Talk of a gold bubble burst is spreading. During the global financial crisis, numerous thought gold was the best place to invest money. Despite the fact that 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. If the markets continue to rally, the demand for so-called safe investments like gold will fall. Gold was at record high on June 21 when it was at $ 1,266.50 when it has now dropped to $ 1,185.
Bursting the gold bubble
Gold prices have been so unstable that numerous say the gold bubble might burst soon. 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. This is why individuals invested their lives into gold during the global financial crisis. Gold’s value is solely based on what individuals value it at. That could very easily change with a gold bubble burst.
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. Although it may be surprising after bank news from Europe and the U.S., Acoba says business is about the same as it always is. Gold prices will get worse according to Renzy as the gold bubble will “end in tears”. 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. It dived to $ 253 by the time 1999 had hit.
Safe haven not so safe
The gold bubble is larger than normal based on the amount of people getting gold. Gold is even endorsed by celebrities. Glenn Beck as well as others are telling individuals that putting their money in gold is their safest bet right now. Beating Broke is concerned about what will happen following the economy recovers. Gold buyers can be sad to see their investment of $ 1,100 or $ 1,200 an ounce change to be $ 800 or $ 900 an ounce instead. The gold bubble is going to burst if investors lose 30 percent of their money. People will rush to sell their gold off when they see the price drop just to make it drop more. Those who will lose probably 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/
