Gold Bubble?

[Parsad]

Every time I start to see articles like this, it usually points to some sort of bubble forming in a specific sector:

 

http://www.fxstreet.com/fundamental/analysis-reports/gold-investments-market-update/2009-06-04.v02.html

 

History has always proven not to do this, yet you always have some numbnuts who decides they know better.  Cheers!

[Viking]

I am definitely not a gold bug. However, I do buy into the 'store of value' argument. Buffett appears to be diversifying outside of US$ somewhat (buying multinatinals and companies such as Iscar).

 

If gold was to sell off, I likely would re-establish a position (5% or 10%) in either GLD or a precious metals mutual fund (RBC?). Interest in gold continues to increase but I do not think we are at the mania/bubble phase quite yet.

[Crip1]

"Bloomberg have covered our recent research concerning Warren Buffett's Berkshire Hathaway poor performance versus gold in recent years. Buffett is the most successful investor in the world but his lack of diversification and almost exclusive focus on equities may bring further pain to his shareholders in the coming years."

 

This looks to me to be propaganda with a pinch of "fear" added for good measure.

 

Years ago there was a business channel in Chicago (WCIU, Channel 26) which would cover business news and other investing-type features for much of the day..."The Stock Market Observer" it was called I want to say. A couple times per week they had a 2-3 minute feature from a precious metals broker in the area who would talk about precious metals. I kid you not, EVERY TIME he was on the air, he would end his little speech in a bland monitone "...there may be no better time to invest in gold". Not one single event would change this assertion...ever. It was pure propaganda.

 

Over time, Gold has underperformed in the Long Term. If someone can deftly trade in and out of it for a profit...great, more power to you. I'm not that smart.

 

-Crip

[Guest JackRiver]

What's the average annual return of gold over the past 80 years?  What was the rate of inflation over that same period?

 

Yours

 

Jack River

[Guest kawikaho]

What's the average annual return of gold over the past 80 years?  What was the rate of inflation over that same period?

 

Yours

 

Jack River

 

Yes, I agree.  I make this same comparison to all the gold bugs/conspiracy nut jobs. 

[Guest JackRiver]

What's the average annual return of gold over the past 80 years?  What was the rate of inflation over that same period?

 

Yours

 

Jack River

 

Yes, I agree.  I make this same comparison to all the gold bugs/conspiracy nut jobs. 

 

But seriously, I was wondering if someone knew the answer off the top of their head.  I'd guess that inflation was around 3 to 4 percent, correct me if I'm wrong, but what about gold?  I would also guess that it is pretty much in line with inflation.  Just a guess.

 

Yours

 

Jack River

[Guest kawikaho]

Oh, hahahaha, I thought you were being rhetorical. 

 

Yes, I did a calculation using historical spot prices of gold about 100 years ago.  Even with gold at $900USD/oz, it returns roughly 4% CAGR.  I always use 4% as the long term inflationary rate.  It fits in well when looking at prices, salaries, house prices for the past 50-60 years. 

 

There is alot of talk about the tanking USD, and the implications with increasing inflation.  I subscribe to this view.  We are heading for inflationary times, but I don't think forecasting these things 4-5 years out is productive or profitable.  It's anyone's guess, really, on how inflationary times will be.  But, I do think we are heading for inflation, that's for sure.  I think that's the crux of this recovery, and that's why I think we're heading for a period of stagflation--although, I think the economy recovers by end of year, just not a sharp recovery. The tanking dollar and inflating debt will cause inflation in the US and longer term rates.  Since the 80's, the US' imports have grown from 10% to now 25%.  As the dollar tanks vs. other currencies, inflation will basically be exported here.  Also, with the tanking USD, the purchasing power is obviously lowered.  So, the dollar we had last year buys less ounces of gold or oil.  Hence, inflation.  The longer term rates are going to kill any chance of recovery in the housing markets.  But, really, who knows.  I do know that long term, gold under performs equities.  Over the span of 100 years, the DOW, neglecting dividends, increased an average of 5.5% CAGR.  Including dividends, i'm guessing the returns would have been somewhere around 6%.  2% compounded over 100 years is a good sized difference. 

[ragnarisapirate]

Today I was in a pawn shop (Cash America; CSH) buying a guitar amp and was astonished to see what they were paying for gold... roughly 75% of scrap; which after taxes, shipping, smelter fee, payroll, rent, and utilities-can't leave much for the bottom line.

