Lots of bubbles have been developing in recent years, but many investors only see the notable rise in precious metal pricesover the last ten years as a bubble.
Nevertheless, the more astute observers of the modern era will also have perceived the housing bubble, the stock market bubble, the derivatives bubble and the U.S. Dollar bubble.
The excessive price rises seen in these assets have been accepted, perhaps even celebrated, while precious metal price rises have often been reviewed critically in the mainstream media and by those overwhelmingly influenced by it.
The Mainstream View
The mainstream view typically seems very clear about the bubble in precious metal prices. The remarkable rally they have demonstrated is often characterized as if it is a dangerous speculative event that is foolish for prudent investors to participate in.
Yet, these same commentators will typically celebrate the housing and stock market bubbles, which actually seem far more dangerous than the recent rise in gold and silver prices.
The mainstream view also seems generally Ignorant of not simply the easy data to obtain, but also the fallout potential of the more complex issues, like the explosive growth in the paper derivatives market without sufficient physical metal resources backing it up. This situation has resulted in an 11 trillion dollar shortfall in asset collateral versus derivatives.
Furthermore, the mainstream appears largely oblivious to the level of systemic risk, primarily because it is not included in their calculation. They tend to ignore the ultimate bubble - the U.S. Dollar.
The Dollar Bubble Compared to the Gold and Silver "Bubble"
It seems worthwhile to put the rise in precious metals prices into some sort of perspective, so comparing the PM rally to recent rises in the value of the U.S. Dollar makes sense.
Nothing Compares to the Dollar/Bond Bubble
The U.S. Dollar bubble may be one of the largest, most pervasive and most denied financial bubble in history. Nevertheless, the identification and awareness of bubbles typically comes only in hindsight. Investors missed the last two great ones, both of which were fueled by intervention.
Furthermore, despite their recent managed price retreat, the metals have moved generally higher over the last ten years to reflect growing underlying interest in the anti-Dollar trade.
Of course, the perfectly logical rallies seen in silver and gold prices have often been interrupted by artificial, manipulative and even perhaps covertly encouraged interference. This price management seems just one more attempt to hide the real economic value of these metals from the mainstream-minded investors that could benefit the most from holding them.
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