The Line

Line 2

Discreetly to the left of the pile of stuffed Christmas toys, you will find The Line.

This part of Scotia Plaza in downtown Toronto is not what you’d call hectic, but traffic has been heavy enough lately to spur the bank into posting a large and uncharacteristic new sign on a silver podium, telling people exactly when the wickets will be open to sell them precious metals (best get it done by 4 pm). As you may know, Scotia is one of the largest bullion dealers in the country, with the goods coming up from legendary vaults built deep beneath King Street’s roadbed.

About the time an ounce of gold was touching $1,200 US, to set a new all-time high water mark, the line was long. And growing longer. Interestingly, the folks queued up were generally not in business suits, and more reflective of Main Street than Bay Street a few meters away. A woman with two toddlers, a guy in TTC overalls, a white-crested senior or two, middle-aged men in snappy casual coats and a determined-looking guy with a worn shopping bag. Full of cash?

A similar line stretched more than a block down Yonge Street, the last time gold was making headlines. Then the metal touched $870 an ounce – in 1979, almost 30 years ago to the day. Silver was heading for $50 an ounce, and there was talk of gold at $2,000, then $3,000. As things turned out, bullion was close to the peak, would tumble, and prove to be a disaster for anyone who bought it. A person in that line on Yonge Street would wait more than a quarter century just to break even, and still get no return for three decades of inflation.

So I watched those people in the glitzy banking hall on the first day of December, 2009, doing exactly the same thing, and wondered how it would end this time. Different? Or the same as always? Now even China, the world’s biggest bullion producer, is warning of a gold bubble.

If history’s any guide, there’s a high probability the people lined up are buying an asset at a price they may not see again for a long time. I could be wrong (that would be a shocker), but the pattern of human activity is unnervingly accurate. People tend to do things because other people are doing them, even when this means their behaviour causes unusual and unnecessary risk.

I alluded to this in a previous post. It’s why profitless dot-coms found buyers even at ridiculous P/E ratios; why people poured Nortel into their RRSPs at its highest level; why the Bre-X hoax lasted long enough to cost billions; why people think houses at their most expensive are worth snapping up; why they slept outside in Yaletown and on Bloor Street in recent days to buy unbuilt condos amidst a condo glut. In contrast, successful investors look at other things – asset allocation, diversification, technical analysis, company ratios, the elements of supply and demand and macros – before they act. Those who buy on headlines (greed) and sell on TV news (fear) usually get it wrong.

As far as Canadian real estate goes, could the times be more telling? A new bank report confirms affordability is now at one of the worst points in history – despite the lowest mortgage rates on record. In other words, there’s only downside.

But not in The Line. All you see is the head in front of you.

AFFORD
Housing affordability has plunged - despite
the lowest mortgage rates ever.

HOWE STREET BANNER
Garth's latest podcast is here.

175 comments ↓

#1 MarcFromOttawa on 12.01.09 at 9:18 pm

http://www.rbc.com/economics/market/pdf/house.pdf

This is probably the bank report Garth is talking about. If you look at page 8 on bottom left corner you’ll see why CalgaryRipOff is always mad. Almost 50% year over year price increases for Calgary and Edmonton in 2007.

I referenced a TD report. — Garth

#2 GB on 12.01.09 at 9:27 pm

Is Harper tricking Canadians into thinking he is a good economic leader?

http://thetyee.ca/Opinion/2009/10/22/BubbleWillBurst/index.html

#3 DrC on 12.01.09 at 9:35 pm

I find gold at the moment completely confusing. Even the erudite Mr Evans-Pritchard is perplexed.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002059/is-6300-fair-value-for-gold/

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002252/china-gold-and-the-civilization-shift/

Is it different this time? Who knows, is the only answer I can give.

Still, if someone finally spots that Beijing is selling the USD then the sky is the limit.

#4 Adam on 12.01.09 at 9:42 pm

Garth makes some good points regarding gold. However, if the US continues to print money as if there were no tomorrow, I can’t see gold declining long term.

What might happen in the meantime, though, is for a major holder of gold to sell off a portion of its supply, causing a big dip in the price. At that point, the lemmings might panic and sell, after which gold might rise again to new heights.

If you were China and India, which would you rather have: gold or US dollars? China in particular has far too many dollars.

#5 geeves on 12.01.09 at 9:43 pm

garth i love your blog
sold my house last year held for 5 years 90% profit
sold my gold on friday 1 year hold 40% profit
cash is king bring on the real crash
no more papering or or extend and pretend
i want to know where i stand in the grand scheme of things

#6 Onemorething on 12.01.09 at 9:43 pm

Garth, great chart, “there is only downside” yes sir.

Given it is the 3rd worst on record, couldnt we conclude it has to go to #1 before it turns given low rates and stimulus we have encountered?

I think this lines up with the stage you mentioned in previous writings which supports the last group, those on the sidelines, now jumping in because they cant help themselves, brains clouded with hype and pressure within their peer group.

7x will be 3.5x minimum when this is over or less, 50% down and 10% mortgages so who cares when you buy at the bottom.

But I again submit there will be better investments for your liquidity than RE for the next 10 years. If you play your cards right, you may find these other investment returns help you pay cash for your home at the end of the downward cycle when RE might be worth investing in once again.

WHEN THERE IS ABSOLUTELY NO REASON TO BUY, AND PEOPLE FLOOD THE MARKET AND STILL DO SO, THE FINISH LINE FOR US BEARS IS VERY CLOSE!

Today, a home that is $800K renting for $2500/m will be $1700/m when the wave hits. This $800K home will be $550K with no buyers until affordability comes in line. Home price goes down, rent goes with it until businesses can find a bottom, negative equity flushed out and unemployment comes back in line. DECADE!

Foreclosures supply rental on top of oversupply that has stopped moving. Back to renting and saving for a downpayment, sounds like the 30’s to me.

That once $800K house is now renting for $1300/m but it’s too big, owner cant pay taxes on it and carry it so it forecloses, you dont care, all you are worried about is having a roof over you head but the the price of Heat & Hydro only support a 1000 sqft home this time around.

Government is going to be the largest landlord in history!

#7 Teho on 12.01.09 at 9:45 pm

As a tip for anyone in Ontario buying gold maple leaf coins, it is cheaper to buy from border gold online in BC as your purchase will not be subject to PST.
Of course you will have to wait for delivery.

The coins are quite beautiful and make a lasting gift fit for a king:)

#8 Dan in Victoria on 12.01.09 at 9:47 pm

Ahh yes….Thursday March 27 1980. For those of you that don’t remember, Google The Hunt Brothers.

#9 pjwlk on 12.01.09 at 9:48 pm

Sorry to be a little off topic here but, my brother-in-law just told me that his insurance premiums just went up because of Google Street View. He called to inquire as to why it jumped $300 and they told him the trees were to close to the house as seen on Street View!

What’s next?

#10 LS on 12.01.09 at 10:00 pm

Well I don’t own any gold, but back in the 80s gold was at over $2200 inflation adjusted US dollars. So if this is a similar spike there is still some money to be made. The window is closing though…

#11 supersocco on 12.01.09 at 10:03 pm

I am not buying gold now, but sure glad I bought a year ago. I have gains of over 200% in ELD and 140% in GLD.UN. It has been a perfect hedge against the other losses I experienced this year. I won’t be selling any time soon. Still waiting to see if Schiff’s predictions hold up of 2000/ounce.

#12 Dan in Victoria on 12.01.09 at 10:20 pm

Scotia bank huh ? What’s this about manipulation ? http://investorshub.advfn.com/boards/read_msg.aspx?message_id=43561155

#13 D from London, ON on 12.01.09 at 10:27 pm

My (now aged) parents were some of the people that got caught up in the gold frenzy around 1979 or so. They still own that gold, for all of the good it did them over the past 30 years…and they won’t sell it even at today’s prices.

In fact, even though they are now older and supposedly wiser, but they’re actually thinking of BUYING more!

Everyone to the lifeboats! This is not a drill…

#14 Crash on 12.01.09 at 10:38 pm

My take on gold is that as long as the major central banks keep printing money, gold will be a hedge against both inflation and potential currency collapses. It takes alot more effort to mine an ounce of gold than it does to manufacture a dollar. Gold bullion is also the ‘stealth investment’ as no one knows you have it and no tax is paid, either at purchase or sale. As people’s faith in fiat currency is eroded they will turn to an asset class that will act as a store of value as gold has been viewed as through the centuries. Even some central banks such as in India are purchasing gold (from the IMF) to bolster their own economies.

#15 Joseph on 12.01.09 at 10:45 pm

You do great research for us bloggers who don’t have the time to sift through a plethora of facts and figures from various sources regarding the Canadian economy. This is invaluable stuff. I for one want to thank you for your efforts on this.

#16 Leonard on 12.01.09 at 10:45 pm

Here’s why I won’t buy gold!

I personally believe it is more worthwhile investing in self-sufficiently items for my family and community.

That is: becoming and being energy, foods, shelther, transport, communication sufficient.

If the worst has to come (hyperinflation, peak oil, wars, etc.), I wanna be able to survive, sustain myself, and hopefully contribute to sustain people around me. I could contribute by ‘selling’ or ‘barting’ my extra output of energy, foods, water, etc.

In a worst case scenario, I would barter extra output against foods I don’t already produce, mechanical or other manual skills (which I don’t have at all). My first thought certainly won’t be to barter against gold. This metal is only good for piling up.

Silver are actually more useful, and silver ustensils may have healthy benefits.

Just a thought!

#17 InvestorsFriend on 12.01.09 at 11:02 pm

Garth said:

A new bank report confirms affordability is now at one of the worst points in history – despite the lowest mortgage rates on record. In other words, there’s only downside.

Sorry Garth I think you mis-interpreted the graph (though I agree with the idea there is only downside)

The Graph of Change in Home Price Affordability can easily be mis-read.

It’s not a graph of home price affordability but a graph of the change in annual affordality as it says.

So we had a drop in affordability sharply but it does not show us the actual level of affordability compared to previous years…

So you can’t conclude from this graph that affordability is low.

Well, I seldom (never?) see you mis-interpret anything… but I think you did here…

#18 West Coast on 12.01.09 at 11:03 pm

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2&ref=patrick.net

A Very good rent vs buy calculator

#19 The Great Gazoo on 12.01.09 at 11:03 pm

Kramer told Jerry Seinfeld best when it comes to explaining the markets:

“It’s all manipulated with junk bonds. You can’t win.”

Don’t say I didn’t warn you, Michael Richards is a 33rd degree mason… you’re welcome…

#20 andthen on 12.01.09 at 11:16 pm

I sold all my silver two mondays ago. I made about 35% The bubble might go higher but I can see it crashing soon.

Be fearfull when others are greedy.

#21 LongMemory on 12.01.09 at 11:18 pm

Is there a link to the source of the chart on the bottom of this article? I looked on howestreet.com, but couldn’t find it. The affordability picture that the chart presents doesn’t seem consistent with the RBC report.

#22 ralph on 12.01.09 at 11:26 pm

What is it about people whenever they see a lineup?

Yes, Garth I remember those days when people had lined up around the block to buy gold in 1979. Then interest rates jumped to around 21%. Well, that was the end of that little party.

I think it is going to be the same this time around, too.
The proof is in the history of human nature. After thousands of years why would it be any different today.

