Hello,
I've been getting a lot of stick from gold bugs about an article I wrote on my blog saying that I thought gold was a bubble that has probably peaked. The article was Gold Bubble, if anyone is interested.
I'm not all that sure that I'm right though, but I think that gold is probably a bubble because I can't find any way of measuring it's underlying value that justifies it's price. And recently, gold seems to have decoupled from it's previous pattern of stock market falls, gold goes up.
I'm hoping to get some peoples thoughts on this before I put my money where my mouth is and short gold.
Basically, I'm looking for people to challenge my views, especially the following views -
1. Gold produces no yield and therefore has very little actual underlying value other than it's usefulness in jewellery and the likes. Gold therefore does not actually need to cost to much more than the cost of producing enough of it to meet the demands for it from industry. The only real reason people will pay $1,600+ for an oz of gold is they believe others will (i.e. it's a speculative bubble).
2. The powers that be will not re-integrate gold into the financial system, there is no political will for a return to a gold standard.
3. And this is the most difficult. Gold was very useful as a fear index with crashing stock markets meaning rising gold prices. In the last couple of months gold has de-coupled from this pattern.
Any comments will be careful read and much appreciated.
I've been getting a lot of stick from gold bugs about an article I wrote on my blog saying that I thought gold was a bubble that has probably peaked. The article was Gold Bubble, if anyone is interested.
I'm not all that sure that I'm right though, but I think that gold is probably a bubble because I can't find any way of measuring it's underlying value that justifies it's price. And recently, gold seems to have decoupled from it's previous pattern of stock market falls, gold goes up.
I'm hoping to get some peoples thoughts on this before I put my money where my mouth is and short gold.
Basically, I'm looking for people to challenge my views, especially the following views -
1. Gold produces no yield and therefore has very little actual underlying value other than it's usefulness in jewellery and the likes. Gold therefore does not actually need to cost to much more than the cost of producing enough of it to meet the demands for it from industry. The only real reason people will pay $1,600+ for an oz of gold is they believe others will (i.e. it's a speculative bubble).
2. The powers that be will not re-integrate gold into the financial system, there is no political will for a return to a gold standard.
3. And this is the most difficult. Gold was very useful as a fear index with crashing stock markets meaning rising gold prices. In the last couple of months gold has de-coupled from this pattern.
Any comments will be careful read and much appreciated.