George Soros says that Gold is the ultimate bubble. While we have to respect Soros for his legendary success, we disagree with him. He neglects to give any concrete reason as to why Gold is in a bubble. We’ll give a few reasons as to why he is “ultimately” wrong.
First, when Gold spiked in 1980, it reached a level that was high enough to back all the US$’s in the world. In other words, we could have gone back to the gold standard and Gold still would have declined. To back the greenback today, Gold would need to be near $6,000/oz.
Secondly, interest rates are at or near historical lows worldwide.
Third, the UK, US and Japan are monetizing.
Fourth, no one wants a strong currency.
Fifth, Silver and the junior stocks have been underperforming Gold for the last few years. If Gold was in a bubble, these areas would be overvalued relative to Gold.
Sixth, Gold would have to double to hit its inflation-adjusted high.
Seventh, Gold production has been declining throughout the bull market.
Eighth, public opinion gold was less bullish at the recent top than at the 2006 & 2008 tops.
These are just off the top of my head. Anyone have any other reasons? Comment!