Gold and the Bubble: When the Metal Points to the Dollar

Gold Isn't Expensive: Paper Money is What's Plentiful

Gold isn't in a bubble. The bubble is the money used to pay for it. This thesis sounds like a pitch from a bullion dealer, but it's backed by uncomfortable arithmetic that resurfaces whenever someone looks at the metal's price and is shocked.

The starting question is simple: has gold become a speculative bubble? In April 2009, the metal hovered around $1,000 per ounce —31.1 grams, over 700 euros— and since then its climb stopped seeming normal. The dominant answer doesn't point to gold. It points to the printing presses.

How Much Gold Exists and How Many Dollars Are Printed

The most repeated calculation is devastating. Between 1946 and 2011, the amount of gold in circulation multiplied by 2.5. The dollar supply did so by 80. The Federal Reserve's machines run much faster than miners', leading to a conclusion that's hard to avoid: since Richard Nixon closed the gold window in 1971, the greenback has lost about 98% of its purchasing power. Seen this way, the metal isn't rising. Paper is falling.

Those who defend this reading insist on a specific request: show me a graph of flat or negative monetary expansion, and I'll believe in the bubble. As long as it keeps growing, gold's rise isn't a market whim, it's a symptom.

Why Does Gold Act as a Safe Haven When the Stock Market Falls?

Because in downturns, money seeks a place to hide, and the metal has been a hiding place for centuries. The pattern repeats with almost annoying punctuality: gold surged strongly in the 1929-1935 period, shot up again in the seventies —amidst the oil crisis— and peaked in the 2000s. When stock markets recover, gold plummets. Those who buy in panic at the top usually buy expensively.

Intrinsic Value: From Magpies to Aztecs

There's a current that brings the discussion down to biology. Gold's value isn't by convention, but by instinct: the same instinct that drives magpies to hoard shiny objects. Metal as a sign of status, aptitude, surplus energy. The evidence presented is historical: the Aztecs already used gold flakes and gold dust as money, and in West Africa, gold was used for payment at least since the 8th century, long before Europe made it official currency.

The Contrary Thesis: The Dollar and Debt Are the Real Bubble

The bubble accusation bounces back to the issuer. The dollar would be overvalued, dragging other currencies into a devaluation war and punishing middle-class savings. On top of that, the United States maintains its AA+ rating despite what is frankly described here as the biggest scam in history. For this school of thought, gold isn't expensive, and paper is forcibly cheap.

The Unexpected Rival: Bitcoin

And in the midst of it all, an unexpected competitor emerges. Bitcoin went from $0.06 in October 2010 to $32 in June 2011, then plummeted 92% in six months, and was back around $31 in February 2013. For some, it's perfect money; for others, a volatility machine. Compared to that, a gold bar is almost a bond. Almost.

What to Do If Gold Falls: The Argument from Those Already Invested

Here the discussion gets personal. Some accept losing up to 75% of their metal's value without drama, because they bought with savings, not credit. Others warn that a single oversized transaction can ruin a hundred successful ones. The repeated recommendation: physical investment gold, not jewelry or numismatics, and always from recognized dealers.

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With these elements, it's reasonable to expect the metal to continue acting as a safe haven as long as cheap money isn't withdrawn. But gold itself plunged when the first crisis seemed to subside. If the printing presses truly shut down next time, the gold bar will weigh the same but be worth considerably less. Or not.