{"id":4358,"date":"2009-10-21T09:25:47","date_gmt":"2009-10-21T14:25:47","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=4358"},"modified":"2009-10-21T09:25:47","modified_gmt":"2009-10-21T14:25:47","slug":"gold-whats-really-behind-the-record-rise-bull-or-bubble","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2009\/10\/21\/gold-whats-really-behind-the-record-rise-bull-or-bubble\/","title":{"rendered":"Gold: What’s REALLY Behind the Record Rise, Bull or Bubble?"},"content":{"rendered":"

By Nico Isaac<\/strong><\/p>\n

When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work \t\t\t\t\t — and they both start with the letters \u201cB-U.\u201d<\/p>\n

When a precious metal goes from being a popular long-term investment \t\t\t\t\t of buy-and-holders to the quick, get-away \u201cvehicle\u201d of day-traders, two scenarios are at work — and they both start with letters \u201cB-U.\u201d<\/p>\n

And when the majority of mainstream \t\t\t\t\t pundits see a “new paradigm” in which prices continue to rise indefinitely, two \t\t\t\t\t scenarios are at work \u2013 and, you guessed it, they both start with the letters \u201cB-U.\u201d<\/p>\n

Enter: the recent \t\t\t\t\t Gold Rush of 2009, when ALL of the above conditions apply. Everyone from hedge funds to housewives now hustle \t\t\t\t\t to hitch their asset wagon to the rising gold star. Which begs this question: Which of the possible two scenarios are at \t\t\t\t\t work: B-U<\/strong>-ll
\n— Or <\/em>B-U<\/strong>-bble?<\/p>\n

Here\u2019s the difference: A genuine bull market is driven by a self-sustaining internal dynamic that’s reflected by a host of technical indicators. A Bubble, on the other hand, is the result of untenable psychology that could shift at any moment and bring prices plummeting down.<\/p>\n

For long-term forecasts and more in-depth, historical analysis for precious metals, download \t\t\t\t Prechter\u2019s FREE 40-page eBook on Gold and Silver<\/a><\/strong>.<\/strong><\/p>\n

It goes without saying into which category the mainstream experts put Gold: namely, a new bull market that has years, \t\t\t\t\t if not decades more to soar. \u201cGold Will Hit $2,000 an ounce,\u201d <\/em>reads an October 8 Market Watch. <\/em>And \t\t\t\t\t — \u201cGold Has More Upside\u2026 The metal\u2019s bull run is just getting started,\u201d <\/em>adds a same \t\t\t\t\t day Barron\u2019s.<\/em><\/p>\n

I found hundreds of news items which agree about the long-term potential for gold\u2019s uptrend. \t\t\t\t\t But not a single one could tell me why<\/em> the rally would continue, other than because the experts say so.<\/em>
\nTo know whether a diamond is real, it must cut glass. And, to know whether the bull market in gold is real, \t\t\t\t\t it must encompass at least one of these FOUR traits:<\/p>\n

    \n
  1. A surge in demand that outpaces supply<\/li>\n
  2. A falling stock market, which raises the \u201csafe haven\u201d appeal of precious metals.<\/li>\n
  3. A real (not imagined) threat of inflation<\/li>\n
  4. An increase in value relative to major foreign currencies<\/li>\n<\/ol>\n

    Right now, the Gold market can NOT check off a single one of these items. <\/strong>Case in point:<\/p>\n

    Supply:<\/strong> Demand for gold from jewelry makers \u2013 which comprises 60%-70% of the market \u2013 has plummeted to its lowest level in 20 years.<\/p>\n

    \u201cSafe haven\u201d appeal:<\/strong> From its March 2009 bottom, the U.S. stock market has soared 50% right alongside rallying gold prices.<\/p>\n

    Inflation:<\/strong> As the October 2009 Elliott Wave Financial Forecast<\/em> (EWFF) notes: An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.<\/p>\n

    A gold rally in other currencies:<\/strong> Again, the October 2009 EWFF <\/em>presents the following close-up of Spot Gold prices VERSUS Gold denominated in foreign currencies such as the Canadian dollar, the Australian dollar, the euro, franc, pound, and yen since 2007.<\/p>\n

    \"\"<\/strong><\/p>\n

    The major non-confirmation \t\t\t\t\t between these two markets is clear, as is the overlying message: IF demand for gold truly outweighed supply, \t\t\t\t\t then its value as measured in other currencies would increase.<\/p>\n

    The rise in gold is primarily the result of speculation \t\t\t\t\t and a falling U.S. dollar. These are exactly the \u201cuntenable\u201d forces \t\t\t\t\t that contribute to a Bubble, not a genuine Bull market. The difference is only a matter of time.
    \nFor long-term forecasts and more in-depth, historical analysis for precious metals,     download \t\t\t\t\t Prechter\u2019s FREE 40-page eBook on Gold and Silver<\/a>.<\/strong><\/p>\n

    Robert Prechter, Chartered Market Technician, is the world\u2019s foremost expert on and proponent of the deflationary \t\t\t\t\t scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the \t\t\t\t\t Crash and Elliott \t\t\t\t\t Wave Principle<\/a> and editor of The \t\t\t\t Elliott Wave Theorist<\/a> monthly market letter since 1979.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    By Nico Isaac – When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-4358","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/4358","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=4358"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/4358\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=4358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=4358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=4358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}