 

It seems that competition has finally come into the gold buying market and driven out a lot of the profit. I remember a few years ago, when I was working in a pawn shop in Eastern KY, and we would give roughly 1/3 of scrap for gold... which wasn't to atypical in the bigger cities in KY... I was under the impression that they were still giving about 1/2 of scrap.

 

Anyway, I found this kinda odd...

 

Speaking of the usurers of the world (pawn shops/buy here pay here lots/payday lenders/rent to own sellers), has anyone looked at any for investment?

[Guest kawikaho]

The only one I've looked at is Nova Gold.  They have a 50/50 partnership with Barrick at Donlin Creek, and the study estimates reserves at 23.9 million ounces of Au.  Even if the cost to extract is more than half of the going prices of gold, you get $450 and ounce.  Multiple that, and check NG's current market cap, and you can see NG going up another 10x.  BTW, Barrick once offered $1.5 billion for Nova Gold when gold was at 600$.  NG politely declined.  Today's marketcap is around 1 billion, and gold is at $970.  I went long NG around $4.80.

[Zorrofan]

Oh, hahahaha, I thought you were being rhetorical. 

 

Yes, I did a calculation using historical spot prices of gold about 100 years ago.  Even with gold at $900USD/oz, it returns roughly 4% CAGR.  I always use 4% as the long term inflationary rate.  It fits in well when looking at prices, salaries, house prices for the past 50-60 years. 

 

There is alot of talk about the tanking USD, and the implications with increasing inflation.  I subscribe to this view.  We are heading for inflationary times, but I don't think forecasting these things 4-5 years out is productive or profitable.  It's anyone's guess, really, on how inflationary times will be.  But, I do think we are heading for inflation, that's for sure.  I think that's the crux of this recovery, and that's why I think we're heading for a period of stagflation--although, I think the economy recovers by end of year, just not a sharp recovery. The tanking dollar and inflating debt will cause inflation in the US and longer term rates.  Since the 80's, the US' imports have grown from 10% to now 25%.  As the dollar tanks vs. other currencies, inflation will basically be exported here.  Also, with the tanking USD, the purchasing power is obviously lowered.  So, the dollar we had last year buys less ounces of gold or oil.  Hence, inflation.  The longer term rates are going to kill any chance of recovery in the housing markets.  But, really, who knows.  I do know that long term, gold under performs equities.  Over the span of 100 years, the DOW, neglecting dividends, increased an average of 5.5% CAGR.  Including dividends, i'm guessing the returns would have been somewhere around 6%.  2% compounded over 100 years is a good sized difference. 

 

I have been pondering whether oil would make a better hedge than gold if we are entering a period of higher inflation/lower US dollar. Non-rhetorical question, does anyone have a comparison of gold/oil during the 70s? A Canadian oil trust pays a dividend, and if oil increases with inflation/lower dollar the trust should rise as oil price rises. Thus you get the same hedge effect as gold....I think. Comments?  

 

 

cheers

Zorro

 

[Guest JackRiver]

Oh, hahahaha, I thought you were being rhetorical. 

 

Yes, I did a calculation using historical spot prices of gold about 100 years ago.  Even with gold at $900USD/oz, it returns roughly 4% CAGR.  I always use 4% as the long term inflationary rate.  It fits in well when looking at prices, salaries, house prices for the past 50-60 years. 

 

There is alot of talk about the tanking USD, and the implications with increasing inflation.  I subscribe to this view.  We are heading for inflationary times, but I don't think forecasting these things 4-5 years out is productive or profitable.  It's anyone's guess, really, on how inflationary times will be.  But, I do think we are heading for inflation, that's for sure.  I think that's the crux of this recovery, and that's why I think we're heading for a period of stagflation--although, I think the economy recovers by end of year, just not a sharp recovery. The tanking dollar and inflating debt will cause inflation in the US and longer term rates.  Since the 80's, the US' imports have grown from 10% to now 25%.  As the dollar tanks vs. other currencies, inflation will basically be exported here.  Also, with the tanking USD, the purchasing power is obviously lowered.  So, the dollar we had last year buys less ounces of gold or oil.  Hence, inflation.  The longer term rates are going to kill any chance of recovery in the housing markets.  But, really, who knows.  I do know that long term, gold under performs equities.  Over the span of 100 years, the DOW, neglecting dividends, increased an average of 5.5% CAGR.  Including dividends, i'm guessing the returns would have been somewhere around 6%.  2% compounded over 100 years is a good sized difference. 

