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Gold Bubble: Profiting From Gold's Impending Collapse

ISBN: 978-1-118-23935-3
257 pages
April 2012
Gold Bubble: Profiting From Gold
How do TV shows, vending machines, Chinese taxi companies, and a former UK prime minister point to a gold bubble that is about to burst?

Many investors consider gold a "safe haven" that will shelter them from recessions, falling markets, and the depreciating value of currency. Many fail to realize, however, that investing in gold at these levels is extremely risky. "We Buy Gold" stores line busy streets, gold miners are no longer protecting themselves from a potential drop in prices, and gold is even being sold in vending machines. All this points to one thing: a gold bubble has formed and will collapse very soon, hurting investors, funds, and banks. In Gold Bubble: Profiting From Gold's Impending Collapse, Yoni Jacobs looks at how you can protect yourself.

Presenting an in-depth analysis of gold dating back over a hundred years, the book explores the structural factors that have allowed gold to form a bubble, why an investor psychology of fear and greed is leading to extremely speculative behavior, why gold will fall during an upcoming recession, what effect the dollar and the stock market will have on the future of gold prices, and how to profit from a gold collapse while the majority of investors lose out.

  • There are plenty of warning signs that gold is about to decline and this book will help you to get ready
  • Gold Bubble is the only book to argue that a gold bust is coming, going head-to-head with the herd mentality
  • Filled with practical advice on how to protect yourself and even profit from gold's collapse by being prepared for what's ahead

With gold prices up over 2,500 percent since 1970, and more than 600 percent since 1999, a bubble has formed and is on the verge of bursting. But until now, no one has been willing to publicly bet against the universal currency. With Gold Bubble you are ready to meet this challenge head on, and take advantage of what other investors won't even acknowledge.

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Preface vii

Disclaimer xiii

CHAPTER 1 Why Gold? 1

Understanding Gold’s Surge 1

Why the ‘‘Gold Bugs’’ Are Wrong 4

CHAPTER 2 Bubble Enablers and Precipitating Factors 5

Removal of the Fixed Price for Gold in 1968 5

Poor Market Performance and Capital Diversion 6

Uncertainty 7

Currency Troubles 8

Emerging Market Growth and Demand 8

Hard to Value 9

Introduction of Gold ETFs 9

Former UK Prime Minister May Be Responsible for Gold Bubble 9

Illusion of Safety 13

Conclusion 13

CHAPTER 3 Signs of a Gold Bubble 15

Parabolic Price Increases 15

Massive Publicity 21

Overspeculation 29

Extreme Expectations 45

Conclusion 56

CHAPTER 4 Gold Takes On . . . 59

Deflation 59

Is Gold a Safe Haven During Recessions? 60

Gold versus Various Asset Classes: Ratio Analysis 63

Conclusion 65

CHAPTER 5 Price Analysis and Forecasts 67

Gold Bubble Anatomy: Is a Parabolic Spike Coming? 67

Gold’s Place in History: Elliott Waves 70

Price Target for Gold Collapse 77

Fibonacci Time Relationships 79

Seasonality 81

Conclusion 83

CHAPTER 6 What Does Gold Depend On? 85

Herd Mentality in the Stock Market 86

Are We Headed for Another Great Depression? 88

Market Cycle Predicts Recession 97

The Dangers of ETFs 104

What about the Dollar? 117

Emerging Market Troubles 123

Middle East Upheaval 136

European Crisis 139

Conclusion 141

CHAPTER 7 Calling the Top: Signs of Reversal 143

Lagging Mining Stocks Signal Reversals in Gold and Silver Prices 143

Bernanke and Buffett ‘‘Puzzled by Gold Rally’’ 149

Dollar Strength and Market Weakness 150

Declining Momentum 151

Big Guys Selling: ‘‘Smart’’ Money Leads the Way 152

Is the Commodity Run-Up about to Reverse Course? 154

Has the Bubble Popped? 165

CHAPTER 8 Ways to Profit from the Collapse of the Gold Bubble 167

Short Gold 167

Short Gold Miners 168

Options Strategies 168

Short Rare-Earths 169

Betting on History: A Gold-Platinum Pair Trade 170

Forget Gold, Buy Diamonds 171

Buy Stocks Instead 176

Buy Physical Property, or Invest in Housing Stocks? 177

Conclusion 186

CHAPTER 9 Other Investment Land Mines to Avoid 187

‘‘Cloud Nine’’ Computing: Sign of a Renewed Technology Bubble? 187

Betting against Facebook 193

Is IPO Mania Warning of a Tech Bubble 2.0? 206

Netflix: Setting Up for Disaster 213

Conclusion 231

Notes 235

About the Author 245

Index 247

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Yoni Jacobs, CMT, is Executive Director and Chief Investment Strategist for Chart Prophet LLC, an investment management company that utilizes its Perspective Outlook to make investment decisions based on a comprehensive mix of technical, fundamental, and behavioral analysis. A contributing author and Opinion Leader for Seeking Alpha, Jacobs has appeared on the Business News Network (BNN), CNN, and ABC News, and has been featured or quoted in Reuters, the Globe and Mail, the Financial Post, CBS MoneyWatch, and many other media outlets.

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April 09, 2012
"We Buy Gold" Is Proof of Gold's Impending Collapse

Many investors consider gold a safe haven that will shelter them from recessions, falling markets, and the depreciating value of currency, failing to realize that investing in gold at these levels is extremely risky. "We Buy Gold" stores line busy streets, gold miners are no longer protecting themselves from a potential drop in prices, and gold is even being sold in vending machines. All this points to one thing: a gold bubble has formed and will collapse very soon, hurting investors, funds, and banks.

In his new book Gold Bubble: Profiting From Gold's Impending Collapse (Wiley; Hardcover; April 2012; $39.95; 978-1-1182-3935-3), investment expert Yoni Jacobs presents a clearheaded, thoughtful, and sometimes terrifying case for its inevitable burst, to help investors prepare—and perhaps even profit—from what lies ahead.  Offering a rigorous account of how and why gold has become so popular and so dangerously overvalued, the book provides compelling evidence for a collapse and outlines how investors can benefit from what others don't know.

Presenting an in-depth analysis of gold dating back over 100 years, Jacobs discusses:

  • What structural factors have allowed gold to form a bubble
  • Why investor psychology of fear and greed is indicating extremely speculative behavior
  • Why gold will fall during an upcoming recession and what effect the dollar and the stock market will have on the future of gold prices
  • How the economic weakness and slowdown in emerging markets, especially China, is largely ignored but poses severe threats to the global economy and commodity prices, especially gold
  • How most people think gold is a great investment because it will either benefit from inflation and excess money-printing, or gain while stocks fall. However, gold is much more likely to fall because we are entering a deflationary period, not an inflationary one
  • How anyone can profit from the gold bubble by shorting gold, shorting gold miners, forgetting gold and buying diamonds, and betting on a housing recovery - while the majority of investors lose out

Gold, with its timeless allure, has long been considered safe, secure, and totally reliable—just like the housing market and the dot-com industry were - until they imploded. Part economic history and part financial guide, Gold Bubble looks back in time to explain how we got into this mess, expertly analyzes the stages of bubble growth, and details exactly where the gold market stands today and where it's headed next.

Packed with charts and images that bring the case for a gold bubble to life in an accessible, highly visual way, the book has wide-reaching implications not just for the impending gold bust, but for identifying, monitoring, and beating future bubbles as well. Outlining simple short-selling strategies, complex options strategies, alternative investment ideas, and more, the book uncovers and explains investors’ opportunities to profit from gold's collapse. 

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