# What will pop the gold bubble? **URL:** \ **Category:** Great Debates\ **Created:** [May 16, 2011, 6:04pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117 "2011-05-16T18:04:33Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [May 22, 2011, 4:16am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/41 "2011-05-22T04:16:38Z")
> [@samclem](#): > > Gold will be back under $1000 US within three years. You heard it here first.. Depends. Depends on who gets elected in 2012. You could be right though. Obviously, if Ron Paul is overwelmingly elected President of the United States in 2012 then gold will be a heck-of-a lot less than $1000 by 2014. Frankly, I dont personally share your optimism about Ron Paul, but, “if” Ron Paul actually “IS” going to be the next President then the price of gold will well in advance “anticipate” the future strong US dollar and gold could decline at any time, even this week. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [May 22, 2011, 11:34pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/42 "2011-05-22T23:34:06Z")
> [@Susanann](#): > > As soon as we see those **7 conditions** , the price of gold is going to go into a decline, and when I am convinced that these 7 conditions are all here to stay then I am going to cash in my gold, and I will advise you also to do the same. The price of gold has been declining since last month. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [May 23, 2011, 1:29am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/43 "2011-05-23T01:29:24Z")
> [@samclem](#): > > Gold will be back under $1000 US within three years. You heard it here first. I’m not so sure about that. Current gold demand isn’t exclusively based on panicky conservatives getting fleeced by Glenn Beck’s sponsors. Irrational goldbuggery is part of it, yeah, but there is also the increased demand from a richer Asia. The shiny yellow metal is a powerful sign of opulence. Jewelry and the like. And now that countries like India and China are becoming richer, more and more people are able to afford symbols of status. That’s a major driver of gold demand, and it’s not going to disappear with a stronger world economy. Quite the opposite, really. Even when the conservative panic market bottoms out, gold demand from Asia will continue to increase. I just can’t see prices dropping by a full third. Demand from the developing world is, I believe, here to stay. ---
**Author:** ![Tatterdemalion](https://avatars.discourse-cdn.com/v4/letter/t/43a26b/32.png) [@Tatterdemalion](https://boards.straightdope.com/u/Tatterdemalion)\ **Post date:** [May 23, 2011, 1:52am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/44 "2011-05-23T01:52:16Z")
> [@Hellestal](#): > > The shiny yellow metal is a powerful sign of opulence. Jewelry and the like. And now that countries like India and China are becoming richer, more and more people are able to afford symbols of status. That’s a major driver of gold demand, and it’s not going to disappear with a stronger world economy. Quite the opposite, really. Even when the conservative panic market bottoms out, gold demand from Asia will continue to increase. I just can’t see prices dropping by a full third. Demand from the developing world is, I believe, here to stay. This is also true of oil of course. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [May 23, 2011, 2:05am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/45 "2011-05-23T02:05:30Z")
> [@Hellestal](#): > > Current gold demand isn’t exclusively based on panicky conservatives getting fleeced by Glenn Beck’s sponsors. Irrational goldbuggery is part of it, yeah, but there is also the increased demand from a richer Asia. > > The shiny yellow metal is a powerful sign of opulence. Jewelry and the like. And now that countries like India and China are becoming richer, more and more people are able to afford symbols of status. That’s a major driver of gold demand, and it’s not going to disappear with a stronger world economy. Quite the opposite, really. Even when the conservative panic market bottoms out, gold demand from Asia will continue to increase. I just can’t see prices dropping by a full third. Demand from the developing world is, I believe, here to stay. > [@Tatterdemalion](#): > > This is also true of oil of course. Well, yeah. But, you need to figure out what the component percentages are of the current $1500. US gold price. I think speculators are about 10-20%. I think the value of the US dollar is another 10-20% factor. If oil drops back to what it’s really worth currently(IMHO $60-70. US), then the gold price drops 10-20% on that alone. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 23, 2011, 2:25am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/46 "2011-05-23T02:25:33Z")
> [@samclem](#): > > Well, yeah. But, you need to figure out what the component percentages are of the current $1500. US gold price. I think speculators are about 10-20%. I think the value of the US dollar is another 10-20% factor. > > If oil drops back to what it’s really worth currently(IMHO $60-70. US), then the gold price drops 10-20% on that alone. Knowing how much gold now owned was purchased at prices above $1000, and how much of it is purchased with borrowed money might be nice to know too. How fast the price of gold drops is going to be influence by the financial condition of the investors. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [May 23, 2011, 3:33am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/47 "2011-05-23T03:33:40Z")
