Where Is Gold On The Bubble Map ?

Gold had a good week, so now the gold bulls must endure a new round "bubble" cries from the gold bears. Anything that has a good week, month, or year must endure this. In the short term, they could be right. But to say that something like the current gold bull market is a historic bubble at the bursting point requires more analysis than short-term overbought technicals or an uneasy feeling that it's gone too far too fast and is too crowded. Why not just filter out the short-term noise and compare it side-by-side to the other historic bubbles? If you do this simple exercise with perhaps the three most well known historic bubbles of the modern age, you see this: (click to view)

Long-term bull markets usually end in a parabolic rise. So this chart basically divides these bull markets into the relatively flat 8 to 12 year pre-parabolic phase and the 2 to 6 year parabolic rise. As the chart clearly shows, the current gold market is nowhere near the end phase of a historic bubble. In fact, it looks to be just now be getting cranked up for that.

I left off from the chart some comparisons that may not apply. For instance, oil up to $147 in 2008 is sometimes referred to as a historic bull/bust cycle. But the credit/great recession gyrations in oil and most commodities, including gold, may wind up being just a severe, but brief interruption of these bull markets. The three charted are historic bulls that have been certified dead for years. I don't think we can declare oil dead just yet.

Now it's true that some respectable investors have described the current gold market with the word "bubble", including the Chinese officials in charge of diversifying China's bank holdings and George Soros, who commented at the recent World Economic Forum in Davos that gold was "the ultimate bubble". But China has to be suspected of talking down the price of gold so they can add more. And George Soros was talking about gold as being the end result of a chain of bubbles when he said it was the ultimate bubble. The bubbles of 2000, loose money, housing, more loose money, etc. ultimately lay the bubble forces at gold's door. So if gold is to be the ultimate historic bubble, it has a long way to go from here.