[quote=partypup]
This, for example, is a bubble:

http://www.lesjones.com/2008/11/25/inflation-adjusted-us-house-prices-1975-2008/

And then we have this:

http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx

Does this really look like a bubble to you? Looks more like a slow but inexorable creep upwards to me.
[/quote]

Here’s a chart that portrays three metals. Two went through the bubble phase and then completely deflated, one is still “stuck”.

http://charts.infomine.com/multivariantcharts/showchart.aspx?mv=1&f=f&r=5y&c=cgold.xusd.uoz,czinc.xusd.ulb,cpalladium.xusd.uoz

Gold should have crashed below $600 last winter, in proportion with other metals, but the fact that there’s virtually no industrial demand for the metal, and the fact that the existence of GLD allowed gold bugs to scoop up the excess gold on the market (absorbing 500 tons in 6 months), postponed the inevitable crash.

[quote]Also, can you please tell me what factors would lead to a decline in the price of precious metals? Since they are dollar-denominated, it would seem to me that a fall in the price of metals would require a corresponding rise in the dollar’s value. [/quote]

No, deflation of the bubble can occur without a corresponding rise in the currency value. Precious metals will be falling in all currencies simultaneously. Gold is up 100% wrt euro in 5 years.

[quote]care to take a bet on where the price of metals will be by the end of 2010? I say gold holds above $1000 and silver holds above $16.[/quote]

I think I’ll just short GLD and that will have the same effect as betting with you directly.