Monday, December 7, 2009

Is a Bubble building in Gold?

In Financial Markets, herd mentality is in work. Investors always go by the herd.
Last year, they chased real estate and property prices shoot up world over and investors bought properties as though there is no tomorrow.

So, this effectively set up a stage for impending financial Bubble and that happened. Property prices fell all over the world. Many caught in the melee. Banks went bankrupt. Companies went bankrupt. Individual went bankrupt.

But still, herd mentality is in work. Now, the people are chasing Gold assets and it has effectively set the stage for the next financial Bubble, that is ‘Gold Bubble’.

Financial Bubbles are created when all of the investors who are interested in a particular asset want to get hold of it. Once the buying potential recedes, then a huge selling potential is created. Once prices start coming down, panic selling by all the investors push down the prices beyond its intrinsic value. This is how financial bubbles are burst.

The present price rise in gold reminds me of bubble is being built in it. It is likely to burst in another six months. The same story will happen again. Banks will go bankrupt. Companies will go bankrupt. And individuals will go bankrupt.

Let us see, if this happens shortly.

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