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« The Five-Million-Dollar Reason for Going Offshore | Main | China TV reports gold sales ‘going through the roof’ »
Wednesday
Mar302011

Gold in a Bubble?

On BNN today, Yoni Jacobs put the case for gold being in a bubble due to over speculation and so his strategy is to short gold stocks.

Yoni 31 March 2011.JPG


With the price of gold reaching record highs, a growing chorus of market commentators say the fundamentals no longer justify such a high price. Yoni Jacobs, Executive Director and Portfolio Manager at Chart Prophet Capital, tells BNN that over-speculation, heightened expectations of price increases and a surge in publicity around the gold market are all contributing to a bubble. 

Gold Bubble 31 March 2011.JPG

To see the clip please click here.

An interesting 'take' from the bearish standpoint. It occurred to us that gold prices could still rise without the miners participating in the rally for a myriad of reasons. However, to short the gold producers when the underlying commodity is going up makes us a tad nervous and we don't see gold going down at the moment, so we'll skip this dance and observe for now.

Yoni shorting gold miners 31 march 2011.JPG

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Over in the Options pit, our model portfolio has managed an average return of 41.23% per trade, 68 closed trades, 66 closed at a profit, or a 97% success rate. Average trade open for 42.76 days.


A gentle reminder for those of you who are still thinking about it, prices will double as of 2nd April 2011, but will remain 'as is' for existing subscribers, join us now while this bargain lasts.


SK Chart with profits re-invested 29 March 2011.JPG


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So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


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Reader Comments (9)

let us see who is proven right..
let us try to remember this guy's name.. if gold continues to go up (which i think very likely).. then miners will follow suit and burn the shorts of mr. jacobs..

this call will either destroy his career at a very young age.. or propel him to stardom.. ;)

for me, im invested in gold/gold miners and believe the recent article by caseyresearch saying that the elephant in the room (those various funds) have less than .1% invested in gold.. if they just doubled or tripled that .1% then we will see a huge surge in prices of the precious metals/miners..

goodluck to all!

March 31, 2011 | Unregistered Commenterrob

Exactly! Gold is in a big bubble. It is just below the mid-ponit in a wide range between 1000 and 2000, this is often a reversal point. Same happened to oil when it got in between 100 and 200. Bulls will never see a reversal, they think it is going to go up forever.

March 31, 2011 | Unregistered CommenterDi

Ah, where to start?

Gold is above its "fair price" according to one Mr. Yoni Jacobs, whoever the hell he is.

So, what exactly is the "fair price" for gold? And exactly how is that price determined?

I have railed against this bit of stupidity many times before and I'll do it here again. The concept of a fair price comes from Thomas Aquinas via Aristotle. It posits that a fair price can be objectively determined for any good or service and it's a sin (Aquinas)to charge more for it than the fair price. This is utter nonsense. Trying to objectify an inherently subjective exercise is ridiculous. Note that neither Aquinas or Aristotle ever told us how one arrives at a determination of fair price.

A modestly intelligent individual and any half-decent trader knows that what something is "worth" is what someone is willing to pay for it. One man's trash is another man's treasure.

What the "fair price" of a Mickey mantle baseball card? It's just a piece of cardboard. To a native tribesman ...nothing. To a lifelong Yankee fan...plenty.

The fair price ends up being identified as the historic price....where a price has been. If the current price is higher than the historic price or it's gone up "too much." it becomes "unfair." How weak is that? To Yoni, the gold price "looks a little high." Uh huh. What does that mean? He means too high compared to where it's been. Again, that's meaningless and, if you're gonna trade, you absolutely have to understand that just because something has gone up doesn't mean it has to come down. Maybe demand is rising and supply isn't. Hmmmmm.

Note that this clown comes from a company called Chart Prophet. Now, I use charting and TA. They're extremely useful, but only to tell you when something is extended from its moving average...that the RATE of change is extreme. It doesn't tell you anything at all about whether there are good reasons for the move or what the long term prospects for the investment in question are. That rate of change may well be justified. The prospects may be spectacular. Microsoft, as an IPO, was a great buy. It wasn't a bad one at $50 (pre the 9 stock splits).

In the case of gold, a world awash in a sea of paper money is desperately seeking a monetary anchor, with China being the biggest and most worried dollar holder. That's a good reason to be in gold/silver and out of clownbucks. The Chicoms don't want to be screwed when the dollar loses another 10, 20, 50, 99%.

But note that Yoni doesn't even mention the word "money." The rise in gold is about conversion of phony money into real money. It's about avoiding the fallout from the intentional destruction of the clownbuck by the Fed. And the "price" of gold is simply a reflection of what holders of dollars think the prospects are for the dollar to maintain its purchasing power. (Not too good.) How hard is that to understand?

Media frenzy huh? Could have fooled me. Every mainstream report I see is washed in acid before it's broadcast or published. The antipathy is almost universal. They talk about gold and silver because the metals are outperforming almost everything else, but they hate that they are. That's a perceptual filter. He sees frenzy. I see denial and loose talk designed to discourage would-be buyers.

