2011-10-04

Is gold a bubble?

I've noticed two different arguments for why gold is not a bubble. One is that gold is not a bubble because hardly anyone owns physical gold, very few people own mining shares and institutions are under-exposed. Most of these commentators are looking at Western investors, perhaps mainly U.S. Another thing one hears, and which is fully backed by the data, is that the gold market is international and actually driven by Chinese and Indian demand. These two facts are exclusive. Of course U.S. and especially Western markets are wealthy, and if they decide to seriously buy gold, the price will advance strongly. That said, the Western markets may be superfluous. For a long-time the world has watched the U.S. equity and bond markets for signals, but now the time has come to watch Indian and Chinese sentiment on gold. And in China, gold is very bubbly.......although I haven't seen a gold advertising poster in my apartment building for quite a few months.

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