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Wednesday, August 17, 2011 3:24 PM

Wells Fargo Says "Gold Bubble Poised to Burst", Mish Says "Wells Fargo Bubble Poised to Burst"

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Wells Fargo analysts proclaim Gold market is a ‘bubble poised to burst'.

Speculative demand from investors has pushed the gold market into a “bubble that is poised to burst” after prices surged to a record this year, Wells Fargo & Co. said.

“We have seen the economic damage” of past bubbles and “feel compelled to ring the warning bells,” Wells Fargo analysts led by Dean Junkans said in a report dated yesterday and e-mailed today.
Economic Damage Nonsense Regarding Gold

If gold fell to $1000 in the next 12 months, pray tell what economic damage would it cause? The answer is none.

The irony is that gold is rising on account of economic damage, currency debasement, and the simple fact that gold is the only currency with no liabilities. The second irony is if gold fell that much, it would likely be an indication that some of the global financial problems were finally fixed.

Those looking for bubbles would be advised to consider shares of Wells Fargo.

WFC - Wells Fargo Weekly Chart

I suspect there will be a retest of that March 2009 low if and when Wells Fargo has to mark-to-market its balance sheet chock full of piss-poor real estate loans and other assets. Then again, the market may take things into its own hands first.

Furthermore, were it not for taxpayer bailouts and extraordinary support from the Fed and Congress, Wells Fargo may have gone to zero in 2009.

Regardless, Wells Fargo is a far better short than gold given the US economic backdrop, weakening global economy, and the competitive currency debasement practices of central bankers throughout the world.

By the way, that is an opinion, not a recommendation.

Mike "Mish" Shedlock
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