Online Calculator | Falling Gold Price Could Mean The Gold Bubble Is About To Burst

Falling Gold Price Could Mean The Gold Bubble Is About To Burst

People are starting to talk about a gold bubble burst. Investors have perceived gold as a safe haven during 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 need to be made anymore. For those investors who bought gold when it reached a record high of $ 1,266.50 on June 21, a further drop from the Aug. 3 level of about $ 1,185 could possibly be disastrous.

Signs of a bursting gold bubble

Gold prices are 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. Gold became a safe haven during the global financial crisis depending on perception. The only reason gold is valuable is because investors have believed it is valuable. If a gold bubble burst would to happen, that would all change.

Markets overreact to European credit crisis

Ron Acoba at Daily Markets explains that the credit crisis in Europe seemed to be devastating to the global economy which is part of why the gold bubble burst may happen. Acoba explains that there is not any effect on their business with the whole credit crisis. Gold prices will get worse as outlined by 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. And then it tanked, falling to $ 253 by 1999.

Guess it didn’t keep individuals safe

The gold bubble is larger than normal depending on the amount of people getting gold. Gold is even endorsed by celebrities. Glenn Beck also 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. Many will lose money buying it for $ 1,100 and $ 1,200 an ounce and then seeing it drop to $ 800 or $ 900 an ounce. The gold bubble is going to burst if investors lose 30 percent of their money. When people try and sell their gold, prices will drop more. True believers in gold will lose even more.

More on this topic

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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