 

I have been pondering whether oil would make a better hedge than gold if we are entering a period of higher inflation/lower US dollar. Non-rhetorical question, does anyone have a comparison of gold/oil during the 70s? A Canadian oil trust pays a dividend, and if oil increases with inflation/lower dollar the trust should rise as oil price rises. Thus you get the same hedge effect as gold....I think. Comments?  

 

 

cheers

Zorro

 

 

Comparing it to the 70's might not be appropriate given that individual commodities are priced on multiple variables with short and long run supply and demand the grand daddy of them all.  So currency considerations, the fact that commodities are by and large priced in dollars, need not be the driving force behind a particular commodity's price.  I do wonder how much oil is sitting on container ships.  I do wonder how hard and costly it is getting to find new gold in the ground (though all the gold ever found is still with us and could fit on one of those container ships). 

 

I'm no gold bug, but if the U.S. dollar (not necessarily inflation) was my concern, I think I would lean to gold over oil at present prices.  Again, mostly from my concern that oil inventories are higher than being reported (short run supply and demand dynamics).  This is with regards to the commodities and not commodity companies.

 

Yours

 

Jack River

[Guest JackRiver]

Kawikaho and to anyone who cares

 

The point of my questions about average annual return of gold versus inflation was to suggest that the premise for Parsad's post may be somewhat flawed.  That that type of article suggest possible bubble runs counter to an asset that has merely followed inflation (in the past it has acted as a store of value as people had hoped).  As you say, home prices do the same thing in the long run.  They pretty much follow inflation exactly (the bubble occurred once they broke from that for at least 6 years).  If or until gold breaks to the upside far away from that long term trend I'm hard pressed to think bubble just because of one article. 

 

Of course, an excellent business at a fair price will trounce inflation.

 

Yours

 

Jack River

[maxprogram]

Thought this would be helpful. The following chart is the inflation-adjusted (CPI) price of gold since 1900. Keep in mind that the price data is annual, so the "intra-annual" prices may distort the averages a bit.

 

http://maxcapitalcorp.com/public/Gold.gif

[Guest JackRiver]

Maxprogram

 

Can you help us interpret that chart?  What is it saying to us exactly.  What was the price of gold per troy ounce in 1900?  What would happen if you draw the chart from a trough in price say year 1916? The chart seems to be suggesting that gold price is growing faster than inflation and that it is even more recently ahead of its longer term trends.  It looks like I may be wrong if this chart is a good proxy for reality.  I guess I can quibble with how we measure inflation.  I have a rule of 4: energy, food, healthcare, and shelter.  That's how I think about inflation.  Given the current situation (massive deflationary pressures) and the past 8 years (what I felt was greater than reported inflationary pressures), I'd suggest that might throw off any good predictive value of the chart.  I'm not a gold bug and have only approx. 2.5% exposed to gold for the past years, but my rule of 4 for many years was running at double digit inflation per year. 

 

Thanks in advance.

 

Yours

 

Jack River

 

 

[Guest kawikaho]

I think that's a good point.  If gold, or anything else for that matter, quadrupled because it was severely undervalued, then I wouldn't say it is in a bubble.  It might be fairly valued.  Although the chart below suggests gold is quite overvalued, I don't think it is .  It has been severely depressed since the early 80's for quite some time.  Gold at $700 USD is inline with 4% inflation.  If you take into account that the USD index has tanked 20% since last year, then you get gold prices of roughly $840 USD.  Gold isn't in a bubble.   I think it would be in a bubble if it went to $3000.  Then I would expect to see these kinds of articles.

 

By the way, the spot prices of gold were stable before the introduction of a fiat currency.  It's interesting to see that prior to the early 1900's, spot prices hardly ever changed year to year.  

 

One calculation that would be interesting to see is the price of gold in relation to the USD index.  I would like to see normalized gold prices by dividing the USD index into gold prices.  Then you can see the effects of speculation on gold.

