … from Sputnik to Voyager, an entire generation of Americans were raised on the notion that science/engineering work was ‘good for society’ and a stable source of income, leading to a middle class existence. The ‘good for society’ angle is what got folks to want to study 6-12 hrs/day, otherwise, many of these persons would have tried to become doctors or patent attorneys.
Today, the best and brightest opt for careers in medicine, management consulting, finance, and law. Even MIT has been placing roughly ~40% of its graduates into consulting or financial type of firm during the 2000s. And that’s MIT, the leading tech school, not Dartmouth, the classical banker’s Ivy.
The reason why I bring this up is that it takes a generation to build a critical mass of expertise in various technologies. It’s not just that someone reads a book on circuit analysis and then starts a new industry. Starting a decade ago, that mass has been dwindling and building high frequency trading platforms has become the rage for tech graduates. What this will do is, in effect, allow R&D critical mass to grow in Asia, while the US focuses entirely upon arbitrage situations to make a living. No one will put in long hours of study, just to be in the lower classes. The difference in salaries between let’s say a Pharmacist and that of a person with a masters in Biochemistry is $110K vs $35K (a.k.a lab assistant role).
Thus, we’re in a financial type of economy and the net result will be a loss of the tech laden concentration, which led to the golden age of the 50s, 60s, & 70s, where the only place to do *real* science work was America. Instead, anyone interested in tech will be looking at Singapore, Beijing, Bangalore, or Seoul, in the years ahead.
Your charts are misleading as hell. So, you want people to believe there is no bubble in gold, simply because the bubble was built over a longer period of time? I could break down the current bubble and give you a chart exactly the same as the one you have at the top. Do us all a favor, go get a job at McDonalds. That’s where you belong.
Hey Brett- your look at the info is flawed. Look at it from an investor/insurance policy. When gold was confiscated people gave it up pretty readily as they had FAITH in our leadership and the dollar. ANYONE have faith in the decision makers today? An attempt to relive the public of their holdings now will be met with rapid lead delivery.
Even if you’d bought at the top of the bubble in 1979, if held ’til now, you’d have doubled your money. I realize that’s a long time to hold onto an investment, but the mega-trend is dollar devaluation, not golden bubbles.
Hmmmm – interesting discussions, but I would like to point out something else. As a chemist my political conviction is actually that of a radical thermodynamicist … – what do I mean by that ?
Real wealth is ultimately always associated with mass and energy flow in any system and mass and energy flow in economic terms is what ?
The REAL economy (as opposed to derivatives etc.)
So where does that position Gold (or palladiium, platinum, silver, etc.) ?
Gold is intrinsically valuable because it takes a lot of energy to get it and it is perfectly stable as an asset – both in terms of its physical reality and its inflation adjusted buying power, which may even increase with increasing planetary population (there is less than 1 ounce of gold per person on the planet.)
This is why we today look at a face mask of Tut-Ankh-Amun and stand in awe.
So matter what the statistics and how you plot them – do not forget that metals are metals and in the long run I doubt that one can loose having some !
… one final point: With QE2 in the works and the obvious continuing and accelerating debasement of fiat currency, the purchase and holding of Gold (in its physical form – not as an ETF) has de facto become a POLITICAL STATEMENT …
… so go out and vote – with your money !
”
ass and energy flow in any system and mass and energy flow in economic terms is what ?
The REAL economy (as opposed to derivatives etc.)
So where does that position Gold (or palladium, platiinum, silver, etc.) ?
Gold is intrinsically valuable because it takes a lot of energy to get it and it is perfectly stable as an ass
”
~~Marcel Schlaf~
We all interested in just one thing. But into what paper trash do we put our ill gotten gold winnings? Depends how much tax on the trash. With local and state governments going broke you can just bet that taxes on trash will go higher and higher. Don’t forget the hidden taxes. More I think of tax — more I think, “let sleeping gold lie”.
Guten Schlaf
!
Very witty indeed.
However unfortunately also not a meaningful contribution to this discussion.
Merely displays the the standard level ignorance on the thermodynamic realities of the physical world which underpins any economic acitivity.
We will not escape these realities – rest assured.
The reason the moves in gold seem more muted now than in the past is because gold is actually an inflation hedge. That’s how the “real” market prices gold. The rally that began in late 2001 just after 9/11 was the market signaling the great money pump the Bush administration was about to begin under the watchful eye of “the maestro” himself, Alan Greenspan. At the peak of the real estate bubble, which of course was created because the Bush republicans would not allow the “real” market to price assets “properly” after the 1-2 punch of the tech wreck and 9/11, gold fell in lockstep with the general stock market. It was prety tough to argue that there were inflationary pressures when Lehman n Bear were both painfully eliminated by their own greed…and home prices were dropping like the temperatures in Jan. (BTW, one could look at a stock chart of any of the homebuilding stocks such as TOL for instance and you will clearly see just how far ahead of the real estate bubble the real market was. The homebuilding stocks actually began their descent right around April 2005, well before the mania in housing had run its course in late 2006..early 2007.) So where are we now with the most recent runup of gold to new price highs? Pretty simple actually. The speculation has never actually been taken out of the markets because the people who are in control of the markets are in control of our government besides. Current Fed Chairman Ben Bernanke feels that the way to improve things on Main St is to make sure Wall St is happy…thus the “threat” of QE2 even as the major market indicies are trading close to yearly highs. The fact of the matter is that the markets were never actually allowed to make the “proper” adjustments. I know for sure that this goes back to the time when George W. Bush declared “Mission accomplished” concerning Iraq. And it might even go all the way back to Ronald Reagan’s efforts at the great money pump. That I don’t know. Mr. Market does though. And make no mistakes about it if you happen to be a goldbug. If the market crashes…you crash!
Im a very simple man. I don’t mind saying this. I say this because what I’m going to say may sound simple but in fact it’s not. The beginning of wisdon is the fear of God. I won’t expound this statment but will say this. The God of all creation has made Gold and Silver a fair wieight of value. Its that simple. Please don’t bash me and if you do please show some respect because I mean no harm to anyone!… Gold and Silver are money. They are the only 2 that have no smell.. A trained dog can’t even find them… I have so much to express but my weak writting skills fail me…. I have truly enjoyed reading the many replys.
I remember back in 1976 -1979 vagly ( I was 8 years old ) . I remember going to this little store by the school I went to buy chips, chocolate and pop. The chocolate bar was about 15 to 20 cents as I remember… then all at once it went to 1 quarter, then 35 cents, 50 cents and then 75 cents… By 1980 we had a chocolate bar at a buck…. I will leave you at this time with this…… Hold on, its comming!!!!!
[...] Gráficas: Now That Was a Gold Bubble. [...]
Gold Confiscation: Could it Happen Again? watch this http://www.youtube.com/edjuh10
I discovered a niche site yesteday that looked alot like this, are you certain another person just isn’t duplication this site?
Do you have a link?
[...] -Now that was a gold bubble. Amid the increasing talk of a “gold bubble” these days (and with many investors not likely caring too much that the “bubble” they now see isn’t all that impressive as compared to the “bubbles” they saw two years ago, four years ago, and six years ago as noted in this item earlier in the week), putting a real gold bubble from 1979-1980 up on the same chart with the more recent moves seemed like an interesting exercise. The result is shown below. Read more here-http://timiacono.com/index.php/2010/10/20/now-that-was-a-gold-bubble/ [...]