The rumors say a gold bubble burst is within the near future. During the global financial crisis, many thought gold was the best place to invest money. Even though the price has risen since October 2008 at a steady pace, the global financial crisis is ending causing the gold bubble to finally near bursting. There won’t be any kind of demand for gold if the investment doesn’t need 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 might be disastrous.
Knowing when the gold bubble will burst
It can be a sign of the gold bubble burst that the gold prices are so unsteady. Not even India or China are that interested in gold anymore according to Brian Renzy from Seeking Alpha. He said that gold is a commodity with a value based upon entirely on the assumption that it will increase in price. This is why individuals invested their lives into gold during the global financial crisis. . If a gold bubble burst would to happen, that would all change.
Markets overreact to European credit crisis
One reason the gold bubble may be about to burst is since the markets may have exaggerated the effects of the credit crisis in Europe to the global economy, according to Ron Acoba at Daily Markets. Acoba explains that there isn’t really 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. If you adjust that because of inflation, it would have reached $ 2,300. It dived to $ 253 by the time 1999 had hit.
Not as safe as thought
The gold bubble is precariously large as millions of people are getting gold. Celebrities are endorsing gold. 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 following the economy recovers. Many will lose money buying it for $ 1,100 and $ 1,200 an ounce and then seeing it drop to $ 800 or $ 900 an ounce. If 30 percent of everyone’s money is lost here, the gold bubble is bound to burst. The price of gold will drop even further as people rush to sell off their holdings. Those who’ll lose one of the most are people who truly believe in gold.
Further reading
Daily Markets
dailymarkets.com/forex/2010/07/28/did-the-gold-bubble-just-pop/
Beating Broke
beatingbroke.com/is-gold-the-next-bubble/