#23 ottawa pete on 12.01.09 at 11:32 pm

Thought the blog would enjoy this graph showing US Federal Debt held by Foreign and International Investors. One can see the problem started in 1970, but just got plain silly since 2001:

http://tinyurl.com/y8vw3op

#24 constantine on 12.01.09 at 11:38 pm

supersocco:

Schiff just raised his target to $5000.
http://www.forbes.com/feeds/reuters/2009/11/30/2009-11-30T190403Z_01_N30457029_RTRIDST_0_LS-GOLD-SCHIFF-INTERVIEW.html

#25 robert on 12.01.09 at 11:40 pm

#11 supersocco

Don’t know how much you’ve got tied up but I think you might consider owning a hedge for the ‘perfect hedge’ just in case.

#26 Boombust on 12.01.09 at 11:47 pm

And don’t fergit dem BRIC shares back in ’79…

#27 Davinci on 12.01.09 at 11:49 pm

The battle lines are drawn Day traders see the hammer coming down. They see 2 big trades going on each on the opposite side.

Treasuries say that the dollar will become valuable in the future as we see massive deflation.
The other side is buying gold and seeing a dollar collapse.

http://www.youtube.com/watch?v=KKcA1WZpvcE

They are saying that it’s an easy choice because dollar collapse is Armageddon and you can’t collect on the end of the world. (Of course it’s not the end of the world it will just feel like it but you will live)

Basically saying they are screwed if they are wrong betting on the dollar and screwed if they are right betting against the dollar. So the only trade is the dollar.

Have people lost their mind?

A dollar collapse is like a world wide black out, if you see it coming like I did you do have another option, you can buy food, water, generator and supplies. The lights will eventually come back on.

#28 JO on 12.01.09 at 11:50 pm

This post reminds me why i sold my long term gold last week…yes, i was a little early but mot a big deal as i have most of my $ in CAD $..which has been rising more or less with Gold…the herd is usually wrong…my best guess is that gold can hit $ 1300 in the next month or two, before taking a massive beating in summer/early fall 2010 down to 7-800’s…but definitely will need to load up on it again…always move against the main street herd..

Apparently, North Korea essentially stold its citizens’ savings through some reverse / revaluation technique..Denninger at the Market Ticker says if the US were to do this, gold would not help ?…this is bizarre..if we end up in hyper inflation, those in massive debt win out…this will eventually be the outcome but before that happens, if we have more deflation (likely in the next year or two), anyone with massive debt will likely be wiped out ….if anything, this ongoing debacle proves we need to eliminate the highly leveraged, fractional reserve fiat money system…at a minimum, we need to reduce leverage significantly and get the gov’t intervention through CMHC out of the way.

Saw the last post below on taxes…good to point out how some guy claiming he can basically avoid income tax is doing something wrong..everyone needs to pay their “fair” share…i believe in that..the problem is for most people, we are already at the limit of what can be considered fair. When the average person adds up Federal, Provincial and city taxes and fees, and then adds in the monetary inflation due to the extreme credit growth we’ve had..and the sales taxes of course, we are well past 50 %…politiicans will keep trying for more, but they too will eventually learn the proven rule – less means more. The best way to earn more tax revenue is to reduce taxes..focus on taxing consumption and reduce/simplify the income taxes.

JO

#29 nonplused on 12.01.09 at 11:52 pm

When interest rates are too low, you get inflation and gold prices rise. When interest rates are too high, you get deflation and gold falls. All the gold market is telling us is that interest rates are too low. And that they have been too low since 2002. How long will they stay too low? I don’ t know. But the last time they crashed, you could get a Canada savings bond for 18%, which was about 7% over the inflation rate of the time. So, if inflation is low, say even 1%, I’d look for 8% on a Canada Savings Bond as time to sell gold and buy bonds.

But they aren’t going to raise interest rates until inflation is out of control again, so probably look for 18% once again.

The thing that might be different this time, is that today there isn’t really a clear way to sow government spending. The deficits and debts are too high. If rates go up now, it wil be in response to a funding crises, and government spending will have to come down. A lot.

#30 Pitaking on 12.01.09 at 11:52 pm

@#1, anyone who bought in Calgary from 2007 on is looking at a world of hurt on their houses now. Many relators I follow are showing a flurry of “prices reduced” on recent emails and the job scene is getting worse by the day. Most small to medium size nat gas companies are week to week on their survival, retail sales continue to be way behind 2007-2008 and even strong companies like Westjet are in hiring freezes and rumored to be announcing large layoffs. Garth, technical analysis says we are going to 1380-1400 on gold before a pause, lots of small miners are making all time highs, nothing more bullish than that.

#31 goldenfox on 12.02.09 at 12:00 am

Are gold and silver in a bubble? I dont think so. Gold at $850 and silver at $50 in 1980 are in inflation adjusted dollars today over $2000 and $100 in price respectively. In a bubble there is over production and everyone has bought. Production is dropping every year and demand is rising as fiat money is being printed by all nations. Unlike nortel shares, the tap for gold and silver cannot be turned on indiscrimately. The 20 year metal bear market has decimated the mining industry. It takes many years to explore and mine deposits, especially when all the low hanging fruit is gone. How many people do you know who own gold or silver?

#32 Taxpayer like you on 12.02.09 at 12:21 am

A little off todays topic, but always relevant to real
estate:

http://money.ca.msn.com/banking/bankrate/article.aspx?cp-documentid=22762925

#33 $fromA$ia ( o Y o ) on 12.02.09 at 12:22 am

Now heres a real RE professional and he’s got great taste. Ask Nikki.

http://www.youtube.com/watch?v=n0MHdnLZqKA&feature=related

#34 itutor on 12.02.09 at 1:30 am

Consider Vietnam. They can use either money or gold to barter. Why? Because they don’t trust money! Why don’t they trust money? Because it is a legal tender! What’s wrong with legal tender? Because it is only uphold by law! What’s wrong with the law? Because law is uphold by government! What’s wrong with goverment? You tell me… :)

This is a crisis of trust. If you think this is a monetary crisis, think again. It is only a manifestation of distrust.

If you understand the nature of the so-called cash that you are holding is actually DEBT, then you might have a chance to wake up.

Search “Money As Debt” in youtube to get an intro on what is it that you are holding. Then do your own research.

I don’t blame Garth. Because he is a politican afterall.

A characteristic largely common to gold bugs is the inability to disagree without being puerile and ad hominem. I’m not sure if it’s tellling or just sad. — Garth

#35 ruraldude on 12.02.09 at 1:36 am

When the Euro was created, the Euro Dollar was 0.75 US. It took just 75 cents to buy 1 Euro, so the dollar has lost half of its value since then. Since the Lonnie is tied to the US dollar, every thing we buy today is actually twice as expensive as it was ten years earlier cause of a devalued currency. That means a house today that we pay $400.000 would only have cost $200.000 in 1999. Oil should be worth only about $ 35 per barrel and gold $600 per oz. If we’re paying more than double for house build in 99 than I think it’s over valued, some exceptions of coarse.
Anyone owning hard assets in 1999 is probably better off than had that same money been put into GIC’S .
People that own rel estate in general tend to be better off than none owners. Having said that the trick I guess is to buy at the right time. That is the million dollar question.
I don’t think any of us are as rich as we’d like to think, and are wages keeping up to the rate of inflation. Inflation tends to be a robber of wealth.
As a note of interest the US dollar is only worth 3% of what the buck was in 1913 when the federal reserve was created.
Trying to keep this short, would be interested in some feed back.

#36 MortgageScuba on 12.02.09 at 1:40 am

Here is a nice chart on gold prices against inflation-adjusted prices from 1914 to 2009.

http://tinyurl.com/28ukyw

#37 Nostradamus Le Mad Vlad on 12.02.09 at 2:01 am

Speakers on, as when I saw the lead-in pic, it reminded me of Edukayshun, same as always. Lining up to buy when the price is high.

Sheeple are getting themselves into a tizzy over next-to-nothing. Well, there’s always the next lifecycle to see if anything was learned. Probably not.
——
Two links concerning Blighty 1 / Blighty 2
——
Figure is here! Crash
——
Carney’s former employers are taking new lessons. — Uprising
——
The Climategate e-mails were released by a whistleblower, not a hacker.
——
The economy is only here to be made fun of, like this.

#38 Ghost of Tom Joad on 12.02.09 at 2:26 am

“A similar line stretched more than a block down Yonge Street, the last time gold was making headlines. Then the metal touched $870 an ounce – in 1979, almost 30 years ago to the day.”

Yeah Garth, but 30 years ago the New World Order hadn’t had hollowed out America. 30 years ago America had factories. 30 years ago, the US dollar had a future.

Obama (who just like Bush is New World Order puppet) is sending in 30K more troops. Is this rational? Does this make any sense at all? Why would a nation whose economy is on life-support continue to wage these foolish wars? Not to fight terrorism, but to use US troops to profit off of oil and drugs. America is being used until it is useless.

Sept 11, 1990 George H.W. Bush “Now, we can see a new world coming into view. A world in which there is the very real prospect of a New World Order”

30 year laters – it could be a very different story for gold.

#39 Munch on 12.02.09 at 3:40 am

Gold is in a “blow off” phase.

Take that to the bank!

I guarantee it, or your money back!

#40 TaxHaven on 12.02.09 at 3:46 am

Time to do more reading.

This is still not a speculative bubble. This is happening in response to voracious and predatory governments. In response to the insolvency of western states, of banks and of economies. Because of the printing of “money”, in direct competition with gold, a real money.

Do you remember 1980? Within three days gold soared to a high and then plunged. What’s happening now? A sustained and continuous step-by-step rise, interspersed with periods of consolidation. Already I hear traditionalists, who see gold only as yet another speculative investment, puzzling over why there has yet to be a dip buying opportunity… They simply don’t understand gold’s role as the ultimate safe haven and the purest form of money. Neither do they comprehend macro-economic conditions on a worldwide basis or the centrality of credit in economic life.

The hoi polloi lined up outside ScotiaBank do not move the gold market. It is dependent on the actions of central banks, of funds, of institutional investors and of the uber-rich of the world.

This is a strike against government incompetence more than anything. It will go a long, lon

#41 Anon on 12.02.09 at 4:33 am

Garth, gold is clearly trading in reverse to USD, and since CAD is chasing USD on its way down gold is getting more and more expensive in CAD as well. This is simply a relationship between three currencies, each being manipulated in its own way. I do believe that gold will remain the stronger of the three currencies until this system finally blows up. Then who knows what happens- maybe ammo becomes the next stable currency, maybe there will be a new currency, or maybe the system never blows up and they just remove a dozen zeros to make the math easier.

#42 Anon on 12.02.09 at 4:36 am

P.S. speaking of ammo- the price for ammo went up faster than for gold in the last 12-18 months. A box that used to be worth $50 last year is now selling for $80. Would you predict that ammo will crash too, or just gold and condos?

#43 Gold Bug NOT on 12.02.09 at 5:30 am

Mr. Turner, are we going to experience 15% interest rate anytime soon in this economic climate?

If not, what is going to bring down the Precious?

Regards,

#44 Maurice on 12.02.09 at 6:58 am

Amigos:
Something doesn’t align with Gold prices in Canadian dollars. We purchased a large position in US:GLD in 2006. The price in Canadian dollars was $120.66 on the purchase date. I am still not back to break even. Gold is at an all time record price in U.S. dollars, not Canadian dollars. Oil is really cheap right now. Every time you start an internal combustion engine the supply of oil decreases. Every ounce of gold ever mined is still around.

#45 Samantha on 12.02.09 at 7:33 am

http://www.theglobeandmail.com/globe-investor/china-warns-of-possible-gold-bubble/article1385240/

#46 Nestor on 12.02.09 at 7:34 am

Garth.

you are using the wrong graph. you show the “change” in affordability. not the actual affordability numbers. this chart is irrelevant to your point. look at the 1994 number. the most extreme change in affordability … that’s precisely the point where real estate in Canada bottomed… and it had been collapsing since late 1989.
what you want to show are the actual raw date of affordability, not change in affordability.

as for gold. why would you think it’s anywhere near a bubble? look at what the banking criminals have done. the US has increased it’s monetary base 150% in just over a year. UK? China? Japan? they are all printing money like crazy. central banks are holding rates at near zero to steal money from savers, and give it to insolvent banks. the US has been depreciating it’s currency for a decade now. people are only now starting to figure out the gold story. we haven’t even got to the speculative phase in gold.

