Wednesday, April 6, 2011

Waiting for the Gold Bubble to Pop

With gold prices at a new all-time high, investors may be wondering when the bubble will burst. However, there are many reasons why it may continue to grow rather than pop. Read more in this full blog post from The Mess That Greenspan Made.

The gold price reached a new all-time high today at $1,457 an ounce and most investors are probably just shaking their heads at the craziness of it all – who in their right mind would pay almost $1,500 for a dumb ‘ol one ounce gold coin? Of course, they were shaking their heads at $1,200 an ounce, $1,000 an ounce, $725 an ounce, $500 an ounce, and so on, calling it a bubble ever since the price started rising about ten years ago when you could have bought the metal for about $300 an ounce. That’s one tough gold bubble…

In Frank Holmes latest commentary over at U.S. Global Investors, he explains some of the reasons why the current gold bubble just doesn’t seem ready, willing, or able to pop, the chart below offered up as evidence that, in a world full of increasingly suspect paper money and paper assets where more investors are looking for something other than dodgy paper, the yellow metal remains under-owned.

Citing a recent presentation by Eric Sprott of Sprott Asset Management, Holmes notes that new investment in gold over the last ten years totaled about $250 billion versus almost $100 trillion that went into other financial assets over that same time. That’s not to say that, as a percent of all assets, it will ever get back to the levels seen prior to 1990, but, based on everything that’s been happening in the world lately, it’s certainly headed in that direction.

This blog was republished with permission from The Mess That Greenspan Made.

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