Chris Lau - Seeking Alpha

Sunday, September 25, 2011

Is Gold/Silver a Bubble that is Popping? What $1.48M Says

Gold prices fell 9% last week. Which way is gold headed? Here were two comments that worth noting.

"Gold doesn't pay a dividend, cannot grow organically or through acquisition, doesn't have a yield, is in unlimited supply (more is being mined all the time), and for some reason it was the vaunted vehicle of financial safety. It's shiny, but even for that purpose it's out of fashion and there's simply not enough gold-chained gangsta' rappers to keep the price high. Technology doesn't even use it anymore given availability of far better and cheaper conductors. This bubble has more helium than the dot com fiasco, or the real estate mess that followed a decade later. Always funny watching the sheople herd to the next BIG one."

"As long as government's kick the can on their deficit spending and debt problems, gold will be a viable safe haven."


One factor amplifying the moves in gold prices is the use of leverage. CME modified its margin requirements. "Gold margins will be raised by 21%, silver margins by 16%, and copper margins by 18%, effective at the close of trading Monday," CME said Friday, after the market closed.

Put another way, with $100,000 to speculate with, you can buy $1,481,481.48 in gold futures.