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. If investors discover no need to invest in gold any longer, then the demand for gold is going to drop a lot. Gold went down quite a bit already from June 21 from $ 1,266.50 to $ 1,185. Article resource – Falling gold price could mean the gold bubble is about to burst by Personal Money Store.
Signs of a bursting gold bubble
Gold prices have been so unstable that many say the gold bubble might burst soon. Brian Rezny at Seeking Alpha writes that India and China, the world’s first and second largest gold markets respectively, are buying a lot less gold. He said that gold is a commodity with a value based entirely on the assumption that it will increase in price. This is why individuals invested their lives into gold during the global financial crisis. Gold’s value is solely depending on what people value it at. A gold bubble burst would change that perception overnight.
Credit crisis difficulties in Europe
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. 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. Rezny said the gold bubble is about to “end in tears,” and that the recent decline in gold prices will get worse. He reminds us that back in 1980, gold was used as an inflation hedge, and it peaked at $ 850 an ounce. That is $ 2,300 when adjusted for the inflation that has happened since then. Then it went down drastically by 1999 to $ 253.
A safe haven gets risky
The gold bubble is precariously large as millions of individuals are getting gold. Even celebrities say gold should be bought. Hucksters like Glenn Beck are convincing average individuals to dump a large percentage of their investment portfolios into gold — even their life savings — to be safe when the global economy collapses to the stone age. Beating Broke is concerned about what will happen after the economy recovers. Gold buyers could be sad to see their investment of $ 1,100 or $ 1,200 an ounce change to be $ 800 or $ 900 an ounce instead. If 30 percent of everyone’s money is lost here, the gold bubble is bound to burst. When people try and sell their gold, prices will drop more. True believers in gold will lose even more.
Daily Markets
dailymarkets.com/forex/2010/07/28/did-the-gold-bubble-just-pop/
Beating Broke
beatingbroke.com/is-gold-the-next-bubble/
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