The End of the Gold Bubble

A few weeks ago, I wrote a post criticizing the fear the something must be done to counteract investment bubbles. I said that one of the problems is, how do we even know if we’re in a bubble? I wrote:

How can we be sure it’s a bubble when an asset inflates? In the 1950s, stock prices soared and they never really came back down. The phrase “permanently high plateau” hasn’t had a good record since the 1920s, but I think that’s an accurate description of what happened in the 1950s.
Is gold a bubble right now? What about oil? Or the Euro? Or could it be that we’re simply adjusting to a new era of commodity prices? I don’t know and for now, I’m happy to consider these open questions. I will note, however, that adjusted for inflation, commodity prices have historically plunged.

Some commenters wrote that I was crazy (as they often do) because it was perfectly obvious (in all caps) that we were in a credit bubble. But no one addressed my concerns that we could be in a gold bubble. In fact, come said that we’re certainly not because of…well, the standard bullish arguments for gold.
Now it looks like gold’s run may be coming to an end. Again, I’m not saying it is, but look at what’s happening. As I writing this, the contract for June gold is down to $892. That’s a huge drop just in the last two weeks.

Posted by Eddy Elfenbein on April 1st, 2008 at 10:17 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.