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Gold bubble?

I've been seeing a lot of articles debating whether gold is in a bubble. Given the rather "bubblicious" past decade we've witnessed, it's become easy to believe there's a bubble lurking behind every bush.

But as the Minyanville chart below shows, it's not quite as easy to make the bubble case when it comes to gold — at least based on the action of the four previous bubbles we've seen over the past dozen years.

(Click here for larger version.)

While many are comparing the trading in gold to what happened a few years ago in oil, the chart above shows that each of the prior four bubbles — including the crude oil bubble — saw prices go up by 4-5 times in a relatively short span of time. Gold hasn't had that type of parabolic move higher. Granted, gold is priced 4-5x higher than it was a decade ago, but this has been a much longer, protracted rise, as the chart indicates.

None of this proves anything, of course, since there's no rule that says all bubbles necessarily reach the same degree (though it's interesting to note how similar the four bubbles since 1999 have been). Also, this chart probably understates the gold line a bit by not giving it a separate scale.

The main point, though, is simply that gold hasn't seen the same type of acceleration these earlier bubbles did as they were heading to a peak.

With the financial news recently dominated by worldwide currency devaluations, "Quantitative Easing 2.0", and so forth, it's no wonder gold has been doing so well. Each day's financial news confirms the widespread national desires to see their currencies weaken. That creates a strong environment for gold.

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