muses of the moment

July 25, 2012

The Gold “Bubble” or Long-term Investment Cycles

Filed under: Gold and Silver Investing, Odds 'n ends, Precious metals — totallygroovygirlfriday @ 1:51 am

Update: Compare the last gold cycle to the “bubble” market chart link below. Click here.

Notice the first sell-off between 1974-1976. The gradual and then accelerating take off thru 1980. Then, the “high”, “denial”, and “return to norm” points? Then by 1983, we set up a new trading range of 300-500. Notice the mania period (point from hitting the last sell-off high a second time to final high) is about 3 years total and the fall after the high is less than 3 years?

When the new low was established in 2001, a new cycle began.

DOW Inflation-adjusted Chart: check out this chart of the inflation-adjusted DOW , look at 1982 to present. Notice the first sell off in 1987, the mania period from 1996-2000. We can also see the bull trap in 2003 and the “return to normal” in 2006. If this chart follows the typical bubble chart, gg would guess we are setting up a trading range (until the next cycle starts) below the green line.

Side musing: You will also notice that during the period between 1960-1983, the DOW was in a bear cycle, while gold was in a bull cycle. And in 2000, the DOW entered another bear cycle and gold started its bull cycle. It is much easier to see these cycles if you use inflation-adjusted stock charts. The DOW and metal cycles tend to act this way. It is possible that around the time you want to sell gold/silver, it will be a real low in the DOW. But remember these are long-term investment cycles (running 15-20 years). If you need a quick return or constant annual income, you may want to spread investments over several different options.

Long-term investment cycles are about keeping your capital intact over generations.

Totallygroovygirlfriday is as impatient as the next PM investor. However, I don’t let my emotions get the best of me. And let me tell you, it is not easy.

In the mist of all the noise, I often refer to this chart of a typical “bubble” market. It is actually a chart of a normal market cycle. It helps me put things in perspective.

We are not in a bubble in gold and silver, far from it. This is a picture of a bubble. Click here.

Groovygirl used to think that the first sell off was in 2008, when we dropped from $800 to $500. But gg is thinking now that the first sell off might be this last one from 1900 to 1500. It received a lot more attention. Also the public really isn’t in the game yet, and gg thinks they will get in after gold goes above the last high ($1900).

If you think this time line is 20 years and the low was in mid 2001, then the first sell off lines up pretty well with the middle of the 20-year cycle. It also falls in line with Martin’s year for a high in 2017-2018. (Or if you go with 15 year cycle, 2008, could have been the first sell off.) GG is leaning more towards a 20-year cycle.

But that is just conjuncture. This is a psychological chart, not an investment chart. Just another tool to keep things in perspective. gg is also not convinced either way that gold will stay at an artificial high due to a new currency or debt revaluation.

Conclusion: we are not in the bubble part of the gold investment cycle yet. And when it hits, it will happen pretty quickly.

Side musing: remember the housing bubble? The main mania phase was only a few years: around 2004 to 2007. That housing bubble mania phase helps us know when a mania phase is really upon us. All banks are in the mortgage-lending business, your relatives and neighbors are “flipping” houses, banks are lending to dead people for profit, everyone is taking equity out of their house…….

Everyone (banks, news media, your neighbor) thought the housing market could never go down.

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7 Comments »

  1. With the housing bubble, the public was able to get loans to buy houses.

    Who will supply the public with the means to purchase gold at $1900? About one out of every five U.S. households owe more on credit cards, medical bills, student loans and other debts not backed by collateral than they have in savings and other liquid assets, according to a University of Michigan report dated May 2012.

    IMO, the mania in gold will be between the 1% — it will be war, it will lead to war, and it will be up to the 99% to decide which side of the 1% they will take. Will they choose a false idol? Will they choose a real hero? Having gold NOW may safe your life in the future when that decision is made; whichever way the ball rolls.

    Just my thoughts…

    Comment by soleirolia — July 25, 2012 @ 3:21 am

  2. Good point. But whether they have it or not, they will talk about it. And silver, even at $100 an ounce is still affordable for most.

    gg

    Comment by totallygroovygirlfriday — July 25, 2012 @ 10:45 am

  3. GG,

    Just a heads up: Silver has been trying to give a daily buy signal on my indicators since Friday. I’m still holding SLV September puts against hardware in light of Martin Armstrong’s forecast for an August/September panic cycle swoon.

    -Lemming

    Comment by Lemming — July 25, 2012 @ 11:55 am

  4. The proof was a recent email from gold’s father of $1100 calling me a fool three days in a row.

    Comment by dumpster — July 25, 2012 @ 7:56 pm

  5. sinclair post about the swooning and posturing about armstrong

    The proof was a recent email from gold’s father of $1100 calling me a fool three days in a row.

    Comment by dumpster — July 25, 2012 @ 7:58 pm

  6. lemming you own no silver with tose pusts but a false promise

    slv is a broken run down indicator of all things rotten in silver

    Comment by dumpster — July 25, 2012 @ 8:00 pm

  7. eratta

    those puts

    Comment by dumpster — July 25, 2012 @ 8:01 pm


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