Gold Rush (Bull or Bubble)
Before we answer this question we would like to educate you about Gold and its role in our economy. Since the beginning of civilisation gold has been used as currency because it does not corrode and it is scarce, Gold was used by Kings to display power and wealth, Gold was used as a universal currency. Paper money use to be backed up by Gold back in the days, this means that paper money had real value that backed it up and this was called "The Gold standard" this meant that people could exchange paper currency for Gold . in 1971 the US(America) went off the Gold standard thus creating a fiat currency. People feared that this will cause inflation so they ran to Gold. Now money had no real value, it was just paper that could be printed whenever, there is no actual value that backs it up.
the chart above shows us how gold has been performing in the past years( based on New York close), this is a clear indication that Gold is in a Bull run. in October of 2001 Gold was above $200, During the year 2011 we saw Gold go above $1900, the Charts never lie.
The Feds have pumped Trillions of money in the economy and have gotten nothing from it except dept. I believe that Gold is a safe haven, it is where you can store accumulated wealth to preserve it especially in this unstable economy. Whenever we hear negative news toward the US Dollar and the debt crisis we always see investors panicking and running to Gold so they can find value in this unstable economy, this is why we are seeing such a strong bull rally in Gold. Many will argue that the US is near recession due to slow growth prospect and enormous unemployment rate, the US is sitting at a $14.539 trillion debt crisis and they have spent Trillions of dollars in War since the year 2003. It is clear that America is heading for disaster if the Government doesn't intervene in a major way.
Another great threat is inflation,inflation is the overall upward price movement of goods and services in an economy,this is measured through various types of price indices including the Consumer Price Index and Producer Price Index (measuring prices set by producers for their output), using data obtained by the government. Inflation is often caused by the increase in the supply of money therefore making it depreciate in value. In August the US inflation rate rose 3.8%, the inflation rate is slowly rising. This only means that the US Dollar is losing value.
I don't believe that Gold is in a bubble, Gold is in a very strong bull run and it is a great investment for long term value investors, I believe that it is only the beginning and that we will see Gold reach even greater heights in the years to come, its a proven fact that there is no real value in paper money, Gold has been the preferable currency way before we were even born.
Posted by wealth at 08:23