Economist Online

Both precious metal, the current relative valuation of platinum vs. gold makes platinum a better bet than gold.

When you see the gold promotion video come out that is geared toward the mass audience, such as the one below, you know gold bubble has entered another stage.

Until the Fed dramatically reverses its easy monetary policy (i.e., when the real interest rate turns positive and rising), gold price still has several legs to go. But be head clear that the gold bubble will eventually crash, just like every asset bubble. Timing in investment is utterly important.

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I have been bullish on gold since I expected the Fed could never get the timing of exit (from the current easy monetary policy) right.

With another round of money-printing or QE2 from the Fed, gold price has been soaring in recent weeks.  FT compares the surge of gold to the past asset bubbles.  The crude comparison seems to indicate that gold is now in its early bubble-forming stage.

(click on the graph to play)

Like every asset bubble, the time of reckoning will eventually come. It’s fool’s game trying to get the timing right, however.

Now it has become more clear that the Fed’s super easy monetary policy is in the process of creating at least two bubbles in the world – first the gold, second is the bubble in emerging markets – remind me of Latin America crisis in 1990s.

Gold at $1269.

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What’s behind recent move?

Why is Gold investor’s darling in current environment? ABC News reports:

My yardstick to judge whether gold is in asset bubble:
1) when everybody is buying, even your trash collector neighbor;
2) when everybody tells you, “This time is different”.

We are nowhere near that point. Not yet.

Rogers thinks US dollar is due for a short-term rally and that means gold will enter a consolidation stage. His long term prediction of gold price stays firm: it will at least increase to a couple of thousand dollars.

He is a true contrarian investor.

Not if most common people even don’t know what the gold price is today. Bubble needs herding behavior: when everybody is rushing to get in, that’s where the gold bubble is about to burst. We are far from there.

Gold just passed $1,200 per ounce.

Gold’s rise has support from fundamentals, but every time you see parabolic move, the bubble is forming. One of the key lessons for investors is “bubble has legs”, it will eventually burst, but nobody knows when.

In 2008, we had “mother of all bubbles” —oil price shot up to $147 per gallon. In 2009-10, we may well have another greater bubble, the gold bubble: $2,000, anyone?

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Analysis of recent rise of gold price (source: FT)

(click to play the video)

Looking at gold future price, I have become more worried about the US dollar lately. Are we going to have 1971-collapse of US dollar again? The sharp drop of US dollar and China potentially losing a huge chunk of its foreign reserve value remain to be the biggest risk in the system.

Guess I need to be more imaginative in this wildly uncertain world.

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