{"id":430,"date":"2011-04-28T08:23:07","date_gmt":"2011-04-28T08:23:07","guid":{"rendered":"http:\/\/www.howtoinvestingoldnow.com\/blog\/?p=430"},"modified":"2020-07-05T15:50:14","modified_gmt":"2020-07-05T20:50:14","slug":"evidence-for-gold-not-being-a-bubble","status":"publish","type":"post","link":"https:\/\/www.howtoinvestingoldnow.com\/blog\/430\/evidence-for-gold-not-being-a-bubble\/","title":{"rendered":"Evidence For Gold Not Being A Bubble"},"content":{"rendered":"
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Given the enormous appreciation of gold from $250 an ounce in 1999 to $500 an ounce five years ago and $1,452 an ounce presently, it’s no wonder that there are so many proponents of a gold bubble, particularly after witnessing the stock bubble ending dramatically in 2000 and the real estate one, ending as dramatically in 2006.<\/p>\n

Those trying to foresee gold rates, usually, base their assumptions on their relation to inflation levels or fiat currency developments, because the latter have been seen to influence the first. In between the end of the 1970s and the beginning of the 1980s, gold prices had soared in proportion to the soaring inflation levels by double digits, so gold investors were able to make huge profits. But these days the inflation rate in the US is rather low: more precisely 1.2%.<\/p>\n

But who could deny the drastic pace at which the dollar has weakened over the last ten years, especially after the trillion-dollar worth money printing, aimed at counterbalancing the soaring US deficit, debt and related interest? And who could ignore the fact that any time the dollar decreases, the gold price increases? Since June, the dollar has gone down by 10% against major currencies, whereas gold has gone up by 14%.<\/p>\n

As regards what’s more profitable – gold versus stocks and bonds -, the answer is also based on figures. If considering the increase in gold rates during the last five years – $1,452 against $500 – we see a 23% annualized return, whereas the return on stocks in that very period was 1.1% and on bonds 6.1%. Well, this spectacular increase seems to announce a bubble, but, unlike bonds, gold doesn’t pay interest, and, unlike stocks, doesn’t bring earnings over time, so how could you possibly claim that the ratio of gold price to the earnings generated is too high and risky?<\/p>\n

Further, no one can deny that, for most of our recorded history, gold has been the most reliable store of wealth. But tradition aside, currently, gold stands for less than 1% of global assets, so how could it be a bubble and not rather the rest of them, those toxic derivatives and leveraged assets? Therefore, it’s rather likely that, given the soaring gold demand coming from central banks and investors alike, gold prices will continue to go up, while fiat money will continue to go down, so, buying gold could prove to be a profitable investment strategy.<\/p>\n

Ask the advice of specialists on how buying gold can aid you in times of economic turmoil.<\/p>\n

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