Wednesday, August 24, 2011

The gold bubble

Readers will recollect that a short while ago I warned against putting money in gold, and there is now the clearest possible evidence that gold is a bubble: the price of gold dropped by $160 an ounce in just the last two days - its largest 48-hour absolute fall in more than three decades.

Why the drop?

At present, the drop is due to expectations that the Fed will announce some moves to shore up the economy. If those do not materialise at a level that satisfies the speculators, then expect gold to leap up again, and beyond the price level 2 days ago; however, if the Fed does move in a manner that satisfies speculators, then expect speculators to sell gold and lower the price even more, and buy equities thus raising those prices.

My guess: the Fed will announce some moves, but those will be inadequate for the speculators; the gold price will therefore stabilise, and equities will rise marginally.

But my guess is as good as yours.

In general, expect this kind of yo-yo-sideways-yo-yo-sideways movement for the foreseeable future of the global economy, declining gently or swiftly for the next decade.

Unless something serious is done by global leaders, or unless there is divine intervention.
Sphere: Related Content

No comments: