The rumors say a gold bubble burst is within the near future. Most individuals 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. There won’t be any kind of demand for gold if the investment doesn’t have to be made anymore. Gold was at record high on June 21 when it was at $ 1,266.50 while it has now dropped to $ 1,185.
Bursting the gold bubble
Gold prices have been so unstable that many say the gold bubble might burst soon. Not even India or China are that interested in gold anymore as outlined by Brian Renzy from Seeking Alpha. Those who buy 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 depending on what people value it at. If a gold bubble burst would to happen, that would all change.
European credit crisis
Ron Acoba at Daily Markets explains the credit crisis in Europe seemed to be devastating to the global economy which is part of why the gold bubble burst may happen. Although it may be surprising after bank news from Europe and the U.S., Acoba says business is about the exact same as it always is. Rezny said the gold bubble is about to “end in tears,” and that the recent decline in gold prices will get worse. Comparable 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. And then it tanked, falling to $ 253 by 1999.
Safe haven not so safe
The gold bubble is larger than normal depending on the amount of individuals buying gold. Even celebrities say gold should be bought. Glenn Beck as well as others are telling people that putting their money in gold is their safest bet right now. Beating Broke wonders what will happen if (when?) 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. The price of gold will drop even further as people rush to sell off their holdings. True believers in gold will lose even more.
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/
