The Gold Bubble or Is it?

Is Gold in a speculative bubble? Is the bubble going to pop anytime soon? 1420++ USD/oz, what a ludicrous price isn't it. From 350 USD just almost a decade ago. Introduce gold into my portfolio? Are you crazy?



If gold is in a bubble, i would call it in phase 2, the exponential phase isn't here yet, so there is still time to breathe. But won't it spell great news if Gold isn't in a bubble yet? I personally believe gold is developing bubble like-symptoms but hey, the markets could always prove me wrong.

Lets look at Charts from The Aden Sisters, Mike Maloney & Jordan Roy-Byrne.

1. The Aden Sisters' Chart

'The rule of thumb is, when gold’s rise reaches a new high for the bull market, it’s a super strong market. And as we’ve just seen, when it’s combined with the stronger phase of the bull market, it makes for an explosive rise.

And explosive it has been! With gold now approaching $1500, it’s near our first important target level for this stronger phase. Gold will most likely resist near $1500 before moving clearly above this level into the next phase of the bull market.

In the big picture and on the upside, once $1500 is well surpassed, the $2000 area will then be the next target. Will $5000 - $6000 or more end up being the final target?

As good as it’s been, gold is far from being in a bubble. And you must admit, it’s been the quietest bull market in history. Just ask the average person.'

- Aden Sisters

2. Mike Maloney's Charts

'The top chart shows global financial assets and gold’s nearly miniscule role. While many have called gold’s early bull run a bubble, they fail to note the bubble levels still present in stocks (equity securities on the chart) and debt (private and government debt on the chart).

The second chart below shows gold’s role in the global financial system as a percent of the total. Ten straight years of increases in the price of gold and gold is still hardly past half of one percent of all the paper assets floating around. The world really is awash in a flood of paper assets, and these charts prove that fact today.'

-Mike Maloney


3. Jordan Roy's Chart

'As you can see in the chart, Gold was in a steady uptrend for the first five or six years. It was contained within lines 1 and 2. The market began to accelerate from the very end of 2005 into 2008. The retracement in 2008 bottomed essentially at line 2. The fact that the market held above it meant that the market remained in a new acceleration mode, which started at the end of 2005. Following the 2008 bottom, the market slowly but gradually accelerated its way past line 3.

Note the change in the market’s character. At the first phase of the acceleration (2005-2008) the market saw sharp impulsive advances and long consolidations. This time around the market is showing more strength. Although the impulsive advances are smaller and shorter, the ensuing corrections are comparatively shorter and smaller (relative to 2005-2008). In other words, the market is gaining strength because the corrective periods are shorter. The final resistance is channel 4, which parallel to 1,2 and 3, connects the 2008 high and highs of late 2010. Channel 4 at present is ~$1,460 and increases to about $1,600 at year end.

A strong move past channel 4 means the market has little in its way until $2,100 and $2,300. There is a strong Fibonacci target at $1,500 which intersects with channel 4 in early summer. That could mark a top.'

-Jordan Roy