 

Kawikaho and to anyone who cares

 

The point of my questions about average annual return of gold versus inflation was to suggest that the premise for Parsad's post may be somewhat flawed.  That that type of article suggest possible bubble runs counter to an asset that has merely followed inflation (in the past it has acted as a store of value as people had hoped).  As you say, home prices do the same thing in the long run.  They pretty much follow inflation exactly (the bubble occurred once they broke from that for at least 6 years).  If or until gold breaks to the upside far away from that long term trend I'm hard pressed to think bubble just because of one article.  

 

Of course, an excellent business at a fair price will trounce inflation.

 

Yours

 

Jack River

[Guest kawikaho]

That's how inflation SHOULD be thought of, and I think gold price inflation factors that in.  The BLS's idea of inflation is bullshit.  If you look at it's long term inflationary trends, it shows inflation to be 2-3%.  But if you try to match prices since the 50's and now, 2-3% doesn't work.  You have to use 4%.  They do idiotic things in the CPI index that goes against the grain of common sense.  For example, since computing power has been doubling every several years, BLS says that the price you paid for a computer several years ago buys twice the computer now.  Huh???  Freaking retarded.

 

And health care inflation has been going through the roof in the States.  It's been in the double digits since the 80's.  Ah well, at least life is short.  We won't have to worry about increasing costs forever.

 

 

Maxprogram

 

Can you help us interpret that chart?  What is it saying to us exactly.  What was the price of gold per troy ounce in 1900?  What would happen if you draw the chart from a trough in price say year 1916? The chart seems to be suggesting that gold price is growing faster than inflation and that it is even more recently ahead of its longer term trends.  It looks like I may be wrong if this chart is a good proxy for reality.  I guess I can quibble with how we measure inflation.  I have a rule of 4: energy, food, healthcare, and shelter.  That's how I think about inflation.  Given the current situation (massive deflationary pressures) and the past 8 years (what I felt was greater than reported inflationary pressures), I'd suggest that might throw off any good predictive value of the chart.  I'm not a gold bug and have only approx. 2.5% exposed to gold for the past years, but my rule of 4 for many years was running at double digit inflation per year. 

 

Thanks in advance.

 

Yours

 

Jack River

 

 

[Viking]

If you lived in Iceland and before their currency/economy imploded last year you invested 10% of your investable assets in GLD (or bought the metal outright) how would that investment be doing today?

 

My guess is that investment would be outperforming bonds, stocks (local icelandic stuff). I do not plan on holding gold as a long term investment. I simply view it as a way to preserve my net worth in the short term as we work through some things the US and global economy have not seen before.

 

Having said all that, I do not own gold today...

[ERICOPOLY]

As you say, home prices do the same thing in the long run.  They pretty much follow inflation exactly (the bubble occurred once they broke from that for at least 6 years).  If or until gold breaks to the upside far away from that long term trend I'm hard pressed to think bubble just because of one article.  

 

Let's go back to the height of the housing bubble.  At that time, the median house price in the US had fallen by about 66% since 1970, priced in gold.

 

That's right, you could buy 3 median houses in 2005 for every 1 median house you could afford in 1970 -- if all of your money had been in gold for 35 years.

 

A lot is said about gold being undervalued in 1970.  Yet, just go back to earlier this decade and you'll find that gold has tripled off it's intra-decade low.  

 

That's pretty insane -- tripling within a decade of low inflation?  The pendulum can swing both ways and you could have it cut in half in a couple of years -- so I don't see it as a store of value unless you are really patient.

 

It's true though:  from $30 in 1970 to $960 today.  That's a 32x rise in price during a 5.5x expansion in the CPI.  CPI is imperfect, but it's not off by as much as 6x over 39 years.

 

I think people are remembering the run that gold had during the 1970s and hoping their hot little hands will come alive again -- but it won't be anything like they are expecting because we're not starting from a severely depressed terminal point.  They'll be lucky to get inflation -- but obviously in the past 39 years they've got far more than that.

 

Maybe TIPS would make them happier (less volatility) as a CPI hedge.  I don't like the tax treatment of TIPS.

[Guest JackRiver]

Eric

 

Can you calculate for us how your numbers would change if instead you used the peak price of gold from that period (70/80s) in relation to home prices?

 

Yours

 

Jack River

[arbitragr]

It's true though:  from $30 in 1970 to $960 today.  That's a 32x rise in price during a 5.5x expansion in the CPI.  CPI is imperfect, but it's not off by as much as 6x over 39 years.

