Talk of a gold bubble burst is spreading. During the global financial crisis, numerous thought gold was the best place to invest money. The global financial crisis is ending which means the gold bubble might burst, although it rose since October 2008. If investors discover no have to invest in gold any longer, then the demand for gold is going to drop a lot. Gold was at record high on June 21 when it was at $ 1,266.50 while it has now dropped to $ 1,185.
Knowing when the gold bubble will burst
It may be a sign of the gold bubble burst the gold prices are so unsteady. Seeking Alpha had a piece done by Brian Rezny stating that India and China aren’t even purchasing much gold anymore. Those who buy gold expect it will always increase in price. Gold became a safe haven during the global financial crisis depending on perception. Gold’s value is solely based on what individuals value it at. A gold bubble burst would change that perception overnight.
Markets overreact to European credit crisis
One reason the gold bubble may be about to burst is because the markets may have exaggerated the effects of the credit crisis in Europe to the global economy, as outlined by Ron Acoba at Daily Markets. With recent news about the surprise earnings of European and U.S. banks, Acoba said the effect of the credit crisis on their business turns out to be minimal. The gold bubble will soon “end in tears” with a huge decline in gold prices, reports Renzy. Similar to what is happening now, gold peaked at $ 850 an ounce in 1980. If you adjust that because of inflation, it would have reached $ 2,300. It dived to $ 253 by the time 1999 had hit.
Safe haven not so safe
The gold bubble is precariously large as millions of individuals are getting gold. Celebrities are endorsing gold. Glenn Beck as well as others are telling individuals that putting their money in gold is their safest bet right now. Beating Broke wonders what will happen if (when?) the economy recovers. Numerous 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 these investors lose 30 percent of their savings or portfolio, the gold bubble will burst. When people try and sell their gold, prices will drop more. Those who really believe in gold will lose more than anyone else.
Daily Markets
dailymarkets.com/forex/2010/07/28/did-the-gold-bubble-just-pop/
Beating Broke
beatingbroke.com/is-gold-the-next-bubble/
