Gold has performed phenomenally the past decade, gaining +20% per year ROI. But that doesn’t mask the fact that it is a bubble.
Detractors would suggest, “Zeke, but this time is different! The credit system is collapsing! Gold is the new currency.”
Most of those contentions would be debatable except the first.
How many times have you heard, “this time is different.” If you went on that advice 9/10 times, you would have your clock cleaned.
The same can be said of gold.
If it truly is different this time, the forward-thinkers, the lucky will get it right.
However, history shows these persons on average to be wrong more than correct.
Gold is in a bubble/developing-bubble. Here is the model.
Model ($10,000 gold is nearly unjustifiable)
Depending on who you subscribe to, the US has anywhere between 45 and 60 trillion in debt. Let’s build a model for the price of gold.
A: What is the fair price of gold? I said $600, my father said $800.
B: How leveraged is the US economy? I said 4, = 60 trillion debt/15 trillion GDP.
C: Multiply your A by B input. I said gold is worth, at most, $600 x 4, $2,400.
I said gold was in a bubble. It is, but I didn’t say we couldn’t make money by continuing to invest in it.
Good luck investing my friends. It is here we separate the dedicated from the intelligent.