 

I think people are remembering the run that gold had during the 1970s and hoping their hot little hands will come alive again -- but it won't be anything like they are expecting because we're not starting from a severely depressed terminal point.  They'll be lucky to get inflation -- but obviously in the past 39 years they've got far more than that.

 

Maybe TIPS would make them happier (less volatility) as a CPI hedge.  I don't like the tax treatment of TIPS.

 

Hey is that "Ericopoly" from last time? The one that left a while back? Welcome back if so!

How did you get about to coming back?

 

 

Anyways, back on topic.

My feeling is that as long as the government feels free to print a bucket load of money, the gold price isn't going to substantially fall.

Maybe if the economy recovers and Helicopter Ben raises rates, but not in the short term.

[ERICOPOLY]

It's true though:  from $30 in 1970 to $960 today.  That's a 32x rise in price during a 5.5x expansion in the CPI.  CPI is imperfect, but it's not off by as much as 6x over 39 years.

 

I think people are remembering the run that gold had during the 1970s and hoping their hot little hands will come alive again -- but it won't be anything like they are expecting because we're not starting from a severely depressed terminal point.  They'll be lucky to get inflation -- but obviously in the past 39 years they've got far more than that.

 

Maybe TIPS would make them happier (less volatility) as a CPI hedge.  I don't like the tax treatment of TIPS.

 

Hey is that "Ericopoly" from last time? The one that left a while back? Welcome back if so!

How did you get about to coming back?

 

 

Anyways, back on topic.

My feeling is that as long as the government feels free to print a bucket load of money, the gold price isn't going to substantially fall.

Maybe if the economy recovers and Helicopter Ben raises rates, but not in the short term.

 

I came back because I really love the board.

 

 

[Santayana]

Welcome back!

[ERICOPOLY]

Eric

 

Can you calculate for us how your numbers would change if instead you used the peak price of gold from that period (70/80s) in relation to home prices?

 

Yours

 

Jack River

 

 

The terminal points change everything. 

 

My motiviation in discussing the real price volatility of gold is to ensure that people understand this before thinking that they can put money into gold as a store of value until an anticipated inflation storm passes.  One day that person will want to switch out of gold and perhaps the price will only be 1/2 of where it is today in real dollar terms, similar to what we saw earlier this decade.

 

That's what has me thinking about whether TIPS make more sense than gold for store of value.  You might not get CPI computed precisely, but on the other hand you aren't taking the price volatility risk.  The government marks up the value of the TIPS annually at the pace of inflation, but you get taxed on that as a "gain" (and you have to pay the tax each year, even if you don't sell your holding).  So with a 10% rate of CPI gain, you'll wind up with only a gain of 6.5% (at a 35% tax  bracket).  The tax on TIPS is a reward to the government for driving up the CPI -- I think it is flawed.

 

 

 

[Guest JackRiver]

Eric

 

Can you calculate for us how your numbers would change if instead you used the peak price of gold from that period (70/80s) in relation to home prices?

 

Yours

 

Jack River

 

 

The terminal points change everything. 

 

My motiviation in discussing the real price volatility of gold is to ensure that people understand this before thinking that they can put money into gold as a store of value until an anticipated inflation storm passes.  One day that person will want to switch out of gold and perhaps the price will only be 1/2 of where it is today in real dollar terms, similar to what we saw earlier this decade.

 

That's what has me thinking about whether TIPS make more sense than gold for store of value.  You might not get CPI computed precisely, but on the other hand you aren't taking the price volatility risk.  The government marks up the value of the TIPS annually at the pace of inflation, but you get taxed on that as a "gain" (and you have to pay the tax each year, even if you don't sell your holding).  So with a 10% rate of CPI gain, you'll wind up with only a gain of 6.5% (at a 35% tax  bracket).  The tax on TIPS is a reward to the government for driving up the CPI -- I think it is flawed.

 

 

 

 

Okay. I follow you now.  Understand that I'm not a gold bug, I was merely trying to see if there was any validity to Parsads suggestion that that article may be a precursor to a bubble in gold prices.  I'm a fan of using psychology, human nature, to anticipate things, but I feel harder data is important too.  I thought Parsad may have been unintentionally misleading by putting the cart before the horse.

 

I, it appears mistakenly, assumed that long run inflation was in line with long run gold prices, and that if something merely moved up with inflation, then how could we suspect bubble?