#47 Nestor on 12.02.09 at 7:40 am

Maurice: you are a liar…

“Something doesn’t align with Gold prices in Canadian dollars. We purchased a large position in US:GLD in 2006. The price in Canadian dollars was $120.66 on the purchase date. I am still not back to break even.”

in 2006, the price of the GLD averaged $55-65, not $120. the equivalent in CAN$ at the time would have been $63-80.

#48 David Bakody on 12.02.09 at 7:47 am

Nothing changes, nothing changes…..

A fool and his/her money are soon parted!

Well something …. we now have the her in the mix.

#49 pbrasseur on 12.02.09 at 8:15 am

“People tend to do things because other people are doing them, even when this means their behaviour causes unusual and unnecessary risk. – Garth”

Actually, as we ear a lot about “the herd” and how dumb it is you should also know that collective wisdom is also very real, as you may learn here:

http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds

(A fascinating book BTW)

Crowds are actually surprisingly smart as long as THE INFORMATION THEY GET IS NOT FALSE OR DISTORTED.

Unfortunately when it comes to real estate the information people get is flat wrong, and I’m not necessarily talking about the media here, they are simply part of the crowd.

The most important piece of information a market gives us is price. For example a rising price indicates success, it tells us something is desirable and likely to be a good investment. The problem with real estate is that prices are manipulated by governments eager to stimulate the economy and to facilitate access to property. While stimulating demand by propping up ever growing (and unsustainable) credit via the CMHC and other means government are causing real-estate prices to rise more than they normally would. Prices rise artificially but they rise nevertheless and that information is interpreted as positive by the market. The bubble starts there (of course bubbles happen occasionally even without government interventions, but they are usually smaller and more confined).

People are collectively not dumb, they are simply acting of the information they get.

#50 robert on 12.02.09 at 8:20 am

#28 nonplused

Are you sure you have that right? The last time nominal rates peaked so did gold and inflation. Deflation was nowhere to be seen.

#51 latinlife on 12.02.09 at 9:06 am

“So I wathed those people in the glitzy banking hall on the first day of December, 2009, doing exactly the same thing, and wondered how it would end this time. Different? Or the same as always?”

No, Garth this is not the same thing as last time. YET.

In the 80’s the line up was all the way outside up bay st.
Before the bank opened.

Not just inside the glitzy hall. During regular hours.

And the The Central Bank of China wasn’t standing in line.

You’re jumping the golden gun amigo.

The Garth indicator: When he calls a top there’s 3.5 years minimum left in the run.

I repeat my comment that it is only gold zealots who seem incapable of disagreeing without attacking others. The ugly investors. — Garth

#52 Art Vandelai on 12.02.09 at 9:07 am

Garth…China’s warning on a gold ‘bubble’ is likely a self-serving attempt to cool the recent momentum.

Notice that they don’t make a peep about the bubble in US Treasury bonds. They hold $2 trillion of these, and are trying to maintain their value as they gradually diversify into other assets (including gold). It’s little wonder they’re talking gold down.

China is the planet’s biggest producer, so your comments are somewhat confusing. Maybe they simply have more clarity. — Garth

#53 Lance on 12.02.09 at 9:09 am

Where to put one’s money… everywhere I look, I see inflating asset bubbles.

The next crash is going to make this past one seem like a teaser.

#54 Toronto C9 Renter on 12.02.09 at 9:20 am

Good post Garth.

Myself, I’m just trying my best to hedge at this juncture.

The two camps –“dollar collapse” & “gold bubble” — each have seemingly good arguments. Of course it helps that each pundit speaks in a confident, dismissive tone like Schiff, Shedlock, Faber, etc!

I personally doubt the outcome is as clear as many want to believe. For example the “dollar collapse” argument is all the rage, but I don’t see it. Too many negative consequences, so the leading economies will work hard to avoid it. Conversely, I don’t see gold back at $700 any time soon, either.

Guess we all just have to be patient, and keep on our toes!

There will be no currency collapse. A steady decline in the US dollar is to be expected, and already factored in by most smart people. And we are going into years of stagflation and disappointment, especially for those who think in extremes. But no greenback disaster. No American hyperinflation. It’s comic book economics. — Garth

#55 dave99 on 12.02.09 at 9:34 am

#16 InvestorsFriend and #45 Nestor,

You pointed out that the graph is the change in affordability, and not the sum total of the changes which would give the present affordability.

You are correct.

However, a quick eyeball of this graph of changes certainly supports Garth’s statement. Further, the following link shows that we are indeed at the one of the least affordable points historically (albeit not as bad as 2007, nor 1995 nor 1990.

http://www.rbc.com/economics/market/pdf/house.pdf

#56 Nestor on 12.02.09 at 9:34 am

Garth,

“I repeat my comment that it is only gold zealots who seem incapable of disagreeing without attacking others. The ugly investors. — Garth ”

how can you complain about gold zealots?? all the world’s monetary problems lie in the fact that governments control the world’s money supplies and interest rates.

you complain that real estate is in a bubble. you complain that government is amassing insane debt levels… and yet, these things are ONLY possible with government control of money. NONE of this would be happening if we were still on a gold standard.

the REASON you have these bubbles and collapses now is the constant printing of money by central banks, and the control of interest rates. you should really look at the root of the problem, not the symptoms.

#57 McSteve on 12.02.09 at 9:35 am

Based on some research I’ve done, it would seem anytime something went “parabolic” on the charts it eventually crashes with horrible results, often taking years to recover. See also Potash and Oil – the later going from $147 to $30ish.

I have some precious metal funds and a little bit of physical silver bullion, more as a novelty.

I think I’m going to start scaling out of my paper assest and lock in some profit – maybe buy some real return ETFs.

Real wealth is a freezer full of food.

#58 miketheengineer on 12.02.09 at 10:01 am

#27 Jo

Your posts do make a lot of sense. Right now, no one can predict the future.

Some say the US dollar is going down(ie a new US dollar comes in, the old US dollar goes out) in the next 12 months…..if that happens, what happens to our Canadian buck…does it go down too? If people believe that set of conditions, that might explain the rise in gold. I don’t know what will happen in the future, all I know is that a lot of people are now talking gold. So all the buzz is buy gold. I think your projections are too extreme. I see it being above 1000 for at least the next year, and that all depends on what will happen to the US dollar. If it (the US Dollar) craps, gold goes up. If it doesn’t crap, then it will hold steady somewhere, at some price. There are too many factors, and market manipulation could be the result for the high price of the gold.(or low price, depending on your perspective)

Unfortunately, lots of people like me can’t buy anything right now due to the unemployment situation, and trying to keep the kids fed. If anything, lots of people have to sell (whatever they have) just to keep the wife and children fed.

I think that Garth’s advice, that if you must own gold, no more than 10% of your total portfolio, is wise advice. Spend the rest on good food, good wine, and enjoy every day like it is the last one, because you can’t take it with you.

#59 latinlife on 12.02.09 at 10:05 am

A characteristic largely common to gold bugs is the inability to disagree without being puerile and ad hominem. I’m not sure if it’s tellling or just sad. — Garth

How bout anti-RE bug top callers??

Seeing others get rich in assets while they prematurely call tops.

That’s sad and irresponsible.

One of the biggest lessons in investing:

Don’t call tops.

I observed a pattern of behaviour which history suggests indicates a bubble mentality. I also see hostility and paranoia among many gold believers. You would do well to worry about both. — Garth

#60 $fromA$ia ( Y ) on 12.02.09 at 10:12 am

…especially for those who think in extremes. But no greenback disaster. No American hyperinflation. It’s comic book economics. — Garth

Pardon me Garth, YOU ARE THE ONE WHO THINKS IN EXTREMES!!!

Maybe you should shut your mouth till either real estate collapses drops( like you’ve been whinning about forever) or GOLD goes to $500 like you claim.

Real estate will not collapse, but it will correct with serious consequences for no-equity owners. Gold continues to be a useful inflation hedge in moderation. Try it some time. — Garth

#61 613 Happy where I am on 12.02.09 at 10:15 am

When I first started to read the posting, I thought you meant the line up was for people who wanted to SELL their gold, which would have made sense…

There are people who see opportunity and buy low and are patient enough to wait it out and there are others who are greedy and want just a quick profit who get burned in real estate, gold, or whatever is up in value at the time.

My parents made a fortune by buying gold at 100 dollars an ounce and selling almost all her holdings at 800 dollars an ounce. It can be done if it is done with a rational mind.

#62 pezzazz on 12.02.09 at 10:17 am

One of the most compelling arguments I’ve heard about gold is that it is a commodity that becomes difficult to come up with the right reason to sell. The higher gold prices go the more reason there is to hold gold. If you are worried about further currency destruction then you would be crazy to sell your gold (for fiat currency). This driving up of gold seems to be because of fear rather than greed. When/if the Americans start defending their currency then gold will back off big time and the retraction will slay many. If the Americans continue to allow their currency to deflate then gold will keep moving and will really move if the Americans ever get to the point where they realize they should say goodbye to the greenback since they don’t own any. If that is the play then the first argument of buying gold for the potential of disaster comes to fruition and gold is no longer pegged to anything and thus becomes valued in the eyes of the beholder. But let’s hope we get some kind of knight in shining armour like Paul Volcker to come in here and turn things around. But let’s make that happen after I’ve loaded up on USD at $1.20, then ride the 30-40% change in crossrate. Then I can stop renting and buy from the people with fear. Preferably in Nostradamus’ gated community.

#63 Maurice on 12.02.09 at 10:21 am

#55 Nestor

Please check your facts before calling me a liar. I wrote US:GLD $126. That is the ETF gold not gold bullion. Facts are facts I still can’t get my $126 CDN out of US:GLD. It is $118 US today. Take of the commission. An appolgy would be appreciated but not expected.

#64 latinlife on 12.02.09 at 10:22 am

I observed a pattern of behaviour which history suggests indicates a bubble mentality. I also see hostility and paranoia among many gold believers. You would do well to worry about both. — Garth

Being up over 200% booking profits all the way up(taking money off the table) and raising stops.

Your point is rendered moot.

Your powers of observation may be betraying you.

Try looking up. Your navel is embarrassed. — Garth

#65 Dave on 12.02.09 at 10:23 am

China is the planet’s biggest producer, so your comments are somewhat confusing. Maybe they simply have more clarity. — Garth

—————————————————–

China is the world’s biggest producer yet they still scurry to purchase more gold outside of their borders. I’m yet to see anyone in China quoted as saying it’s a gold bubble.

Just a pointer. In economic panics, people sell anything and everything. Panic/fear in a bad market is stronger than greed in a great market. Gold happens to be one of the things that the crowd panic purchases in a bad market.

The U.S is in a whole heap of trouble for many years. What currency will people take comfort in owning? People will not be at ease holding U.S dollars in 2,3,4,5 years from now. This is obvious and should be bullish for gold. Whether rational or not, people will be less willing to hold dollars going forward. I wouldn’t be betting against that anytime soon. A gold sell-off next week wouldn’t do a thing to encourage people to keep U.S dollars for a few years.

Higher gold prices are coming.

