Wednesday, May 30, 2012

Gold Bubble Callers are Wrong, Again.

First off, People need to stop focusing on the PRICE of gold and start focusing on the VALUE.

Today was a great day for gold in terms of both price and value, however. Right now, the DOW is down 1 percent to 12,455 and oil is down big, 3.45 percent drop to $87.6. Gold, however, is up nearly 1 percent to $1,563.

Gold bubble callers argue that the "gold bubble" has collapsed the last few months because the PRICE has fallen from $1,900 to the current price of mid-$1500's. However, hasn't the DOW fell in price as well? Hasn't gasoline prices, the price of oil fell? We need to be looking at these figures in terms of gold and not the US dollar. That is how you find the value.

Believe it or not, the DOW:GOLD ratio is currently under 8 (7.96). When the Dow was 13,300 and gold was $1,700, the ratio was still around the same. Interesting...

Meanwhile, gold stocks have been finally showing signs of a reversal. The HUI, GDX and GDXJ have all been outperforming the metal of recent. As I've stated before, I believe that gold juniors will outperform all on the next leg up in gold. And I do think that leg up will be coming sooner rather than later.

Final point on stocks - if you go back to 2002, the HUI has outperformed the metal. Since about 2008, however, the metal has outperformed the stocks. But the HUI will outperform the metal going forward, IMO. We are starting to see that now.

There are great deals everywhere - the juniors, the explorers, the warrants, etc. It's like throwing darts.

One final word for the gold bubble callers - you were wrong in 2008, and you are wrong now.

How is gold a bubble if virtually NONE of the middle class owns it?

The housing bubble - Pizza delivery guys turned "housing experts" overnight. Zero Money down loans.

The tech bubble - Unprofitable businesses with ludicrous valuations. Everybody a speculator. Even your cab driver.

The Tulip Bulb Mania, The South Sea Bubble.... Same deal.

I just hope that people are smart enough not to listen to you.

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