Over the last several months gold prices have been rising steeply, albeit with the occasional correction along the way.
Some experts are now looking at gold as being in a bubble, ready to burst, followed by a dramatic fall in price.
In the words of an analyst at Wells Fargo:
“We have seen the economic damage of past bubbles and feel compelled to ring the warning bells.”
But what is the price of gold telling us? What do these huge price increases, occasional dips and talk of bubbles really indicate?
I think, if you step back, they tell you people are scared silly by what’s happening in the world right now. While big media headlines may change each day, those people who are concerned with economics from a global perspective are looking closely at inflation in China, debt loads in Europe, and the shaky state of the US economy.
There are no big economies out there in any kind of shape to lead the charge into recovery. All the world’s big economies are in trouble.
In other words, the rise in gold prices is telling us that both investors and individuals are looking at gold as a safe haven during uncertain times. It’s the one safe place for your money right now.
Investors, who are trying to make money from changing gold prices, are flocking to the yellow metal simply to make profits.
But outside of the investors, and the investor mentality, are people who are not looking to gold as a means to make big profits, but as a way to protect their wealth.
Gold owners fall into this latter group. We are not watching the price go up and down twenty times an hour. We are simply buying more gold, as and when we can, to protect ourselves.
Will the price of gold continue to rise? Or will it correct itself and fall? For gold owners, this isn’t really the central question. We are in it for security, not short-term profits. Certainly, if our holdings rise in value, that’s great. But if they fall somewhat, that’s not a disaster. There will still be a secure value there, albeit at a lower level.
Put simply, rising gold prices tell us that economic conditions right now should propel us to secure some of our wealth.
And when there are times of price correction, those are the times to buy more gold.