#66 brico9 on 12.02.09 at 10:25 am

Garth has stated a 10% holding of gold is recommended. I would not consider him anti-gold. I would call myself a gold bug – but I do understand the idea that gold is not money. Money in terms of ease of exchange for goods or services in our economy. It is an investment like any other but that is more liquid than most and you can store it – unlike oil etc. You can also own it with having to deal with a bank or brokerage. No point battling the about the end of the world and debating if gold, food or ammo is best – if it comes to that, most of us will be dead.

My idea is that gold and real estate have an inverse relationship. I hope when gold is at his peak – real estate will be close to the bottom and I will exchange my gold for paper currency and then exchange it for a house.

#67 AlienVoice on 12.02.09 at 10:34 am

OK, let’s count how many people were standing in that line-up. 100? 200? 300?
And how many people live in GTA? 5,000,000?
People buying physical bullion are in overwhelming minority, so there is no concerns for bubble for now.
And China is scaring people off with all this bubble talk and buying up gold reserves at the same time? Sounds like a game…
USA has doubled their paper (digital) money supply in a year and will double it again in 2-3 years. Printing press is what driving silver, gold and oil prices up, not 100 people lining up at Scotia.

Garth, when gold was $950 you were saying it is finished and it is time to sell. Today it is $1210 and will keep climbing because fiat money is set to undergo a massive devaluation.

Another sold bug with a bad memory and an attitude problem. I published a book 10 months ago suggesting people keep 10-15% of their wealth in gold, and have not changed my opinion. That is an equal weighting to oil/energy. Tell me where I said gold was ‘finished.’ It is a useful inflation hedge, but it’s still not money. — Garth

#68 Sid on 12.02.09 at 10:34 am

Just reading online

“Canadian home-resale prices are likely rise in 2010 at an even faster pace than this year but a dangerous bubble probably won’t develop, TD Economics said in study published on Tuesday.”

About what you would expect the bank to say, no? — Garth

#69 Gord In Vancouver on 12.02.09 at 10:38 am

Thanks for the post, Garth.

When I first saw the picture of people lining up, I thought your post was referring to unemployed Canadian waiting to register for their EI benefits.

#70 Sid on 12.02.09 at 10:39 am

Here’s the article:
http://ca.news.finance.yahoo.com/s/01122009/6/finance-canada-home-prices-rise-10-percent-2010-report.html

So let me get something straight, if last year’s rebound of 4-5 percent was caused by pent up demand, then what will be the cause of the 10% increase next year (if pent up demand has depleted?). It’s obvious the banks want to perpetuate the bubble.

#71 Maurice on 12.02.09 at 10:42 am

#46 Nestor

Please check your facts. The price referred to US:GLD the ETF at $120.66 CDN. Not the price of bullion. I am not a liar.

#72 Chris on 12.02.09 at 10:47 am

Garth,
Read this and repond enjoy….. No bubble my ass….

http://ca.news.finance.yahoo.com/s/01122009/6/finance-canada-home-prices-rise-10-percent-2010-report.html

My shapely one, too. — Garth

#73 PeckedToDeathByDucks on 12.02.09 at 10:49 am

when paper burns…

N. Korea Revalues Won, Wipes Out Savings: Report
Published: Wednesday, 2 Dec 2009

“…the money became useless paper overnight,”

#74 Nestor on 12.02.09 at 10:50 am

“Please check your facts. The price referred to US:GLD the ETF at $120.66 CDN. Not the price of bullion. I am not a liar.”

yes you are. the price of the US: GLD in 2006 traded between $63 -80 CAD. NEVER at the price you quote.

#75 Goldbuggered on 12.02.09 at 10:50 am

Gold is nowhere near bubble territory yet.

The CPI is wrong. $2300 is not the correct inflation adjusted high.

Gold is once again reverting to its role as the worlds reserve currency. It is money, not a commodity.

The metric to look at is central bank base money. In order to back US base money 100%, gold would have to reach the $7000 mark. This is assuming the US still has the 8000 tons of unencumbered gold that they claim, despite not allowing an audit of their gold supply since the Eisenhower administration.

In 1980 gold spiked to reach a price where US base money was backed 140%. The bubble was the extra 40%. Bubble territory today would be the $10-11000 mark.

The big money hasn’t even started pouring in yet.

Funny how the MSM are so quick to call gold a bubble today. They are now bubble vigilantes, even though they missed every other bubble. Once again they probably have it wrong.

#76 Wilson on 12.02.09 at 10:57 am

New book and possibly a movie deal

The World According to Garth

#77 Finanzkrise on 12.02.09 at 10:59 am

As Garth mentions, gold is a possible hedge against inflation. However, in a deflation scenario, nominal gold prices would not likely hold, even if real prices remain high. Given significant deflation, gold investors would likely need to sell holdings to cover losses in other assets, and the price of gold could also drop in relation to the US dollar, out of risky foreign assets.

#78 Finanzkrise on 12.02.09 at 11:02 am

CORRECTION TO MY PREVIOUS POST:
As Garth mentions, gold is a possible hedge against inflation. However, in a deflation scenario, nominal gold prices would not likely hold, even if real prices remain high.

Given significant deflation, gold investors would likely need to sell holdings to cover losses in other assets, and the price of gold could also drop in an inverse relationship to the US dollar, which would rise as a flight to safety and with the unwinding of the current US dollar carry trade away from risky foreign assets.

#79 Nibs on 12.02.09 at 11:05 am

Hi Garth

I agree that the gold bull/USD bear trade is overcrowded at the moment. It will likely mean a counter trend rally in the USD at some point over the next couple months, resulting in a relatively violent pullback in commodities. I personally have been purchasing put options on several ETFs traded on the NYSE, including an emerging market ETF and a Canadian ETF. If I’m right, I will pocket the increased price in USD, plus the increased value of the options. We’ll see.

While I agree with your bearish sentiment on gold over the short term, I think we have to keep in mind that central banks have deep pockets. Any significant pullback in gold will bring the central banks to the table. Remember that these institutions have been net sellers of gold over the past 30 years. They are now set to become net buyers. That will provide price support and downside protection for gold prices. I don’t see gold lingering much below $1000/oz for any significant length of time before competitive acquisitions by central banks buoys prices again.

In summary, I agree that a short term, temporary pullback in gold and a counter trend rally in the USD is likely, though I am still bullish on gold for the long term. Your advice to hold no more than 15-20% in gold is timeless. And yes, goldbugs are still crazy.

#80 neutral on 12.02.09 at 11:06 am

Garth, we have to wait another year for your assumtions to happen, if they will ever happen. So far, not a winner. Heads up: http://ca.news.finance.yahoo.com/s/01122009/6/finance-canada-home-prices-rise-10-percent-2010-report.html
Both of you gyus wrong. I think the truth is somewhere in the middle, like usual.

Try reading before you post. That report has been cited often, including by me in the above article. The bank says what you would expect a bank to say. — Garth

#81 $fromA$ia ( Y ) on 12.02.09 at 11:08 am

Real estate will not collapse, but it will correct with serious consequences for no-equity owners. Gold continues to be a useful inflation hedge in moderation. Try it some time. — Garth

??? What gave you the idea that I am an extreme gold bug??? I am holding 15% in gold rest in ca$h. Bought at $735, $780, $840, and at $1030USD.

Fact, USA printed 7 times their own currency since 2001.

Fact, Canada printed more $$$ proportionally to USA in the last year.

Soon to be reality, $2000 ounce gold will be the bench mark. If you don’t trust government, you buy it. The banks punish you for holding cash with low rates. Were you gonna stick your cash cowboy? Too much capitol everywhere.
This Government wants to justify the high home prices with devalued dollars. Punishing savers. Dilution money to make debt smaller, when your holding cash, your punished… that why people are buying gold.

Garth 5-10% bonds won’t keep up with whats going to happen next.

#82 Joshua on 12.02.09 at 11:10 am

Hi Garth:

Since we are on the topic of gold, I would be more inclined to add a few gold producers to my portfolio rather than the commodity itself to get to your suggested 10-15%. Does that fit into what you would suggest, or do you recommend owning the actual commodity?

I believe physical gold is the worst form of ownership, unless you think you’ll need to chew off a piece to buy loaves of bread underneath the onramp. Gold producers, gold sector ETFs and futures are all preferable, cheaper better leveraged ways to participate. — Garth

#83 $fromA$ia ( Y ) on 12.02.09 at 11:10 am

Furthermore, the penny and nickel may have seen their last days.

I can’t stand pennies.

#84 My_View on 12.02.09 at 11:11 am

Sorry Garth,

I strongly disagree,

Bricks/mortar, Gold, Cash and yes even debt are king.

Both Gold & R/E have a long way to go.

Those who want facts, just ask.

#85 newfangled on 12.02.09 at 11:15 am

Here’s the new TD report on Canadian Housing:

http://www.td.com/economics/special/pg1209_resale.pdf

“From their trough [in 2008], the most sustainable path
for Canadian home prices would have been a gradual and modest uptrend aligned with nominal income growth. But now that home values are already past their previous peak in such short order, we estimate that the typical home remains overvalued by 12% at the national level. Unfortunately, sheer momentum suggests that this overvaluation is likely to increase over the course of the next few quarters, peaking
at 13-15% in H1/2010.”

A bit later on: “The misalignment of home prices with their fundamental drivers, such as demographics and income, cannot last. That much is known. What is less clear is the exact timing of when and precise channel by which the two will eventually realign.”

There’s some good (and reasonably fair) stuff in there.

#86 AlienVoice on 12.02.09 at 11:21 am

Tell me where I said gold was ‘finished’.

Garth, please check your own gold related articles – that is EXACTLY what you said.

I said gold is not money. It isn’t. As for ‘finished’, best cough up a link. — Garth

#87 pezzazz on 12.02.09 at 11:24 am

On another note this is why you should never play levered etf’s… gold, silver, oil, financials…don’t do it.

http://www.my10000dollars.com/etf-time-decay/

#88 Mr. D - Ottawa on 12.02.09 at 11:25 am

Reply to #46 Nestor

((( Maurice: you are a liar…
“Something doesn’t align with Gold prices in Canadian dollars. We purchased a large position in US:GLD in 2006. The price in Canadian dollars was $120.66 on the purchase date. I am still not back to break even.”
in 2006, the price of the GLD averaged $55-65, not $120. the equivalent in CAN$ at the time would have been $63-80. )))

You would think that if you would call someone a liar, you would at least get the price of gold right (or close). In 2006, the price of gold ranged from $524.75 to 725.00 USD per ounce. The average for that year was $603.46 USD. Your numbers are way off. Where did you come up with $55-65? Did you just make that up? The last time gold was that cheap was in 1972. You can find historical prices here:
http://66.38.218.33/charts/historicalgold.html

Just scroll down to YEARLY GOLD CHARTS, check the box for 2006 and then click on View Charts and Data.

#89 Wilson on 12.02.09 at 11:27 am

“I believe physical gold is the worst form of ownership, unless you think you’ll need to chew off a piece to buy loaves of bread underneath the onramp. Gold producers, gold sector ETFs and futures are all preferable, cheaper better leveraged ways to participate. — Garth

You’re getting more delusional with every post you make.

No mention of the risk with the recos.

#90 McSteve on 12.02.09 at 11:28 am

Hyperinflation is know where in sight – this is a speculation bubble.

Gold would be killed instantly by a return to 20% interest rates – it’s happened before.

And Canada is not North Korea. Besides, North Korea has bigger problems than a worthless currency – like a stone-aged economy full of starving people.

#91 Rogers on 12.02.09 at 11:47 am

Garth,

You said gold was done a month ago to Tom Jefferies
on howe St radio.

