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The concept of a bubble is fashionable and easy to glom onto to reinforce or describe a belief.

A trend on the other hand is sometimes difficult to spot and even more difficult to analyze. The determination in advance of trend inflection points is at best a guess. There are too many variables.

Bubbles are short lived. A trend that is very obvious, especially when when more than ten years old, is certainly not a bubble. For those hung up on the fact that the price of gold once rose sharply and then fell sharply in an extremely short time just can’t seem to grasp the difference.

The underlying reason is never comprehended because there is the once it rose and then fell concept. There is no valid comparison. The comparison is false. The underlying concept is that the value of gold is rising out of hand, the actuality is that the values of various world currencies is falling at a precipitous rate.

Then there is change. There is comfort in the belief that the status quo will continue. The relation between the price of gold and world currencies should be taken not as a short term variation within the parameters of the current status quo, but as an indicator that there is no status quo. Fundamental economic change is underway.

There is world change underway. To analyze economic events and the price of gold as an American event is folly. Until the view is lifted from the USA lower 48 borders to encompass the globe, there can be no understanding. Change , massive change is underway. The rise in the US$ price of gold is the primary indicator

Good post.

Those who raise 1980’s spike need to know how different things are now.

In August of 78, gold broke through the $200 barrier after years of trading in the $100-200 range. I’ll bet that some folks back then were worrying that it was a bubble.

By September of the next year (1979), gold doubled its record, hitting $400 (one-third of that gain alarmingly coming in the final two weeks of the period).

In the following 15 weeks, gold doubled again, with half of that rise in the last two weeks of the period. See the pattern, rises happen fast, and faster at the end, like a whiplash acceleration.

Here’s the 1980 bubble summary: New record, followed by quadrupling in price in 1-1/2 years, including a 25% rise in the final two weeks.

In the past decade, we’ve seen some 25% years, but no 25% fortnights (two-week periods). More importantly, it took the last decade for gold to quadruple, while the run-up to the 1980 bubble saw quadrupling in 1-1/2 years. The lesson is that how fast something rises can indicate whether the rise is sustainable, as opposed to being a bubble.

Doubling in a year is common among stocks and commodities in certain years. That’s my threshold for when I start to pay close interest, and worry about “bubbles.”