BIT Studio

November 29, 2010

Gold Bubble Top Ten

Filed under: BIT Financial — webmaster @ 11:46 am

  Top Ten Reasons Why We Are In A Gold Bubble
Reason #10:
Gold has a limited use in jewellery and micro-circuitry with little intrinsic value in the manufacture of other finished goods.
Reason #9: Because of the recent exponential run-up in the value of gold, jewellers have cut back on its use thereby creating a significant decline in demand.
Reason #8: Exchange Traded Funds (ETFs) have simplified the process of gold ownership to a point where the general public can purchase it on a whim and, given the opportunity to make easy money, have created a pyramid scheme of epic proportions.
Reason #7: ETFs own thousands of tons of gold and are currently warehousing the inventory in banks and other high security facilities, an extremely expensive process for an asset whose primary value is based on fear and emotion.
Reason #6: Bond yields are on the rise as inflation and interest rates increase, and it has been suggested that a safe and secure 4% bond yield could lure the goldbugs back to fiscal reality.
Reason #5: The very same ETF-vehicle that made gold so easily accessible to the masses could work against it; in the case of a “run-on-the-goldbank”, ETFs will be forced to support the redemption rate and sell inventory quickly into a declining market.
Reason #4: Some say that gold is the only hedge against inflation. The 1971 Nixon-shock collapse of the 1944 Bretton Woods Agreements, which replaced gold with the U.S. dollar as the international value standard, created an environment where inflation is a fact of life, just one more measurement of many used in establishing rates of growth and prosperity.
Reason #3: Some say that all fiat currencies, especially the U.S. dollar, will collapse, but just as a rising tide lifts all boats, all countries will inevitably print more and more money and the monetary value of everything, including gold but not limited to just gold, will rise accordingly.
Reason #2: Some say that gold will become the international reserve currency, a new (old) standard for value, but how would this be accomplished? Countries such as England, France and Switzerland have steadily sold off reserves over the years; should they be penalized? The U.S. is currently the largest hoarder of gold reserves in the world; should they be rewarded? Private investors hold vast amounts of gold; will the U.S. government again make it illegal for individuals to own gold, as they did in 1933?
And the #1 Reason why Gold is in a Bubble:
Because everyone thinks it isn’t.

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