> [@TriPolar](#): > > Knowing how much gold now owned was purchased at prices above $1000, and how much of it is purchased with borrowed money might be nice to know too. How fast the price of gold drops is going to be influence by the financial condition of the investors. I’ll posit one further observation/opinion. If one could get 4% on a relatively safe fixed instrument today, you’d see 20%+ of speculative money come out of commodities. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 23, 2011, 5:03am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/48 "2011-05-23T05:03:35Z")
> [@samclem](#): > > I’ll posit one further observation/opinion. > > If one could get 4% on a relatively safe fixed instrument today, you’d see 20%+ of speculative money come out of commodities. For commodities in limited supply like gold, or oil, that would ring true. I don’t what the specific percentages would be. But as I stated before, gold is an investment that won’t lose all of it’s value, even if a decline in price occurs, where many other investments are risky, or have a very low return. Competition for investments in other areas will certainly affect gold and other commodities. But even a 20% drop in price of something as speculatively priced as gold doesn’t look like a pop to me, just slow deflating. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 23, 2011, 5:22am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/49 "2011-05-23T05:22:32Z")
I’ll pop the gold bubble as soon as I find the Philosopher’s Stone . . . any day now . . . ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 23, 2011, 5:35am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/50 "2011-05-23T05:35:06Z")
> [@BrainGlutton](#): > > I’ll pop the gold bubble as soon as I find the Philosopher’s Stone . . . any day now . . . As I noted before, that could be ironic. ---
**Author:** ![Miller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/miller/32/481_2.png) [@Miller](https://boards.straightdope.com/u/Miller)\ **Post date:** [May 23, 2011, 6:38am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/51 "2011-05-23T06:38:20Z")
> [@Susanann](#): > > Trying to get me more fans? I already have a ton of followers who already always follow and read my posts. That’s… not exactly because they agree with you. ---
**Author:** ![Tabby\_Cat](https://avatars.discourse-cdn.com/v4/letter/t/6a8cbe/32.png) [@Tabby\_Cat](https://boards.straightdope.com/u/Tabby_Cat)\ **Post date:** [May 23, 2011, 7:23am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/52 "2011-05-23T07:23:36Z")
I think Planet Money on NPR did a piece on this a few weeks ago. What’s a bubble, really? When a good is traded at prices greater than it’s intrinsic worth, and yet the price still goes up. What’s the intrinsic worth of gold? Practically, not much. Jewellery, electronics, not much else. Why is gold going up, then? Because other people think gold will go up. Why does everyone else think that gold will go up? I dunno. NPR Money doesn’t either, and I don’t think anybody does. Conventional wisdom? Monkey/reptile brain attraction to the shininess of gold? If it’s a bubble, it’s been a 4 thousand year old bubble. When will it be popped? I have no idea. When people realise that gold is basically worthless, I guess. Fiat money hasn’t been around for that long anyway, and it’s taken us pretty long to get past bartering. How long did we take to transition from bartering to gold, that’s how long it’ll take for us to get past gold into fiat money - a paradigm shift, if you will. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [May 24, 2011, 9:11pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/53 "2011-05-24T21:11:38Z")
> [@Simplicio](#): > > There’s been talk of the US selling off its gold reserves, since its probably never going go get a better price for them then now, and they don’t really serve a purpose anymore. Dunno how big the reserves are compared to the total amount of gold out there, but I’d think its big enough that it could signifigantly increase supply. > > Plus, the conspiracy theorists would have a field day with the Obama administration killing the price of gold after the crazier conservatives have spent the last two years sinking all their money into it. I know hedge fund managers that have hedged against gold. They short gold and go long stuff like platinum and rhodium. Who knows what happens to the price of gold over the long term, gold and oil are the two commodities that don’t act like other commodities but at least some people seem to be ready to bet against it (and silver too). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [May 24, 2011, 9:13pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/54 "2011-05-24T21:13:01Z")
> [@emacknight](#): > > Part of the rise in both gold and oil is the fall of the US dollar. And part of that fall is deficit spending. Once that gets sorted out, GDP rises, and the debt to GDP ratio shrinks, the dollar should go back up pretty quickly. That will eat into the value of gold and might spark a flight from it. > > The top of these bubbles usually represents speculation, in that those people buying never plan to take possession. When gold stops rising the speculators pull out fast and cause the sharp drops. Gold has not been acting like other precious metals. Back in 2008 when other precious metals tanked, gold held on pretty well. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [May 24, 2011, 9:14pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/55 "2011-05-24T21:14:04Z")
