Wednesday, April 27, 2011

The Fed Decision: Market Scores

Bernanke had his huge afternoon today, which I discussed in detail this morning in The Fed Decision: QE3.

The market handed out the score for its confidence in Bernanke's ability to control inflation moving forward. 

Final result: Gold $1,530. 

New all time record high and still climbing after hours.

For those in the media that keep waiting on the gold bubble to burst, we'll review the current gold secular bull market (yellow line) in comparison to the last true bubbles: the gold price in the 1970's (red line) and the NASDAQ in the 1990's (blue line).


A true bubble finishes with a spectacular blow off in price which can be seen in these previous two bubbles.  Gold has been a strong steady rise year after year with no major spike, yet.

The current gold bull market will end in a bubble someday, and it is always fun to speculate where that parabolic move higher will finish.  The following chart shows where gold would need to rise in order to cover the current US money supply.

M1 = $3,675
M2 = $7,931


The Federal Reserve no longer tracks M3 (total money supply), but professional estimates have the dollar value for gold needed to back this measure at over $50,000 per ounce.

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