 

Anyway, I understand you to be a math wiz and I was typing on my iphone last night so I may not have asked my question fully, but can you equate for us the home price in gold example you give using the peak price of gold, whenever that occured, during the 1970s or 1980s?  I think the gold price was 800 something as you are probably aware, but I don't know what home prices to use? 

 

As your reply suggest this breaks down depending on your starting date.  Without one key number, I have to assume that home prices were lower in the 70s and 80s than at the peak of the bubble and now.  That the average price of gold, now and then, may have been roughly the same which would mean more house in gold then versus now.  Am I thinking about that correctly?

 

For others who care:  As I keep saying, I'm not a gold bug and I'm not trying to defend gold or its price.  I believe, like Seth Klarman, that an investment should produce annual cash flows in contrast to a speculation which doesn't. 

 

Yours

 

Jack River

 

[ERICOPOLY]

Eric

 

Can you calculate for us how your numbers would change if instead you used the peak price of gold from that period (70/80s) in relation to home prices?

 

Yours

 

Jack River

 

 

The terminal points change everything. 

 

My motiviation in discussing the real price volatility of gold is to ensure that people understand this before thinking that they can put money into gold as a store of value until an anticipated inflation storm passes.  One day that person will want to switch out of gold and perhaps the price will only be 1/2 of where it is today in real dollar terms, similar to what we saw earlier this decade.

 

That's what has me thinking about whether TIPS make more sense than gold for store of value.  You might not get CPI computed precisely, but on the other hand you aren't taking the price volatility risk.  The government marks up the value of the TIPS annually at the pace of inflation, but you get taxed on that as a "gain" (and you have to pay the tax each year, even if you don't sell your holding).  So with a 10% rate of CPI gain, you'll wind up with only a gain of 6.5% (at a 35% tax  bracket).  The tax on TIPS is a reward to the government for driving up the CPI -- I think it is flawed.

 

 

 

 

Okay. I follow you now.  Understand that I'm not a gold bug, I was merely trying to see if there was any validity to Parsads suggestion that that article may be a precursor to a bubble in gold prices.  I'm a fan of using psychology, human nature, to anticipate things, but I feel harder data is important too.  I thought Parsad may have been unintentionally misleading by putting the cart before the horse.

 

I, it appears mistakenly, assumed that long run inflation was in line with long run gold prices, and that if something merely moved up with inflation, then how could we suspect bubble?

 

Anyway, I understand you to be a math wiz and I was typing on my iphone last night so I may not have asked my question fully, but can you equate for us the home price in gold example you give using the peak price of gold, whenever that occured, during the 1970s or 1980s?  I think the gold price was 800 something as you are probably aware, but I don't know what home prices to use? 

 

As your reply suggest this breaks down depending on your starting date.  Without one key number, I have to assume that home prices were lower in the 70s and 80s than at the peak of the bubble and now.  That the average price of gold, now and then, may have been roughly the same which would mean more house in gold then versus now.  Am I thinking about that correctly?

 

For others who care:  As I keep saying, I'm not a gold bug and I'm not trying to defend gold or its price.  I believe, like Seth Klarman, that an investment should produce annual cash flows in contrast to a speculation which doesn't. 

 

Yours

 

Jack River

 

 

 

I don't think you are mistaken to believe that gold largely tracks inflation over the very long term.  But it doesn't get there in a straight line.

 

 

 

There are some nice charts here on the historical price of gold:

http://www.finfacts.ie/Private/curency/goldmarketprice.htm

 

You would have paid roughly $19 for gold in 1800 and might have sold it for:

a gain of 57% in 1970  (170 year holding period)

a gain of 4,300% in 1980 (180 year holding period)

a gain of 1,400% in 2001 (201 year holding period)

a gain of 4,900% in 2009 (208 year holding period).

 

 

Curiously, you drew the conclusion that house prices long term track inflation, but after a 6 year spike you concluded that it was a bubble.  But gold also tracks long term inflation, the 6 year price volatility has been far more extreme than with housing, but you seem skeptical of a bubble.

 

Both asset classes largely track inflation over the long term.  I just find it interesting that you found a bubble in the one that has seen a far less extreme upward price swing.  I think you are right to identify housing as a bubble, but is the reason why you shy away from gold as a bubble perhaps influenced by the higher volatility in real gold prices?