> [@Alessan](#): > > The only real value gold has - in market terms - is as a raw material for the jewelry industry. So I suppose the price of gold depends on how much people want their bling. Its also useful in electronics but yeah, its mostly jewelry and a store of wealth. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 24, 2011, 9:19pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/56 "2011-05-24T21:19:06Z")
> [@Damuri\_Ajashi](#): > > I know hedge fund managers that have hedged against gold. They short gold and go long stuff like platinum and rhodium. Who knows what happens to the price of gold over the long term, gold and oil are the two commodities that don’t act like other commodities but at least some people seem to be ready to bet against it (and silver too). > [@Damuri\_Ajashi](#): > > Gold has not been acting like other precious metals. Back in 2008 when other precious metals tanked, gold held on pretty well. > [@Damuri\_Ajashi](#): > > Its also useful in electronics but yeah, its mostly jewelry and a store of wealth. Yes, it is different from other commodities. It has a known value, a known supply that only grows at a known level, for known costs. And it is vital to both industry and culture. ---
**Author:** ![Strassia](https://avatars.discourse-cdn.com/v4/letter/s/e8c25b/32.png) [@Strassia](https://boards.straightdope.com/u/Strassia)\ **Post date:** [May 24, 2011, 10:56pm UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/57 "2011-05-24T22:56:07Z")
> [@Tabby\_Cat](#): > > I think Planet Money on NPR did a piece on this a few weeks ago. > What’s a bubble, really? When a good is traded at prices greater than it’s intrinsic worth, and yet the price still goes up. > What’s the intrinsic worth of gold? Practically, not much. Jewellery, electronics, not much else. > > Why is gold going up, then? Because other people think gold will go up. Why does everyone else think that gold will go up? I dunno. NPR Money doesn’t either, and I don’t think anybody does. > > Conventional wisdom? Monkey/reptile brain attraction to the shininess of gold? If it’s a bubble, it’s been a 4 thousand year old bubble. When will it be popped? I have no idea. When people realise that gold is basically worthless, I guess. Fiat money hasn’t been around for that long anyway, and it’s taken us pretty long to get past bartering. How long did we take to transition from bartering to gold, that’s how long it’ll take for us to get past gold into fiat money - a paradigm shift, if you will. I would say the last gold bubble popped in 1981. [Cite.](http://goldprice.org/30-year-gold-price-history.html) It took gold over twenty year to recover, without counting inflation. It still hasn’t recovered if you take inflation into account. [Cite](http://www.ritholtz.com/blog/wp-content/uploads/2009/10/gold-REAL-dollars.gif). Meaning you would have done better to stick your money under a mattress in 1980 than buy gold. You would have been much better off in 2001 if you had invested in US treasury bills in the 1970s then in gold. Heck, you would be better off today if you bought a 30 year treasury in 1981 then you invested the same amount in gold. ---
**Author:** ![Snarky\_Kong](https://avatars.discourse-cdn.com/v4/letter/s/a183cd/32.png) [@Snarky\_Kong](https://boards.straightdope.com/u/Snarky_Kong)\ **Post date:** [May 25, 2011, 12:19am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/58 "2011-05-25T00:19:52Z")
> [@strassia](#): > > i would say the last gold bubble popped in 1981. [cite.](http://goldprice.org/30-year-gold-price-history.html) it took gold over twenty year to recover, without counting inflation. It still hasn’t recovered if you take inflation into account. [cite](http://www.ritholtz.com/blog/wp-content/uploads/2009/10/gold-real-dollars.gif). Meaning you would have done better to stick your money under a mattress in 1980 than buy gold. You would have been much better off in 2001 if you had invested in us treasury bills in the 1970s then in gold. Heck, you would be better off today if you bought a 30 year treasury in 1981 then you invested the same amount in gold. nuh uh! Gold, glorious glorious gold! ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [May 25, 2011, 2:45am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/59 "2011-05-25T02:45:03Z")
> [@TriPolar](#): > > Yes, it is different from other commodities. It has a known value, a known supply that only grows at a known level, for known costs. And it is vital to both industry and culture. Your description of why gold is different applies to a lot of commodities. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 25, 2011, 3:55am UTC](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117/60 "2011-05-25T03:55:11Z")
> [@Damuri\_Ajashi](#): > > Your description of why gold is different applies to a lot of commodities. Well you’re right, it is, now that I look at what I wrote. It would require a lot more qualifications. First of all it’s primarily non-consumable. It’s supply is very limited relative to demand, and that supply grows very slowly. It does have a unique cultural significance, and a wide variety of industrial applications that are difficult to replace with a single substance. But basically what I’m getting at is that is a very old non-consumable commodity with very stable market properties, exhibiting broad demand worldwide for varying reasons. I say this because the price of gold, though unreasonably high in my opinion, should still be greater than would be expected for a commodity that had only industrial value or cultural value, or did not have the known supply characteristics, market stability, or broad based demand. [Previous page](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117.md?page=2) [Next page](https://boards.straightdope.com/t/what-will-pop-the-gold-bubble/582117.md?page=4)