My position on gold is as I published in ‘After the Crash.’ — Garth

#92 omg on 12.02.09 at 11:52 am

Nice Bank Owned Property in Victoria

Now I do not track the MLS every day, but I do not recall ever seeing a bank owned property for sale in Fairfield (one of the choicest areas in Victoria).

http://www.realtor.ca/propertyDetails.aspx?propertyId=8802842

#93 Another Albertan on 12.02.09 at 12:02 pm

Lots of cognitive dissonance in the room today, eh?

#94 Sean on 12.02.09 at 12:12 pm

I find gold very interesting. I think what is often missed, is that gold is a currency. Always has been, always will be. To obsess over its “price” in relation to another currency, is to miss the point entirely. These so-called record prices are denominated in US dollars… that is the real story. To ascertain that gold can or should only reach a certain dollar price, is to implicitly give some intrinsic value to the US dollars that it is priced in. I think when people truly understand that, they start to understand the true role and value of gold. Are you willing to place your confidence in the USGov or the USFed to manage the continued value of the dollar… are you willing to place all your eggs in that one basket?

I would respectfully suggest that anyone unwilling to hold at least 10% of their assets in precious metals just does not get the “game”. And it’s ironic because it is the very same game that most on this blog seem to believe is causing the housing market to be grossly overvalued. If you believe the govt is artificially suppressing interest rates, and causing asset bubbles, then you owe it to yourself to question their stewardship over the money they print. And you owe it to yourself to diversify the money you choose to hold in savings.

That being said, I often ask myself what the top will look like in gold. I think the “behavioural” signs that Garth brings up are some of the best indicators. But in that regard, I would be inclined to compare the behaviour in real estate versus the behaviour in precious metals. Show me line ups at every bank, every coin dealer, the same elbowing and arguing to buy that we see with pre-sale condos… and that will look a lot more like a top to me. Conversely, ask yourself how many people you know that own gold… how many have ever even seen a gold coin. I would suggest that as we head into unprecedented inflationary times, gold may yet be in the early innings.

#95 Nestor on 12.02.09 at 12:17 pm

#87 Mr. D in Ottawa. i guess they don’t teach people to read up there.

what i said, was that the GLD (not gold but the gold etf) AVERAGED $55-65 in 2006. That’s the equivalent of $550-650.

what i ALSO SAID, was that anyone BUYING the GLD would have paid between $63-80 CAN$. in fact, the HIGHEST PRICE YOU COULD HAVE PAIN IN CAN $$ IN 2006 FOR THE GLD WAS $80 CAN (the equivalent of $800/oz CAN)

my FACTS are CORRECT. MrD from Ottawa can’t read, and Maurice IS a liar.

#96 Mike (Authentic) on 12.02.09 at 12:21 pm

Sounds like a lot of gold bugs are as bad as the banksters, betting agaist the common man and economy in hopes to make themselves rich.

Sorry, I’m not going to buy gold so I can bet the economy will go down in flames just so I can make some ROI.

Although I have been tempted to buy gold, money and greed loose out to morals and ethics IMO.

Mike

#97 POL-CAN on 12.02.09 at 12:21 pm

A very good documentary on money/debt/gold was made in 1996 by Bill Still. It was called “The Money Masters”. This year he released a new one called “The Secret of Oz”. Both are well worth the time to watch if one want to understand the history of money with an emphasis on money as debt.

Gold backed currency is not THE answer but it does tend to keep TPTB more honest in terms of spending/printing.

It does not stop the boom bust cycles however!

Anyway….

The Money Masters:

http://www.youtube.com/watch?v=lXb-LrVkuwM

The Bill Still report:

http://www.youtube.com/watch?v=sGNPEQDXxwo&feature=channel

The Secret of Oz trailer:

http://www.youtube.com/watch?v=6cq9yEVcGIU

#98 Sean on 12.02.09 at 12:23 pm

Another thought regarding a top in gold… I feel that another appropriate benchmark for gold will be to monitor the percentage of your portfolio that precious metals represent. In true bubbles, as currently with real estate, the one asset becomes disproportionately large in your portfolio. I feel that if / when real estate becomes truly cheap compared to gold, which I believe will happen, then an appropriate action would be to reduce gold holdings in favour of income-producing real estate or agricultural land… i.e. swap tangible for tangible, and bring your precious metals allocation back into line somewhere around 10% of net worth.

#99 MikeB on 12.02.09 at 12:38 pm

RECESSION … WHAT RECESSION!!!
.4 % growth in GDP…. Whippee… BUT as Garth pointed out this growth number is bogus.
If you watch the link of video on BNN you will see that if it were not for the spending by the Govt. there would be no growth whatsoever. Plus the government attempt at creating jobs is pretty suspect. Stephen is up to his masterful tricks again.

http://watch.bnn.ca/clip241847#clip241847

#100 POL-CAN on 12.02.09 at 12:43 pm

Must read (if you think the recession is over):

Charting The Great World Trade Collapse

A new report by VoxEU provides some detailed perspectives on just how bad the collapse in world trade has been as a result of the last year’s events. In a nutshell: the current Great Recession/Depression has plunged the world into an unprecedented collapse of global trade, with the resultant blowing of liquidity bubbles having been the only way for individual governments to respond to this massive loss of GDP. And while drops in world trade are nothing new, with a 5% drop in the 1982 and 2001 periods, as well as a more severe 11% contraction in the 1970s, the current plunge of over 15% YoY is truly unprecedented and demonstrates the fragile nature of “globalization.” What the outcome of this fact will be, depends entirely on the traditional dynamo of world economic growth – the US consumer, and unfortunately he is still down for the count.

http://www.zerohedge.com/article/charting-great-world-trade-collapse

#101 just a guy on 12.02.09 at 12:43 pm

Not that I want to break up a good cat fight, but Nestor is correct. If Maurice paid C$120 for the GLD ETF in 2006, then he should consider finding a new broker.

Let’s move on….

#102 bill on 12.02.09 at 12:44 pm

Gold has a ways to go yet. Will it form a bubble ? yes. And it will go down. but not at this point in time and certainly not before we have a better handle on what the future holds. The uncertainty is fueling the current speculation. That these people are late in the game is true. They do have some upside yet. This is just a trickle of folks buying. When everyone on the street ,bus or coffee house is talking about gold like they talk about realestate that would be a warning to get out.
And the wild card this time is we have the chinese being told to buy gold by their ‘government” That has a lot of goldbugs thinking how high will it go with that impetus.
To anyone buying gold now , are you prepared to have wild fluctuations in price ? Up and Down…? it goes with the territory. you should have bought back in the sub three hundred dollar range when noone would touch the stuff.
If you are buying ,do like Garth sez: just buy a bit. its like an insurance policy. you shouldnt try to make a pile of cash out of it. That chance is long gone.

#103 PeckedToDeathByDucks on 12.02.09 at 12:52 pm

Natural Gas is diving again. You would think that at this price we, as a country, would be converting all our energies (figuratively and literally) into locking into this price for a loooong time and converting all our generators from coal and oil to the most available resource. Why aren’t we using such a cheap, clean resource instead of paying a ransom for oil pirates.? (figuratively and literally)

#104 Mr. D - Ottawa on 12.02.09 at 12:56 pm

Reply to #94 Nestor

Maybe the problem is that you can’t write. If you want to refer to a stock symbol such as GLD, then at least mention the exchange (NYSE) or say you’re referring to the ETF and not the price of the commodity.

Also, your facts are ALMOST correct. The peak price of NYSE:GLD in 2006 was 71.12 reached on May 12. The official Bank of Canada exchange rate on that day was 0.9099 (1.0990). This gives a peak price of $78.16 CAD. At least $80 is close.

You’ve got quite an attitude though, telling people they are liars or they can’t read.

#105 BDG YYC on 12.02.09 at 12:56 pm

#95 Mike …
That’s a rather interesting point of view. So I’m curious as to what sorts of things fit into that moral and ethical basket. Also … how do you manage it to make sure your ROI doesn’t get out of hand? Do you keep a list of the things you’re not buying ? Etc.

#106 T.O. Bubble Boy on 12.02.09 at 1:02 pm

Some signs of the condo bubble popping in downtown Toronto:

1) The Fashion House condo project now has a contest to win a $100k shopping spree! I believe that there are several $1M+ floorplans that just got sliced up into cheaper ones.

http://www.fashionhousecondos.com/runwaytohallway/content/fh-contest-rules-and-regs.pdf

2) The Minto King West project is pushed to re-launch at Feb 2010 at the earliest (it stalled out of the gate with the 2008 Financial Crisis).

#107 Drake on 12.02.09 at 1:12 pm

Bought most of my gold when it was under $500 an ounce. Only once paid more. I suspect they’ll be another good decline in the price, and I’ll pick up as much as I can afford since the dollar has only one direction to go, down.

Our dollar certainly is not. — Garth

#108 Evangeline on 12.02.09 at 1:12 pm

#96 POL-CAN
((A very good documentary on money/debt/gold was made in 1996 by Bill Still.))

Did you see Still’s vid on state banks? He proposes the state bank model as a solution for the problem of huge interest payments that taxpayers have to pay on government debt. Among all the gloom and doom south of the border, the state bank of North Dakota is thriving and the state is prosperous. Low unemployment too. The state bank of ND was started during the Great Depression and it loans out its deposits at low interest rates only to projects that benefit the state. The mandate is to enrich the state not the bank managers.

#109 Popeye on 12.02.09 at 1:15 pm

5 year chart on gold ETF (US:GLD):

http://finance.yahoo.com/q/ta?s=GLD&t=5y

#110 kitchener1 on 12.02.09 at 1:16 pm

A blog post about Gold, thats going to get the blog dogs going.

Lets look at simple economics, any commodity or stock that shoots up in value very quick in a short time is bound to lose steam at some point and revert back to mean.

Gold has been doing very well, it even shot up when the US $ was rangebound. It tells me a few things:
1. it is foreshadowing something big in the pipeline
2. There is a lot of worldwide demand, despite all the happy talk from world leaders about a recovery to the recession.
3. We are not yet in the “public participation” phase so it still has a ways to go yet.
4. From my info-research, the short posistion on Gold is not very large, so the big players still see upside.
5. Most buyers are institutional at this point, watch out when it starts to drop as the automated sell orders will slaughter this pig in no time.

When everyone is talking about Gold then start to get worried.

It might very well be in a blow off top or may still have some room to run, don;t know.

Just remeber, as is clear by RE market.

Markets can stay irrational longer then you can stay solvent.

#111 bill on 12.02.09 at 1:18 pm

It is no sin to make money from a bad economy , Authentic Mike. Why should I or anyone else lose because of poor decisions by others . It is obvious by now that the response of the united states to the 911 terrorist incident was and is totally out of proportion to what happened on that sad day. They put that entire conflict on a credit card and then had economic collapse . We had very little choice in the path they took. And now the economic chickens is home to roost.It is ones duty to family to provide for the future. Can you eat morals or ethics? When your family goes without will you find comfort in that you did the ‘right ‘ thing?
Nobody in their right mind wants what is happening these days , I sure dont. I get no feeling of superiority or smugness as the world economy takes a crap.But I recognize the peril and potential and am taking steps to minimize the consequence of others actions.

#112 Kelly McMae on 12.02.09 at 1:25 pm

#92 Another Albertan on 12.02.09 at 12:02 pm
Lots of cognitive dissonance in the room today, eh?

No kidding. Surprised no offer has yet been tabled for “my dad is going to beat up your dad”.

#113 bill on 12.02.09 at 1:26 pm

A point to ponder is why is the chinese government is worried about the ‘high’ price of gold.
Well my take is that they are worried that their populace will be unable to purchase as much as they would like to due to high prices. Is this a clue that they will dump some gold to knock the price down to make it more affordable to the population? And if they did dump some gold would the price stabilize or go up again?

