May 15, 2012

The Gold Bubble has Burst

By now it is clear to everyone that there is nothing fundamentally "safe" in Gold or any other precious or industrial metals. As a non-productive asset its value is only based on expectations of future demand. There is nothing inherently wrong with that, if the demand was real - say for jewelery or industrial uses. However when an investment's value is only derived from expectation of even more investments chasing the same asset, it becomes pure speculation. Or to go to an extreme, even a Ponzi scheme.