The point he makes about commercials on TV people begging to BUY your gold is absurd. First of all, that's a simple con. And the perpetrators are trying to get people to SELL...not buy. Gepiche? When the mania arrives and the media gets on board, only the smartest people will be selling. Now, it's the most easily duped.

Vending machines...please. So what? If you're basing a sell decision of the likes of that factoid, you're an idiot.

The only semi-valid point this dude makes is that producers have taken off their hedges and they could reinstate them. Will they? That's the question. Talk to Barrick (co-conspirator with Morgan and the Fed) and Ashanti and see if they want to go back down that road anytime soon after losing tens of billions. There will always be some hedging, but wholesale hedging? I doubt it. And wouldn't the Chicoms love to buy that future production in off market deals if they could? Absolutely.

Note that Mr. Jacob never mentions that the price has been suppressed by the central bank/bullion bank/Barrick combine.

But then again, charts won't tell you that. They don't say WHY something is rising or falling. You have to KNOW something about the subject you're discussing.

This guy is shorting mining stocks. All I can say is get ready for a religious experience. That's Like shorting Apple at 20.

To close, Di, old friend, how are those shorts coming?

"I put another short on gold today. Looks like another top. Stop at 1438. By end month it should be at 1320-1340."

Comment by Di — March 23, 2011 @ 1:22 pm

Last I saw, silver was making new highs at $37.90 and gold was surging. Ooops, I see you got taken out. And you were so sure. At least you had a stop in.

As I like to ask people who seem to know it all, "Could you be wrong?"

I know the price of gold and silver could get poleaxed at any time. I, in fact, hope they do go down and hard, but only because I want some more cheaper. I could be wrong on direction, degree, and timing. I know it's always possible that I've missed something important, but it sure isn't the twaddle this guy is dishing out.

I've done so well so far and I don't see the dynamics changing that have propelled the metals so far. In fact, I think the case grows stronger. So, I'm long. You and Mr. Jacobs are short.

I guess we'll see who has the better handle on the situation, won't we?

March 31, 2011 | Unregistered Commenterfallingman

Fallingman, if you go on like this, I"ll fall in love with you. Hope you're a female. Otherwise we'll have a problem...

March 31, 2011 | Unregistered Commenteriossi

hi, you all make me laugh at this point in this time to say that gold is in a bubble? your timing and the reasonsc for golds large rise are all based on fundamentals and gols is actually undervalued when you adjust it for inflation.. The two reasons why gold is kept as a store of value is right in front of you, maybe that is why you can't see it or you just weren't breast fed as a child. you must be those core inflation guys that feel if the price of a fire truck has not gone up there is no inflation, while commodities to you are all going to crash sometime tonight. we have both inflation and deflation going on at the right time. why are all the central banks net buyers not net sellers of gold? jp morgan is taking gold as payment. utah, just signed into law that they will be taking silver and gold as payment or legal tender, nah what do they know. it's a great concept. replenish the system with silver and pay down your state debt. oh i get it you are a keynsiast shoot all your bullets until you are left with nothing but high taxes, a lower standard of living, and a debased currency. bubble, no my friend and even it it was now would not be part of natures law to have it pop now. i know you don't believe in inflation, well maybe way out there on the horizon deflation is coming to roost, gold will perform fine then. under the gold standard the mining compny homestead did prety well and created wealth.THE SYSTEM IS KAPOOT, BROKE, DOESN'T WORK, SO WHILE YOU BARTER IN PEBBLES I'LL STICK WITH THE BIG G and S. DON'T LEAVE OUT PLATINUM OR PALLADIUM.
tHE ONLY HARD ASSET I SEE BESIDE GOLD AS A currency is copper of different sizes.

March 31, 2011 | Unregistered Commenterbob

yup. agree with bob and fallingman..
just my request to bob(gold-prices).. please repost this mr. jacobs' video/interview a few months/years down the road if gold is trading above $2000... ;)

and try to make a research if he is still connected with the same company or even doing a research analyst job... :p

April 2, 2011 | Unregistered Commenterrob

thats a bit harsh on him.......

April 2, 2011 | Unregistered CommenterGold Prices

I JUST WANTED TO CORRECT MYSELF. THE ONLY HARD METAL I SEE BESIDE GOLS IS OF SILVER, YEA BABY. DID YOU KNOW OR CARE THAT FOX NEWS NOW HAS A SILVER PRICE NOT JUST GOLD. I MMENTIONED CPPER BECAUSE THEIR IS SO MUCH AND IT IS MUCH CHEAPER THAN ANY OF THE OTHER HARD ASSETS.

April 2, 2011 | Unregistered Commenterbob

Iossi,

Sorry boss. We have a problem.

Damn. If only my ruminations on gold worked on the ladies. They seem to like GETTING gold from me a whole lot more than hearing me TALK about it. Life is so unfair.

April 5, 2011 | Unregistered Commenterfallingman

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