#114 jess on 12.02.09 at 1:26 pm

mental elements yield to metal reality

Copper-trading Scandal
maclean july 1,1996
http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=M1ARTM0010930

…”Rogue trading, of course, is nothing new. In December, 1994, Orange County, Calif., declared bankruptcy after revealing that it had lost $2.2 billion in bonds and derivatives that its treasurer had purchased. In July, 1995, Japan’s Daiwa bank disclosed that Toshihide Iguchi, a bond trader at its New York operation, lost $1.5 billion over 11 years selling U.S. government securities. And in perhaps the most sensational loss of all, Nicholas Leeson, a Singapore-based bond trader with the British bank Barings PLC, lost $1.8 billion, plunging the venerable firm into bankruptcy…

In all the cases, regulators were left trying to answer one simple question: how did the wheeler-dealers get away with it for so long? While there is no definitive answer, there is a common thread running through – none of the top executives at the corporations seemed to have safeguards to ensure that they knew exactly what their employees were doing. And as long as there were healthy profits, no one seemed to care. In fact, Hamanaka was so respected at Sumitomo that many young traders wanted to work with him. And when Akiyama became president of the firm in 1990, he immediately asked to see him. “I felt relieved,” recalled Akiyama, “since he was a sincere man contrary to my expectation….

People who have worked closely with Hamanaka, however, say officials at LME have to shoulder some of the blame because they were warned about his shady deals almost five years ago. In 1991, David Threlkeld, a copper trader who was then based in London, told authorities that Hamanaka had asked him to falsify trading records. Hamanaka was subsequently investigated in what became known as the Coppergate affair, but no evidence was found. Two years later, the LME probed his trading again but took no action

#115 AlienVoice on 12.02.09 at 1:36 pm

Here is the link Garth,

http://www.greaterfool.ca/2009/04/page/4/

In your article ‘Of Bullion&Bubbles” as of April 2009 you are writing:

“And what has gold done? Diddly. The world has failed to see bullion as an alternative currency in this time of turmoil, financial crisis, increased money supply or the historic accumulation of debt. The metal has given a one-year return of zero, traded in a fairly narrow range and been in far less demand than guns and ammo. The US dollar has become even more of a global currency than ever and the safe haven for worried wealth.

Give it up. Long-term, gold’s finished. Buy oil.”

My published opinion stands: a 10-15% holding of gold is prudent. More is imprudent. — Garth

#116 McSteve on 12.02.09 at 1:54 pm

By the Canadian Index – (TSX60) it’ll give you all the gold you need and some banks and oil to boot.

Materials make up 18.0% (Gold makes up 10% of the TSX), 32.2% is our government sanctioned banking cartel, 28.2% energy, the remainder in other bobbles and minor industrails.

#117 wetdog221 on 12.02.09 at 2:09 pm

Someone earlier, think it was GB, asked “Is Harper tricking Canadians into thinking he is a good economic leader?” . . .

Sorry to burst your bubble mate but how could Harper possibly trick anyone about anything to do with the economy? Just as the fertilizer was hitting the ventilation system south of the line last fall, both he and his finance minister publicly stated that Canada’s economy was invincible and were forecasting continued budget surpluses. These are the folks that were supposed to have their fingers on the pulse of our economy but how wrong do we need them to be before we lose confidence in what they say?

Masterful tricks, not from the likes of Misters Harper or Flahrety . . .

Its sorta like old Ralph Klein pretty taking credit for the prosperity of Alberta in its heyday . . . The way he talked you’d almost of thought that personally he’d negotiated the deal that had the dinosaurs dying off in his neck of the woods (and all the other geological happenstances) thus creating all the fossil fuel under Alberta soil.

#118 Nostradamus jr. on 12.02.09 at 2:17 pm

New predictions from Garth Turner’s #1 most respected poster.

…China very BK…going to war with North Korea & Russia.

…China have 10 million man army.

…> 50 million chinese unemployed, living in the streets.

…Wealthy elite Chinese relocating to Vancouver BC.

…Vancouver will change official name to Hongcouver.

Nostradamus jr.

#119 wise on 12.02.09 at 2:24 pm

I think gold is an alternative of people saving, since they trust no currencies, they have to find the way out. People will think gold, silver..or probably RE as an alternative they save their money or notes. As long as countries still struggle with their currencies, this story will continue.

#120 Nestor on 12.02.09 at 2:33 pm

#103 Mr. D – Ottawa on 12.02.09 at 12:56 pm

Also, your facts are ALMOST correct. The peak price of NYSE:GLD in 2006 was 71.12 reached on May 12. The official Bank of Canada exchange rate on that day was 0.9099 (1.0990). This gives a peak price of $78.16 CAD. At least $80 is close.
___________________________________________

i’ll do one even better.. the HIGH on the GLD for the DAY was $72.26 US… or $79.46 CAN… what do you think … even closer???

i suggest you go back and learn to read.. .. and take that liar .. who claims he paid $120 CAN for the GLD in 2006 , with you.

#121 pjwlk on 12.02.09 at 2:50 pm

#30 goldenfox said: “How many people do you know who own gold or silver?”

Most people I know don’t have enough money for any extras never mind gold or silver. It’s been said that most people are 3 pay cheques away from the street – and I believe that.

#122 robert on 12.02.09 at 2:51 pm

One can debate whether or not the US Dollar is in a secular decline however one cannot argue the path is straight down (see March 2008-early 2009). There will be rallies along the way (sorry no currency collapse hyperinflation for all you gold bugs) and what happens to gold during the next one will be most instructive. In fact I think we had a slight taste of what might possibly lie ahead when the US mule actually started to pull for a few brief moments last week. Didn’t the precious fall by $40 or more? I’d also be interested to know at what price the most fervent bugs acquired their stash. Sub 800 was the time to be buying. And I would humbly suggest that many of those that did are happy to sell to you folks in line today at 1200.

#123 David Bakody on 12.02.09 at 3:05 pm

What would happen if I one of big boys sold off say 1 Billion in gold for a quick profit and do you think he would broadcast it first? Then what would happen, would the stock go up or down and if it went down who would have the money to re-invest? I know that is simple stuff but big investors and speculators play a much different game that those who stand in long line ups.

#124 Two-thirds on 12.02.09 at 3:27 pm

Lots of comments today, so I’ll throw my own too.

When the next drop in the markets takes place (the second half of the W), what do you think will happen, as the world flees to safety:

a) Gold prices will EXPLODE

b) USD value will EXPLODE

c) Gold and USD go up simultaneously

d) Gold and USD go down simultaneously

Now, if its true that gold has been tracking the S&P index quite closely this year and inversely tracking the USD index, you may see why some here are bullish on the USD *in the short term.*

Long term, it appears that commodities have a better future than the USD, but I’d only buy gold during the next pullback, which could be the next dip in the “W”

Thoughts?

#125 Soju on 12.02.09 at 3:36 pm

At least with RE the space is being used for something… As for Gold, where is it? In a shoe box. Gold bars are useless and most people won’t be using them for any purpose. The current prices are based on people hoarding the metal. Gold prices will eventually drop like a rock. RE people still need to live somewhere.

#126 Shawn on 12.02.09 at 3:38 pm

#95 Mike claims buying Gold is immoral as a bet against the economy.

Sounds the sour grapes of one who has no money to invest.

Mike your decision to buy or sell gold will not affect the economy unless your real name is somnething like Warren Buffett…

There is NOTHING immoral about buying gold.

Some might argue that it will be financially fattening, but no informed person will call buying gold immoral…

#127 Ian on 12.02.09 at 3:43 pm

“The US dollar has become even more of a global currency than ever and the safe haven for worried wealth.”

Garth, how could you say that?! This is delusional.

Correct when written. — Garth

#128 PeckedToDeathByDucks on 12.02.09 at 3:43 pm

@David Bakody…buying a Bbbbbbillion back is no problem. Jeeze, that’s just chicken feed. Companies can print & sell more paper than that in a blink. Check out Xerox or NIBC Bank in this Bond Sale summary.
U.S. corporate bond new issues

Do a google for “bond sales” and you will get an appreciation for the paper promises being created out there. The paperprestidigitizer is smoking!

#129 greyhound on 12.02.09 at 3:57 pm

Politicos used to offer a chicken in every pot. Now a Realtor is offering a “free” can of pork and beans with every house:

http://thereformedbroker.com/2009/12/02/free-can-of-beans-with-the-purchase-of-a-house/#more-7328

#130 Ian on 12.02.09 at 4:10 pm

To # 95 Authentic Mike

Please don’t be so naive, what is immoral is printing paper and confiscating peoples wealth through inflation and controlled stock markets.
We goldbugs store bullion as a protest against Central Banks scams.

#131 I Got Gold on 12.02.09 at 4:19 pm

Every gold coin purchased is a vote against the central bankers and against the federal government and both entrenched political parties.

All this polarized political rhetoric vanishes as we realize there is just one political party, the Bankster Party, that uses both parties and their minions in the Commons as a false front for their operations. But they could have the rug pulled out from under them, like they covertly employ, but by direct vote of the public that federal government-issued money is valueless rubbish.

I hope you get the gist of my message here, that unbeknownst to Canadians, they may be participating in a huge revolutionary overthrow of their own amoral government as they elect to purchase and utilize gold.

Can this gold rush be halted?

The answer to the above question is no because bankers and government are predictably headed in the only direction they know, which is the hopeless trap of printing more money and taxing the people to death after they have issued it.

I think the Anarchy Party has moved here today. Sheesh. Hand me my Remington Defender. — Garth

#132 POL-CAN on 12.02.09 at 4:21 pm

#107 Evangeline

Hi…

North Dakota is a prime excample of what happens when you keep the money changers out. If things continue to get worse we just might see more of this in other states. Maybe even on a national level?

The Bank of England central bank model has just about killed itself via the inevitable BK of pretty much the entire western world. When most of what you collect in taxes goes to paying the interest on the debt, bk is not far off. Even more so if your ability to collect said taxes is impaired due to massive job loss.

Interesting times we live in….

#133 Rob in busted bubbleland on 12.02.09 at 4:30 pm

Your column reminds me of the headlines in the UK just before the bubble burst, in this case it was 1st time home buyers being priced out of the market, vola a few months later the bubble burst.

#134 Gonzo on 12.02.09 at 4:34 pm

Everything right now is a hedge against the US dollar: stocks, gold, commodities, including the Canadian dollar and other currencies. Personally I don’t think it will last. I also think that if the US dollar makes a bottom and the other asset classes crash, gold may survive the best.

#135 I Got Gold on 12.02.09 at 4:39 pm

Madmen, Gamblers, Alcoholics, the US Dollar and Gold
by Ron Hera

The fact that central banks are reducing US dollar holdings and increasing holdings of other currencies, as well as gold, is simply a matter of preserving the value of their reserves in the face of developments influencing the value of the US dollar, such as the burgeoning US dollar carry trade. Having gone “all in” to save the largest banks, the Federal Reserve and US government continue to assume that the crisis can be managed, despite the fact that their policies are making the situation worse in terms of sustainable housing prices, public debt and the value of the US dollar. In the mean time, Wall Street bankers have gone back to the casino, nonchalantly cashing in their bailout chips and pocketing the gains.The rationale of buying time for US banks and of supporting US real estate prices seems reasonable on its face but this probably doomed policy is proving counterproductive. Despite the patina of economic recovery sprinkled over the news media like fairy dust, small business and commercial real estate failures, as well as ongoing residential mortgage and credit card defaults, are rippling through the weak US economy, while unemployment continues to rise undermining consumer spending thus, ultimately, bank balance sheets. Setting aside the understandable reluctance of US banks to make new loans, no amount of tenuous good news, no matter how exaggerated, has been able to rekindle the frenzy of consumer borrowing that formerly characterized the US economy.The illusion of control is a temporary state of affairs. The triangle of dysfunction and co-dependency formed by the Federal Reserve, Wall Street banks, and the US government is like a story about a madman, a gambler and an alcoholic, where each traps the others in their respective downward spirals. The illusion of control, common to all three, is gradually bringing about a situation that will inevitably be entirely out of control, but, as with gambling addicts and alcoholics, the point where control is lost can only become apparent after the fact, just as the financial crisis of 2008 caught the vast majority of experts by surprise.

