Are we about to see the end of the Mania in Gold Prices?

How high is too high for the price of gold?

Most mining companies are forecasting Gold to settle in the thousand dollar area, maybe $1100.  When I was telling people way back in 1998 that gold was not finished as a safe haven in tough times.  People like the Aden sisters were forecasting gold to go to $10,000 an ounce back in the late 70's when they were popular prognosticators. Dines, Bob Bishop, Doug Casey another group of Gold Groupies have pushed gold as an inflation protection for 40 years.  Instead of inflation we've had booms and busts and now possibly we are looking at stagflation.  

My reason for liking gold was  the coming collapse of the American dollar because they were debt financing war in Iraq and my certainty was only made stronger by the Afghanistan war and the second Iraq invasion.  All this was easy to predict because it all happened before by a little incursion called the Vietnam War.  The American dollar went into a long slump after that debt- financed invasion.  Not only that problem but America seeing thier position in the world as Global Policeman completes the foolish policies....  They are spreading themselves too thin in face of the competition for resources around the globe with the rising strength of Latin America, China and India.  Geopolitics brings down Empires like America.  Although it is hackneyed to compare America to Rome but read any paper or talk to any cab driver and they will bring it up every time.

People turn to Gold as a safe haven when things get tough.  People also move like herds, i.e. Wildebeasts.  Read the "Madness of Crowds" and don't forget the price of tulips topped out at ___see below *1, I can't bear to write such a number.

Risk increases the higher the price of gold rises.  The bottom was seen for gold in this cycle when companies like Barrick Gold Corporation quit foreward selling the metal and the banks were selling it off as "Dead" money and an anachronism.  At that time any amateur could have said we were seeing a bottom in the price of gold.  But it stayed there for some years and an amateur would have lost faith, belief and patience.  People ignored the screaming buy signals in gold and dispersed in time for the Dot.com crash and went on to lose money in real estate....  The thundering herd driven over the cliff by Goldman....

It is not easy to time markets or to be in the best investments all the time.  Diversified portfolios are recommended for this reason.  the thing is gold is scarce and it doesn't take much money to drive the value through the roof. All the Pension Funds need to do is a little Groupthink and put aside a 1% of thier portfolios as insurance into gold and you suddenly have billions of dollars chasing a scarce commodity and the price rises dramatically.  You don't sell your gold that you bought as insurance so the trading in gold remains thin with few trades moving the price ever higher.  All the gold in the world would melt into a cube that might be the size of a football field at an average high school.  A troy ounce in liquid form would be a level teaspoon full of gold worth about $2000.

Nobody knows where a mania tops out.  The world is in the process of de-leveraging and banks everywhere are failing.  Even China's banks are becoming subject to rumblings about bad loans.

You tell me where the top is and I'll buy some Put Options for the rollercoasteer ride as the crash happens.  When it falls its going to take a great deal of money with it.  Realize commodities that crash do not have an equal number of winners opposite the losers.  Money goes to "financial markets Heaven" after big Blow-outs!!!

Be sure to give me a call when you've picked the Top of this cycle for Gold.  You might notice the word cycle is used a lot by me.  Eveything is cyclical and prices expand too much on the ups and on the downs but always revert to the mean.  Gold will too and if the gold miners are forecasting $1100, I'd say they're going to be correct.  Speculating means you're going to need to guess when the decline starts.  At this time you can buy gold at $1100 an ounce by investing in a well-managed mining company like Barrick Gold.  The problem being that when the tide goes out, its going to take all the boats.  Shares in the gold miners will take a big hit along with the miners.

Book:

*Extraordinary Popular Delusions & the Madness of Crowds
 by Charles Mackay and Andrew Tobias (Paperback - Jul 25 1995)


*1
Tulip mania (or tulipomania) was an extraordinary period in Dutch history (around 1620 to 1637) when speculation in tulip bulbs went wild. The prices went up to astronomical levels (up to the equivalent of $US2 million per bulb!) before the bubble burst in February 1637.

Tulips originally came from Turkey and they were introduced to the Netherlands about 1593, where they thrived in the local soil.

Breeding was commenced in order to find varieties that suited the rather harsh climate of the Netherlands. Tulips quickly became very popular among the rich and fashionable and new breeds were given exotic names or named after Dutch naval admirals. Breeds with vivid colors, lines or flames quickly became highly sought over. The prices of tulip bulbs began to rise sharply.

source: http://www.squidoo.com/tulip-mania