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Or gold is in a massive bubble

Bubbles are normally driven by some kind of irrational exuberance and they aren't backed by sound financial logic, like the tech bubble in 2000 and the housing bubble in 2008.

The value of the dollar continues to drop rapidly, and devaluing the dollar has been policy for decades, which would explain the move in gold. Recent inflation as well.

I'm not sure what the rationale would be to call it a bubble.

I'm all about bitcoin. I don't own gold. But I think the recent moves in gold seem justified and based in reality, not some over-the-top speculation.

I also think bitcoin drains a lot of the capital out of gold in the coming years.

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Ben Ewing 3mo ago 💬 1

Gold has been flat or falling in even nominal terms for more years than it has been rising in the last 100 years alone while your two ‘sound financial logic’ conditions existed.

Mountain Man 3mo ago 💬 2

Those were not my two 'sound financial conditions' - they were the opposite - unsound financial conditions.

The bubbles happened because tons of capital chased unsound business models like unprofitable web businesses and mortgage securities based on inflated housing prices sold to people who couldn't afford them.

Tons of capital chasing unsound business practices produces bubbles that pop. How does that relate to Gold currently? What is unsound about the capital piling into gold when the dollar is losing value and inflation has soared?

Ben Ewing 3mo ago 💬 2

Ask that to someone who cashed out gold down 65% nominal in 1999 after believing people like you in 1980, when inflation had been high and the dollar had been falling right up to the peak

Mountain Man 3mo ago 💬 1

You're right to bring up the 1980s, but the context is key. Gold's price ran up hard to 1980 because of massive inflation in the 70s. The crash then happened because the Fed successfully fought inflation by raising rates to over 20%, which made the dollar stronger and killed the need for an inflation hedge.

Today, we're in a very different environment. Central banks are not aggressively fighting inflation, and the market knows that rates are about to come down again, even with the stock market and gold at all-time highs and inflation above target, and an out-of-control national debt.

The rise in gold isn't based on a speculative chase; it's a direct response to a loss of confidence in the underlying currency.

A bubble is when prices rise detached from fundamentals. But in this case, the fundamentals—money printing and fiscal irresponsibility—are what's driving the price. This isn't a bubble; it's a revaluation of gold to account for the depreciation of the dollar.

Ben Ewing 3mo ago

Your ai is even more stupid than you are.

First, there is no fundamental rule that gold must be valued at a certain USD price based on how much USD is in circulation. If there was gold would always reflect money in circulation, which it doesn’t.

Second, gold has not become more valuable. It is still a yellow pet rock.

Gold has risen because real yields have fallen, causing people to speculate (italics) on non yield bearing assets. Go and defend silver too if you like, it has risen too.

This unwinds as soon as real yields rise, not when ‘gold reprices higher’. So this is the definition of a bubble.

But feel free to keep wasting the earth’s energy producing garbage outputs like this, at least it will prevent you buying more crayons to chew on.

Owner_of_donky 3mo ago

Ask someone who has chashed out Bitcoin down 75% nominal in 2022 after believing people like you in 2021...

1984 3mo ago 💬 1

Gold is used as the most stable reference point due to it's direct correlation with the energy and labour cost of mining and extraction it.

Is demand high, more mining will happen.

Is demand/price low mining is not feasible.

Secondly gold has always been a valued commodity all around the world.

So, believing printed paper by an obscure private entity, unlimited, is a more stable reference point than gold is stupidity.

Ben Ewing 3mo ago

The fact that basically every country would prefer imperfect printed paper tells you all you need to know about their unwillingness to value everything against your pet rock.

Stop wasting your crayons.