Investors, governments and central banks around the world are seeking safety outside the US dollar, particularly in gold, as well as outside of the US stock market, e.g., in emerging economies. The more borrowed money the US government spends, the more money the Federal Reserve prints and the longer zombie banks are kept on life support, the worse the eventual condition of the US economy, the weaker the US dollar and the higher the price of everything in US dollars will ultimately be, particularly gold.

link –

http://www.silverbearcafe.com/private/12.09/madmen.html

#136 Jeff Smith on 12.02.09 at 4:41 pm

#117 Nostradamus jr. on 12.02.09 at 2:17 pm
>…China very BK…going to war with North Korea &
>Russia.

Bullshit! North Korea needs china for their oils & foods subsidies. China & Russia just recently signed treaties to resolve all their boundary disputes.

>…China have 10 million man army.

Bullshit again! China has an army of around 2million soldiers.

>…> 50 million chinese unemployed, living in the
>streets.

BS! because the number could well be above or below this, nobody knows for sure because of the nature of migrant workers.

>…Wealthy elite Chinese relocating to Vancouver BC.
BS!

>…Vancouver will change official name to Hongcouver.

BS!

>Nostradamus jr. <—- full of BS!

#137 michael_bolton on 12.02.09 at 4:42 pm

Correct me if I’m wrong (I was born in 1980), but wasn’t the main factor in gold’s previous decline the raising of interest rates to over 20%? How likely is that to happen today?

Also, China’s perpetuating talk about a gold bubble because it’s in their best interests to see gold decline, and the US dollar rebound.

When I see the guys on CNBC recommending gold, that’s when I’ll believe we’re in bubble territory.

#138 Dark Wettler on 12.02.09 at 4:43 pm

I see you were careful this time not to make any personal call on whether gold is in a bubble or at risk of an imminent breakdown from it’s top.

Considering that the price of gold has not been able to keep up with the rate of inflation since the gold standard was abandoned in 1971 I would be hard pressed to call it a bubble.

#139 jaxx on 12.02.09 at 4:47 pm

By the way, if you own gold – make sure you take possession of the physical gold. If you can’t look at it and hold it – you may actually only own PART of that gold bar (fractional reserve ownership).

The Risks of a Catastrophic Deflationary Collapse
By Lawrence Tout
MidasLetter.com
Tuesday, November 3, 2009

http://www.midasletter.com/commentary/091103_The-risk-of-catastrophic-deflationary-collapse.php

#140 I Got Gold on 12.02.09 at 4:48 pm

Here in Mexico, the Treasury has had a law passed that taxes all bank accounts with 3% on all sums in excess of $15,000 pesos (about $1,100 dollars) deposited in an account in a period of one month. This is up from 2% on deposits exceeding $20,000 pesos in one month. The government hates the “informal economy” that operates in cash and wants to stamp it out by stamping out cash. Of course, the monetized silver coin would be doubly hateful, as besides serving as cash, it would be an excellent means of savings, out of reach of the grasping banking system.

The general opinion is that those people who are getting by without paying taxes will just decide to hang on to their cash and not deposit any cash at all in their bank accounts. Governments don’t seem to care whether people eat or starve – they want their tax payments no matter what.

Once again, when government becomes too expensive for the governed it becomes irrelevant, because eating is more important than complying with rules regulations and tax laws.

#141 West Coast on 12.02.09 at 4:49 pm

At the end of the day I seem to always come back to Cheney’s quote: “debt doesn’t matter” because at the end of the day the US has the biggest club and so what if India just bought 200 tonnes of gold or China holds trillions in debt – what’s to stop the US from taking the gold or waiving their debt? Morals?

Imagine an adult – a bit of a selfish disillusioned one that borrows $BIG CASH$ from a 10 year old – then finds himself in a position where he cannot pay the kid back.

#142 Coho on 12.02.09 at 5:18 pm

Everyone would be shocked if they knew the extent at which human behaviour is being manipulated, influenced, etc. Herding behaviour is the term that is being used at this time to explain the irrationality of home purchasers, people playing the markets, or rather, people being played by the markets.

We typically do the opposite of what we should do for our health whether it be financial (buy high and sell low), emotional or spiritual, but it does very well serve the agenda of the truly powerful which remain hidden. The ones being pressured and manipulated include people in authoritative positions and not just the sheeple. There are many steps in the hierarchical ladder here on earth. Even people in very high positions of power only have one piece of the bigger picture puzzle. In fact, some have claimed there are twenty seven levels of security clearance above President Obama.

We’re all programmed to an extreme degree but we do not know it. Through knowledge, strong will, etc, some people seem to be less affected and do not run with the rest of the herd. With increasing unemployment, people will have more time on their hands and if they use it wisely to educate themselves about where the ruling elite are taking this world, they’ll begin to awaken from their slumber. Better to learn the “sad truth” rather than live in ignorance.

#143 Soju on 12.02.09 at 5:31 pm

Garth,

Great article today! Didn’t know there were so many greater gold fools here. You’d think that after listening to you talk about the current state of RE prices that the mind would catch-on to the next.

#144 AUAG on 12.02.09 at 6:29 pm

WHEN TO SELL YOUR GOLD & SILVER????

In 1979 when gold was $850 & silver was $50 and
the price of a house in t.o. was approx. $85,000 – $100,000 (that’s when we bought our house ward 30).

Therefore, a Torontonian should sell when they can buy a house in Toronto for 100 to 115 oz of gold.

This means that gold should be $6000 -7000 /oz in CANAIAN dollars before one shold sell. Or consider gold to be in a bubble.

What say u guys/gals????

#145 Greg W., Oakville on 12.02.09 at 6:48 pm

Hi Garth, FYI articals

Recent World Events Indicate Impending Market Chaos
Giordano Bruno
Neithercorp Press
December 2, 2009
http://www.infowars.com/recent-world-events-indicate-impending-market-chaos/

Stealth Treaty Seeks Strict Controls Over Internet
David Bollier
On the Commons
December 2, 2009
http://www.infowars.com/stealth-treaty-seeks-strict-controls-over-internet/

Gold Rises to a Record on Stronger Demand for a Currency Hedge
Pham-Duy Nguyen and Nicholas Larkin
Bloomberg
December 2, 2009
http://www.infowars.com/gold-rises-to-a-record-on-stronger-demand-for-a-currency-hedge/

#146 Cory on 12.02.09 at 7:07 pm

Wow, now Talisman lays off 220 staff in Calgary…..

http://www.cbc.ca/canada/calgary/story/2009/12/02/calgary-talisman-layoffs-shale-gas-jobs.html

This will really drive real estate up to the sky!!!!!!!!!!!!!

Well, makes sense to me anyway.

#147 Men With Hats on 12.02.09 at 7:11 pm

i want to know where i stand in the grand scheme of things

In a lightening storm standing under a tin-foil umbrella .
No one believes a word of your post .

#148 Bottoms_Up on 12.02.09 at 7:26 pm

.#143 AUAG on 12.02.09 at 6:29 pm
—————————————-
I’d say houses are over-priced (not gold under-priced).

#149 blacksheep on 12.02.09 at 7:27 pm

The dollar/gold inverse relationship no longer always applies.
Dollar goes up, gold goes up also, many times lately.[today]

I’m watching for a crisis that normally causes a flight to dollar saftey, to start pushing gold up at the same time.
When/if this happens, all bets are off, price wise.

take care
BS

#150 Rogers on 12.02.09 at 7:28 pm

#130 I GOT GOLD

AWESOME POST.

God Save The Sex Pistols

#151 kevin on 12.02.09 at 7:34 pm

You know Garth, just because because something is going up doesn’t mean it is a bubble. Gold is no where near a bubble. Yes the price is up but where is the mania. Secondly where is the world wide mania.

Personally I feel those Canadians in line as you describe are just early to the party. When the chart gets parabolic let me know because as far as I can tell from the chart we are still in the channel. The same channel we have been in since 2001 to present.

Bubble? My eye!

#152 CalgaryRocks on 12.02.09 at 7:45 pm

#116 wetdog221 on 12.02.09 at 2:09 pm

Its sorta like old Ralph Klein pretty taking credit for the prosperity of Alberta in its heyday . . . The way he talked you’d almost of thought that personally he’d negotiated the deal that had the dinosaurs dying off in his neck of the woods (and all the other geological happenstances) thus creating all the fossil fuel under Alberta soil.

Well good old Ralph was first elected premier in 92 when oil wasn’t really worth that much. Yet he was able to balance the books and stand up to public unions and others. Something special Ed seems unable to do.

Your simplistic and uneducated view doesn’t account for other provinces that are also blessed with natural resources yet can’t EVER balance their books, much less pay off their debt.

Not to mention countries that have huge oil reserves and yet are complete basket cases. Looking at you Venezuela!

#153 Onemorething on 12.02.09 at 7:50 pm

Wow Garth you could swing a Chrome Plated 3-iron and hit a dozen Gold Bugs is seems. Price is going up, same with RE, herding at an all time high and just sweet for that downturn, spring 2010.

Time to buy more USD for the next jump and trickle out of my past par Swiss Francs.

We will not be able to fend off deflation!!!!

RE Crash vs. Correction – Agree with Garth, correction will be min. 30% nationally, 50%+ in high bubble territory.

Crash constitutes 75-80%.

If you own gold, gold shares, ETF’s etc, and buying it to protect against a CRASH, be warned, the government will find ways to keep from you.

#154 Evangeline on 12.02.09 at 7:52 pm

#131 Pol-Can

I watched all 22 videos this aft … thanks for the link!!!! He makes a good case that does not seem to be tin.

Living under the monetary system that we have, it is hard to imagine living under a stable monetary system … we just take the threats to our money for granted and live with the fear as a natural part of life. It should not be so, and what’s worse, if Still (and Freidman, Jackson, Franklin, Jefferson, Lincoln, and all the others he quoted) are right, it need not be so.

(I had actually posted a link in an earlier thread to his video where he cited $7,000,000,000,000,000 as the 2009 interest due on the U.S. debt.)

#155 CalgaryRocks on 12.02.09 at 7:59 pm

Stealth Treaty Seeks Strict Controls Over Internet
David Bollier
On the Commons
December 2, 2009

Actually about 1 year ago Google Video refused one of my homemade movies because it had a copyrighted music track on it.

Pretty funky. It wasn’t even a well known song.

#156 Evangeline on 12.02.09 at 8:12 pm

#130

((Every gold coin purchased is a vote against the central bankers and against the federal government and both entrenched political parties.))

In the the video that Pol-Can posted the point was made that the private banks that control the financial system (by having a monopoly on currency creation), also control the gold, seeing as they own most of it.

#157 Rogers on 12.02.09 at 8:12 pm

David Rosenberg on Gold

Going to $2665 oz

http://www.businessinsider.com/as-gold-hits-1200-china-prepares-to-increase-its-holdings-significantly-2009-12

#158 Steady Eddie on 12.02.09 at 8:36 pm

Gold is in a roughly 20 year bull cycle which is typical for a commodities. It’s got another 5-10 years in it. Buy on the dips not the highs in a bull market. Every time there is a dip there will be plenty of buyers. For 2 decades we had the Greenspan put on Wall Street, now we have the Beijing put on Gold. The price of Gold will go from any where to $1800 – $5000. Silver and Palladium should be in your portfolio as well. The USD is finished. In less than 20 years the U.S will be a 2nd world gulag casino country of sharecroppers paying taxes to China.

