|
Squint
hard enough at the Nasdaq Bubble, and apparently
you can see the future of gold...
The GREAT SAGE HIMSELF – seer
of the financial crisis, gloom-n-doomster extraordinaire – Nouriel Roubini thinks today's
gold investors are "sheep or lemmings".
Either way, gold is a dumb thing
to buy, says he. Because it's a bubble, plain and simple and always.
"Since gold has no intrinsic
value," says Dr.Doom, "there are
significant risks of a downward correction."
Oh sorry – that was him back
in December 2009, not August 2011. The gold price has very nearly doubled since then,
despite having no value to NYU economists. But no matter. It's what happens
next that counts.
Hence this chart,
contrived by a Reuters staffer apparently, and linked approvingly by the
great sage on Roubini's @nouriel feed on Twitter this week.
Less-qualified minds than the
Doctor might wonder quite how the Nasdaq's path is
supposed to say anything about gold's "bubble" today, especially
when they compare the two in the chart above. They last touched in 2005
– hardly nailed on.
You might also note that the
vertical axes show nominal prices (Dollars per ounce for gold, index value
for the tech-stock Nasdaq). That overplays gold's
relative gains, now running at 6-fold since the chart's starting point. The Nasdaq, at its top of only a few months earlier, you'll
recall, towered more than 10 times higher from a decade before.
And that choice of starting point
is significant, too. Because 2001 saw gold's lowest monthly average in more
than two decades. Whereas a decade earlier, 1990 was a long way from kick-off
for tech...
Look – there's a dip in the
gold price ahead! And then another! But see how well the gold price now maps
the Nasdaq? And see where we're headed? Gold
$21,500 in January 2025 here we come!
Yes, if we also roll the
tech-stock index – as with gold – back to its last historic low
(Sept. 1974), then the true "bubble" ahead would become clear. On
the laziest analysis, at least. Step forward Roubini
again.
"Question for gold
bugs," he asks, also in a Tweet: "How much of gold long positions are
financed now, as Nasdaq was in late '90s, with
leverage? Do CME data show that?"
Hmm, well, no they don't, because
they don't need to. All futures and options are leveraged, by definition. You
get exposure to a larger chunk of the asset than your money would otherwise
buy. And after this month's margin hike by the CME on gold futures, the
leverage is now 25-to-1 across the board.
US regulator the CFTC publishes
data more in line with what (we guess) Roubini is
after. And the "net long" position in Comex
gold futures and options, held by structurally unhedged
(ie, speculative, non-mining, non-refinery and
non-bullion-bank) traders was equivalent on the latest data
to 802 tonnes of gold bullion by value.
Bubblicious? That's nearly 50% above the 5-year average (whoah!)
but it's also below the peaks of spring, then summer and then autumn 2010
(ah). It's also less than half the fully-cash paid bullion exposure held in
exchange-traded trust funds (ETFs) around the world. And it's barely half the
daily turnover in London's professional wholesale gold bullion market –
heart of precious metals dealing worldwide, and with a handy association
website signposting the latest data just here. (It needs sizing up by 3 or 5 times, depending on activity, to
account for netting. Ask a professional.)
Still, let's not be hard on the
professor. He hasn't got a clue, after all, what he's talking about. But that
never got in the way of a good PR-grabbing, sheep-baiting headline. And it
is, after all, precisely what Twitter is for.
Adrian Ash
Head of
Research
Bullionvault.com
You can Receive your first gram of Gold free by opening an
account with Bullion Vault : Click here.
City correspondent for The Daily Reckoning in London, Adrian Ash is
head of research at BullionVault.com – giving you direct access to investment
gold, vaulted in Zurich, on $3 spreads and 0.8% dealing fees.
Please Note: This article is
to inform your thinking, not lead it. Only you can decide the best place for
your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on
it.
|
