Wait I thought the bubble burst?

The "gold bubble," that is. I mention this because gold ran up almost $60 in the past two days. It's back to $1720.

Talking heads on CNBC and elsewhere told us that gold, and commodities in general, were in a bubble all summer. Then, when oil took a hit and gold dropped in value at the end of August and the beginning of September, they patted themselves on the back. They kept asking - is this the end of the gold bubble - believing that it was in a bubble.

Of course they ignore the fact that almost every instance during which we saw a significant pull back in gold this summer was preceded by an increase in margin requirements on gold contracts by the CME.

More importantly, they ignored the fact that the Fed essentially announced a toned down QE3. The Fed is continuing to provide "stimulus" just by maintaining the extraordinary size of it's balance sheet at $2.89 TRILLION (between 3 and 4 times larger than it was for several years, before the financial crisis). In addition, the Fed will need to buy additional treasury securities over the next two years in order to keep rates low until at least mid-2013. Just because Bernanke didn't call it QE3 doesn't mean that it's not.

And of course most importantly, they ignore the massive debt accumulated by governments, consumers, and students. Either central banks around the world are going to try to inflate the real value of this debt away, or governments are just going to either buy the debt or cancel it. Either way, the market will not like debt-backed, paper assets and it will continue to turn to real assets, which will continue driving the prices of gold and silver upward.