Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Recession, Depression, or Recovery, Gold Continues to Boom

Commodities / Gold and Silver 2010 Sep 08, 2010 - 02:44 AM GMT

By: Q1_Publishing

Commodities

Best Financial Markets Analysis ArticleAs gold nears new all-time highs, a minority of investors is in it, more are waiting for a dip, and most will miss out on it altogether. Well, until the top when everyone will be herding into it.

The case for gold is a simple one. But today we’ll look at why the gold boom has much more room to run and how historical evidence shows there isn’t much time to “weight” to get in.


The Long Boom in Gold

All the fundamentals are in place in place for the gold bull run to continue well into the future.

The U.S. budget deficit is likely to be much worse than predicted.

In Too Much Hope and Audacity, we found the government’s deficit forecasts to be a bit too optimistic. Although they called for a cumulative $9.7 trillion budget deficit over the decade, further analysis revealed it was a “best case” scenario. The official forecast included expiration of the Bush tax cuts, no recession in the next 10 years, and a greatest hiring boom in the past fifty years. As a result, the 10 year deficit is likely to exceed the $9.7 trillion estimate.

Also, deflation has the Fed very concerned. The Fed is, at a minimum, going to keep rates at or near zero for a long time to come. That means real interest rates will likely be negative, which in The “Real” Reason it’s too Early to Bet Against Gold we show why that will keep gold prices moving higher.

Finally, there’s a much bigger driver for gold: gold is still an outside-the-mainstream investment class.

Great Things Come to Those Who “Weight”

The main reason gold has the most upside potential of any asset class is simply because so few people own it or have any exposure to it.

Remember, bubbles are driven by the masses herding into a specific investment class. The tech bubble was created by a record number of Americans owned stocks. The housing bubble was driven by the percentage of households that owned a home reached its highest point in history. The current “bond bubble” – where the U.S. government can borrow money for 10 years at 3% - has been driven by investors dumping stocks and buying bonds at a record rate.

The gold bubble will be no different. At this point however, owners of gold and gold stocks are still very much the minority.

The chart below, courtesy of BusinessInsider.com, shows how much room there is left to move in the gold bull market:

As you can see, gold sector investments – from bullion to gold mining stocks – make up a tiny fraction of the investment world’s portfolios right now.

This proves gold is still a non-mainstream-asset class.

Better yet, when we look at the history of bubbles, it shows gold prices can go much, much higher.

History is Rhyming

The major bubbles of the past 30 years have all been dominated by one theme: at their peaks, the bubble asset class makes up a substantial portion of most investors’ portfolios.

The table below shows the past three major asset bubbles and how the bubble sector made up an outsized portion of the overall market:

The oil/hard assets bubble of the late 70s culminated in 1980. At the time the energy sector made up more than 25% of the S&P 500. That was more than four times higher the level when the energy sector hit rock bottom in 2000.

The tech bubble peaked around the turn of the century. Tech stocks made up more than 30% of the S&P 500. That was almost triple the average weighting sector for the previous 20 years.

The credit bubble peaked when banks accounted for more than 20% of the S&P 500. That was more than triple its percentage in 1980.

There’s a clear pattern here signaling there’s a lot more upside for gold since they still make up a tiny fraction of investors’ portfolios worldwide.

It’s impossible to say whether gold will reach the 20%+ barrier that marked other bubble tops. The pattern, however, shows bubble assets tend to grow three to four times larger on a relative basis than their long-run averages. So it’s not too hard to see where gold and gold stocks as a percentage of investors’ assets will triple or quadruple from here.

Gold Bubble: The Biggest Yet

As gold prices continue to rise, we’ll keep in mind the key foundation for bubbles – low interest rates.

The Fed’s response to the Asian currency crisis and Russian debt default fueled the tech bubble.

The Fed’s response to the tech bust was created the even bigger housing/financial bubble.

This time around the Fed’s unprecedented actions will inevitably create another bubble that will be even bigger.

As we said in our free gold report before the stocks in went up more than 1600% in six months (get your free copy here), every few decades though, the right conditions come along to make an absolute fortune in gold and gold stocks. Right now the conditions are right.

Good investing,

Andrew Mickey

Chief Investment Strategist, Q1 Publishing

Disclosure: Author currently holds a long position in Silvercorp Metals (SVM), physical silver, and no position in any of the other companies mentioned.

Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.

© 2010 Copyright Q1 Publishing - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in