Gold Bubble Could Possible Burst
The rumors say a gold bubble burst is in the near future. Most people thought gold was the safest bet when it came to financial investment within the global financial crisis. Although 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 investors find 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 when it has now dropped to $ 1,185.
Knowing when the gold bubble will burst
Some say the gold bubble is about to burst because gold prices are too volatile. Not even India or China are that interested in gold anymore as outlined by Brian Renzy from Seeking Alpha. It is assumed that gold will continue to increase in price forever for everyone who invests in it. Because of that, numerous bought gold during the financial crisis. The only reason gold is valuable is because investors have believed it is valuable. A gold bubble burst would change that perception overnight.
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 also the U.S., Acoba says business is about the exact same as it always is. Rezny said that the gold bubble is about to “end in tears,” and the recent decline in gold prices will get worse. In 1980, the exact same thing happened when gold peaked at $ 850 an ounce. Adjusted for inflation, that $ 850 was equal to $ 2,300. And then it tanked, falling to $ 253 by 1999.
Gold was not that safe
Since numerous have bought gold, the gold bubble has gotten huge. Gold is even endorsed by celebrities. Glenn Beck also as others are telling people that putting their money in gold is their safest bet right now. When the recovery happens, Beating Broke wants to know what will happen then. Gold buyers will 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. The price of gold will drop even further as individuals rush to sell off their holdings. Those who’ll lose probably the most are individuals who truly believe in gold.
Additional reading
Daily Markets
dailymarkets.com/forex/2010/07/28/did-the-gold-bubble-just-pop/
Beating Broke
beatingbroke.com/is-gold-the-next-bubble/
Goldman Engineering gold recovery
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