Study the mainstream media and you’ll find several financial journalist who are declaring that the recent rise in gold prices means we are now in a dangerous “gold bubble”.
The implication is that the bubble will soon burst, gold prices will plummet, and we’ll all lose a ton of money.
But if you pause, and consider the current price of gold rationally, you’ll see there are no signs of a bubble.
The rise in the price of gold has been gradual, cautious even, with numerous periods of correction, as we saw earlier this year.
Also, if you look at real bubbles, like the dotcom bubble which burst in 2001, they all have something in common – and that is a seemingly irrational, almost vertical growth, without any foundation in business fundamentals.
Why did investors pour billions of dollars into dotcom companies which had no apparent way of even making money? (Honestly, most of them didn’t even have a revenue model. )
That is a bubble – when the herd rushes blindly forward, pouring money into an industry or sector without doing the simple math.
The rise in gold prices has not been like that at all.
There is nothing irrational about buying gold right now. In fact, it makes tremendous sense.
The U.S. dollar is growing weaker, several European countries are on the brink of economic collapse, and wars and revolutions are erupting across the Middle East and North Africa.
Investors and individuals are not buying gold in the belief that it will make them a fortune as an investment. They are buying because we are in the middle of a very scary period of economic and geopolitical upheaval.
Right now, the desire to secure a proportion of one’s wealth in the form of physical gold is a totally rational response to uncertainty.
And as I said earlier, the price of gold hasn’t been rising at an uncontrolled rate. Far from it. It has risen step by cautious step, with several corrections along the way.
In that sense, it has become a very reliable and rational barometer of the growing levels of uncertainty around the world over the last few years.
The rise in gold prices is saying, “Be careful, be cautious, watch out.”
Above all, it is telling us to buy more gold now, before prices rise even further.
You can buy gold coins and gold bars online at GovMint.com.