IS Gold Wealth Coming to be a Bubble

With the year bringing  havoc to bonds  and a bear market in stocks , accompanied by  Chaos and trouble   in some of the countries in  the  Middle  east region , like  Syria  & Libya .

All   this recent happening    and  together  with investor   concern over the European Sovereign-debt crisis and fears of renewed global recession  caused  gold strong rally this  recent months

Another   Rush  came in from  the  Chinese and Indian buyers of gold as they are  concerned about the prevailing high inflation in their countries and are seeking a safety  Haven  , and  also possibly  the  Big rise  in  Wealth in those two countries creates additional demand as owning gold can be seen as a Wealth Of Fortune . 

If the above is true , surely it means that  gold may be   going to extend further  its gain this year  as long  as  inflation in China and India still    elevate  higher   even  with  their Government  trying to  slow  down   the inflation  crisis 

Without forgetting  the   present  Debt  crisis  in both Europe and Big America  , Gold Might possibly  still edge up  again  as recently   the world’s largest gold ETF, the SPDR Gold Trust,  has reported   the net tonnes its holds decline this year, showing that, overall, there isn’t much demand-from portfolio managers and retail investors in developed countries.       

 The fund  witness  some  peak  when   it climbed as high as 1,309 tonnes on Aug  but slipped  back to below stock value  at  1,232 tonnes just recently  but  Overall , it has been largely steady in the  1,200 –to 1.300-tonne range over the year. This figure  reflect  there is No  evidence of a  flight to the safety of gold in either Comex futures either 

 For now, as long as Chinese and Indian consumers  are  still caught up  with their   worry about inflation, and the global economy remains under threat, there are no real reasons to expect gold prices to decline.

 India and China are also the key drivers of these two categories , With Indian’s demand jumping 38 per cent in the second quarter of this year   and their demand   for bars  and bullion  has leapt  by almost 80  percent   which  show  their Government is try  to stock  up   in  such  time  especially  to   counter against    inflation ,  and  yet  they  still could not   reduce the worsening effect  as inflation stood at 9 % until today .

China did  manage  to bring  down  their inflation with similar counter measure ,but  the worsening threat  from Europe  and with  recession spell being   felt  in major  economy like the United States  ,  there are no real reasons to expect gold prices to decline.

With  that being  said  ,  somehow  the recent  price of gold  has  plummeted promptly  from  all time  high  of US $ 1,170  by about US$120 an ounce , the volatile trading is again is spreading  claims that gold is in a possible  bubble  

It is clear that GOLD  price increase  came  from  people who  are buying gold as either a hedge against inflation or economic calamity , or solely because they treat it  as  investment  after  consideration   that globally  the increase  in political  uncertainty  ,doubtful economic future and financial problems  today exceeded that  of any other time , as Investment  Guru  Mr  Soros  mentioned recently    of possible   second  Depression Era   is coming

Gold benefits for this worry .

 Even after the downturn in prices for this episode , it is not clear if gold has hit its peak, is gold still being driven by fundamentals or is it a speculator’s delight? Because of this uncertainty , regulators have acted, as  carefully as they can   as they did in the former  case of the internet  crash and housing bubbles.

   

If you want to leverage and increase your wealth by converting it into gold bullion, you will have to buy Gold mining stocks.

 Those who did will have made a lot of money because these stocks appreciated rapidly , to between and  five  times their purchase price, However, They went up so fast that bullion could not keep pace. I would not suggest buying more highly capitalised blue chip stocks until bullion catches up.

 It is a corrections that merely  consolidated the upswing that climaxed  but  as the correction unfolded, the fundamentals for gold stocks continued to improve. This divergence may have set the stage for  some Updown Swinging action soon.

Could  it be that  the purchasing power of gold  reflect a vicious bear market that will embroil all the world’s paper currencies.

Gold always offer a store of value but investors will have a look beyond and  buy  gold mining stocks that can increase production, make successful explorations and can turn around setbacks.  

The  only  way  you can make good profit from Gold mining  stock is to diversify . investing  is like planting  a garden , there will always be some weeds, while  some plants  over grow , others may not survive.