Is Gold a Bubble?

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Gold is off its record peak of nearly $1,900 per ounce last fall—down to a still staggering $1,794 per ounce

The price remains so high that there’s a fierce debate over whether gold is no longer a safe haven, but has crossed into the riskier territory of a bubble.

Jeff Clark, senior precious metals analyst at Casey Research, believes that a true bubble in the gold market would have to meet two criteria:

1.The price soars in a short time. In 1979, the gold price doubled in six weeks (that was a bubble). The best that gold has done recently (2001 to present) is a 32% rise over the course of the year in 2007.
2.There has to be widespread public participation. Think mania. During the real estate bubble, you couldn’t go to a dinner party or watch TV without hearing about real estate.

Chances are, your friends and neighbors aren’t chatting about—or even buying—gold. In fact, “most reports say only 1% of North America is invested in gold,” says Clark. 

Is gold a good investment? Not if you’re hoping to hit paydirt by buying now and selling for a swift profit. But if you’re considering a long-term commitment, it could be a good buy — especially now that prices have receded.

To invest in gold, you could consider buying an ETF like GLD or GDX, or you can buy pure gold coins from the U.S. Mint.


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