People are starting to talk about a gold bubble burst. During the global financial crisis, many thought gold was the best place to invest money. But after increasing in value steadily since October 2008, the gold bubble may be reaching the bursting point as the global financial crisis fades. There won’t be any kind of demand for gold if the investment doesn’t have to be made anymore. For those investors who bought gold when it reached a record high of $ 1,266.50 on June 21, a further drop from the Aug. 3 level of about $ 1,185 could be disastrous.
Waiting for the gold bubble to burst
Some say the gold bubble is about to burst because gold prices are too volatile. Seeking Alpha had a piece done by Brian Rezny stating that India and China aren’t even buying much gold anymore. Those who purchase gold expect it will always increase in price. . The only reason gold is valuable is because investors have believed it is valuable. If a gold bubble burst would to happen, that would all change.
Markets overreact to European credit crisis
The gold bubble burst is affected also by the dramatic affects of the credit crisis in Europe on the economy according to Ron Acoba from the Daily Markets. Acoba explains that there isn’t any effect on their business with the whole credit crisis. The gold bubble will soon “end in tears” with a huge decline in gold prices, reports Renzy. He reminds us that back in 1980, gold was used as an inflation hedge, and it peaked at $ 850 an ounce. Adjusted for inflation, that $ 850 was equal to $ 2,300. Then it went down drastically by 1999 to $ 253.
Safe haven not so safe
Since numerous have bought gold, the gold bubble has gotten huge. Even celebrities say gold should be bought. Putting money into gold is encouraged by Glenn Beck who believes gold is the best way to invest with the economy as it is. Beating Broke is concerned about what will happen after the economy recovers. Numerous will lose money getting it for $ 1,100 and $ 1,200 an ounce and then seeing it drop to $ 800 or $ 900 an ounce. If these investors lose 30 percent of their savings or portfolio, the gold bubble will burst. People will rush to sell their gold off when they see the price drop just to make it drop more. True believers in gold will lose even more.
Find more details on this subject
Daily Markets
dailymarkets.com/forex/2010/07/28/did-the-gold-bubble-just-pop/
Beating Broke
beatingbroke.com/is-gold-the-next-bubble/