#159 CONS-serv-a-frige party on 12.02.09 at 9:01 pm

The weak link, as claimed by both GATA and hard charging analysts like Jim Sinclair with Dan Norcini, is the lack of physical gold. The metals exchanges have been running a criminal shell game for years. They do not require collateral properly placed, like 80% on short sales. In London they are digging from the 50 and 60 year old barrels to produce gold bars for delivery. In London they are hastily seeking gold bars from the Bank of England and European Union central banks in order to avert delivery defaults. The strain was evident last spring when Deutsche Bank was caught without sufficient gold, rescued by the Euro Central Bank in the nick of time. The strain was repeated in early October when London borrowed central bank gold bullion in the nick of time. Word has it that all delivery demands were met, and all were from Asia, predominantly from China. The strain will repeat by the end of this November month. The strain will again reach critical levels in March, and if the system holds together after the upcoming demands for gold delivery are handled, or not managed, whatever, we will see events reaching climax next March and the spring months heading into June.

Review some indirect evidence serving as confirmation of the tungsten gold bar story. This is inductive reasoning, at the basic level. The London and New York metals exchanges cannot complete delivery of any order over one metric tonne without fresh assay reports. Trust has been shattered. This was never required before, but is now. Why is that? Could it be that Hong Kong’s revelation of four tungsten bars (fake gold) was true, verified, and spread via a global alert? Yes, clearly! Assayers the world over are unavailable. They are all tied up as bullion bankers, sovereign wealth fund managers, lesser central banks, and individual billionaires are scrambling to verify their gold holdings. The assayers were entirely available two months ago, but not now. Why is that? Could it be that Hong Kong’s revelation of four tungsten bars (fake gold) were true, verified, and spread via a global alert? Yes, clearly!

The Canadian Mint has released information that admits to 17.5 thousand troy ounces of gold and other precious metals missing, whose estimated value is $15.3 million. No credible explanation has been offered for the missing inventory. These are not lamps, boxes of paper, crates of machine tools, floor tile, stereo sets, or power tools sitting in inventory. These are gold bars. Or were they tungsten bars? Permit the Jackass to surmise that the Canadian Mint were interrupted in their coin production process. They poured what they thought were gold bars into a cauldron, but since tungsten melts at 8000 degrees, and gold melts at 2200 degrees, the cauldron soup was lumpy with tungsten cheese. Instead of admitting they held and discovered 17.5 thousand ounces of tungsten, sure to rile the Wall Street boys, sure to turn the gold market upside down more than already, sure to invite severe scrutiny to many bankers who already face criticism (but not prosecution) over mortgage bond fraud, THEY JUST SAY IT IS MISSING !!! Just where did it go, Ottawa? Did some high level bankers (surely not Goldman Sachs) borrow it or steal it? Maybe it went to an industrial supplier that specializes in zinc, tin, copper, lead, and tungsten!!! See the National Post article (CLICK HERE). It seems the B.S. story of lost gold invites the least criticism, scrutiny, and follow through, amazingly. Theft and fraud is rampant, and the name of the game. Of course, incompetence, and clumsiness are more acceptable than corruption and collusion.

The end result of all the extra authentication processes, the absence of available assayers. the missing gold at mints, and the scattered reports of tungsten gold that have this week extended to at least on European bank location in addition to Hong Kong, is less actual verifiable gold bullion in the hands of people that trade it. In other words, THE GOLD SHORTAGE IS MORE REVEALED AND EXPOSED. Notice lastly, the no Hong Kong banker denied the story of discovering tungsten bars with gold plating. Instead, the story proliferated to a global examining of gold inventory. Notice also that no Depositor bullion bank invited investigators inside for a closer look at inventory, after doubt and lost confidence within the system occurred. These are all tell-tale coincident signs, indirect evidence in support of the tungsten salted bars and the entire story. One has to be with a military intelligence background not to see it.

#160 OttawaMike on 12.02.09 at 10:17 pm

#102 Pecked to death by canaries
Nat gas N.A. markets took their first delivery of liquified gas from the mid east this week with plenty more to arrivelater.
We should be fueling our transport network with it at least.

#161 pjwlk on 12.02.09 at 10:59 pm

There will be no currency collapse. A steady decline in the US dollar is to be expected, and already factored in by most smart people. And we are going into years of stagflation and disappointment, especially for those who think in extremes. But no greenback disaster. No American hyperinflation. It’s comic book economics. — Garth

The good Pastor Lindsey Williams disagrees with you Garth. (Youtube: http://tinyurl.com/yzyhwtq). In 2008, this guy accurately predicted the jump in oil to $147/barrel and then crashing to $50. His more recent talk on the US dollar is quite disconcerting.

#162 downbytheriver on 12.03.09 at 12:03 am

@#136 michael_bolton When I see the guys on CNBC recommending gold, that’s when I’ll believe we’re in bubble territory.

Pssst:

http://www.businessinsider.com/david-rosenberg-buy-the-gold-dips-because-its-only-going-higher-2009-12#comments

Also, notice that on their website in the section on the right hand side where their indexes are: there used to be a tab for US, one for Europe, one for Asia and one for oil. They’ve now added a tab for gold prices.

#163 Dave on 12.03.09 at 7:29 am

If you own gold, gold shares, ETF’s etc, and buying it to protect against a CRASH, be warned, the government will find ways to keep from you.
—————————————

and the more government tries to fix prices, the more aggressive public reaction.

#164 Ronaldo on 12.03.09 at 7:35 am

#57 Mikehe engineer

Agree with your closing paragraph that if you “need” to own gold limit it to 10%. More if you can afford it. As many analysts state that owing gold is like buying life insurance, you purchase gold as insurance against a calamity, and like life insurance you had better hope you don’t need to use it.

Personally I own silver as it is an industrial metal and is consumed plus its more scarce than gold and has a greater potential for increase. Current ratio to gold is around 1-64 which is still too high. Look for a ratio of 1-50 in the near future. It was around 1-17 at the peak in 1980. My advice to all is to buy silver. It is cheaper and a lot more affordable if you need to own precious metals.

#165 Dave on 12.03.09 at 7:37 am

Everyone would be shocked if they knew the extent at which human behaviour is being manipulated, influenced, etc. Herding behaviour is the term that is being used at this time to explain the irrationality of home purchasers, people playing the markets, or rather, people being played by the markets.

We typically do the opposite of what we should do for our health whether it be financial (buy high and sell low), emotional or spiritual, but it does very well serve the agenda of the truly powerful which remain hidden. The ones being pressured and manipulated include people in authoritative positions and not just the sheeple. There are many steps in the hierarchical ladder here on earth. Even people in very high positions of power only have one piece of the bigger picture puzzle. In fact, some have claimed there are twenty seven levels of security clearance above President Obama.

We’re all programmed to an extreme degree but we do not know it. Through knowledge, strong will, etc, some people seem to be less affected and do not run with the rest of the herd. With increasing unemployment, people will have more time on their hands and if they use it wisely to educate themselves about where the ruling elite are taking this world, they’ll begin to awaken from their slumber. Better to learn the “sad truth” rather than live in ignorance.
——————————————————-

blame the higher powers! I’ve met so many people like you in my life. I’m betting you live a very simple life. Why try to improve your life, it’s just easier to blame society’s influential. Poor me, poor you, poor us….blah, blah, blah

#166 Boombust on 12.03.09 at 9:24 am

Gold or tulip bulbs? What difference does it make?

#167 Mike (Authentic) on 12.03.09 at 12:47 pm

#125 Shawn on 12.02.09 at 3:38 pm “Sounds the sour grapes of one who has no money to invest.”

We’re invested in oil, not gold. Life isn’t about money Shawn, but we do have more enough.

#104 BDG YYC That’s a rather interesting point of view. So I’m curious as to what sorts of things fit into that moral and ethical basket.”

Not hard to imagine. Just think of things not related to greed, social hardship, pain or suffering to make a profit. Ie. Opposite of Wal-Mart.

#168 brett on 12.03.09 at 1:51 pm

Gold a bubble, haa, and what do they call the 1000 trillion OTC derivatives outstanding?

I see no rush to buy gold from the general public, the jewelery/pawn shop guys are buying more gold from the public then scotia is selling. With the higher price now, those gold selling home parties are seeing more action once again. The public will not participate until gold is much much higher, probably around $4000 gold.

#169 Ronaldo on 12.03.09 at 3:23 pm

#140 West Coast

Murphy’s Golden Rule – “Whoever Has The Gold Makes The Rules”

Is this what your are saying?

#170 Ronaldo on 12.03.09 at 3:28 pm

#115 McSteve – agree since it is said that most Financial Institutions are unable to beat the Index after you get socked with all their fees. Seems like a nice balanced approach.

#171 jason on 12.03.09 at 3:44 pm

An error in the above submission.The indian Central bank paid $1,045 an ounce.

#172 Bill-Muskoka (NAM) on 12.03.09 at 5:21 pm

Seems there is a direct correlation between the IQ (Investment Quota) and the GIC (Gullible (or Greedy) Idiot Comprehension) factors of many people’s brains.

The MSM promotes headlines and articles that ‘inform’ people what is HOT and what is NOT.

The timing is critically manipulated however. After the market has been ‘pumped’ up and the pros have taken their booty, then the ‘info’ changes to disaster mode…a tad too late to prevent people from being completely ruined. Nice game!

Remember…’You can’t win if you don’t play!’ (SUCKERS!)

#173 BDG YYC on 12.03.09 at 6:31 pm

167 Mike (Authentic) on 12.03.09 at 12:47 pm
#125 Shawn on 12.02.09 at 3:38 pm “Sounds the sour grapes of one who has no money to invest.”

We’re invested in oil, not gold. Life isn’t about money Shawn, but we do have more enough.

#104 BDG YYC That’s a rather interesting point of view. So I’m curious as to what sorts of things fit into that moral and ethical basket.”

Not hard to imagine. Just think of things not related to greed, social hardship, pain or suffering to make a profit. Ie. Opposite of Wal-Mart.
…………….

Right … Oil !!! I should have guessed.
Too funny. :-) Who writes your stuff … its great. :-)
:-) :-) :-)

#174 Dan on 12.04.09 at 2:18 am

Let’s suppose that people didn’t live in their houses, they just bought them. Most people bought paper claims to houses, with promises to pay from large corporations. Only a few percent of buyers actually had their hands on a real house.

Now let’s suppose it becomes obvious to everyone that the large corporations can’t deliver any houses, and their paper claims are worthless. What do you think would happen to the price of the real houses? Gold in a nutshell, although not my favourite metal.

#175 Myron Martin on 12.13.09 at 10:56 pm

Question for Garth: If you think 10-15% precious metals investment is prudent for individuals what level would you consider appropriate for the Bank of Canada?

The reason I ask is because in my extensive research over 50 years of the fractional reserve fiat currency system as instituted in 1913 by the Federal Reserve Act I recently came across statistics on the gold reserve holdings of the nations of the world and Canada was not even in the top 20 which came as a considerable surprise.

Since it did not even make the list I sought to determine what the Bank of Canada’s gold reserves are and so far have been stonewalled in getting an answer!
Neither my own MP, a dozen newspaper reporters, any party leaders including the Prime Minister, even the Bank of Canada, have been willing to address the question, how about you?

What ARE the actual reserves, if you can find out, and are they appropriate in your opinion, and if not, as a major gold producing nation, where should they be?