Wealth Secrets: Is gold or silver in a bubble?
Wealth Secrets: With such strong gains this year already in both gold and silver, you’d think surely this was the case, right? When things go up for that long, common sense would say they are due for a correction, right? Well that’s what financial planners and pundits have been saying for each of the last TEN years that gold has consecutively risen. That just proves we’re in a bubble, right?
(Here’s some wealth secrets for you: Of course, financial planners or your portfolio manager won’t get paid when you purchase gold or silver bullion and are therefore dis-incentiveized to advise you about precious metals as they get no cut, but that’s a topic for another post…)
Wrong. It just goes to show how bad things really are around the world that gold can continue to rise consecutively ten years in a row (or how well “someone” – maybe the government? – is able to manipulate or influence the precious metals market down…).
Still not convinced?
What then IS a bubble?
A bubble in this context is something that continues to appreciate out of control BEYOND it’s fundamentals due to speculation or momentum that eventually results in a crash or bursting of the bubble, where prices return back to meet the fundamentals.
(That’s probably not the official definition, that’s just my definition to keep this simple) So while you may be hearing a lot about gold (and silver to a lesser extent) today, that does not mean that we’re in a bubble (just the fact that we are bombarded with way too much advertising and marketing noise today).
Here’s how I’ll prove it to you:
- What percentage of gold or silver is your net worth today?
- What about your neighbors? Friends? Family?
- Do you know anyone who owns any significant amount of gold or silver in their portfolio?
If gold and silver were bubbles, a large percentage of the people you know would own the precious metals. I mean how many people do you know who owned tech stocks in the late 90s? How many people do you know who are now upside down on their mortgages from the recent real estate boom/crash? (Mortgage debt doesn’t go up with appreciation unless you participate in the bubble by refinancing or getting a 2nd mortgage to access that bubble-created appreciation…) And how many of these people currently are investing in gold or investing in silver?
See the difference? That doesn’t mean that precious metals CAN’T become a bubble but currently we are no where near a bubble in precious metals.
Additionally, noted scholar and author Mark Faber on his world speaking engagements frequently asks his attendees (typically representatives of major financial institutions like hedge funds) what percentage of their net worth is in gold.
Are you know what the response is around the world? Less than 1/2 of 1%.
Does that sound like a bubble? And this is not individuals this is the big money of the world, billions of dollars in management, and they’re not investing in gold yet either…
Suffice to say, there are more than a few factors leading to the rise in gold and silver prices and the demand for investing in gold and investing in silver.
And as our economic woes and monetary crises continues to worsen with no real solution other than financial repression (ie, inflating the debt away), the fundamentals for investing in silver and investing in gold to maintain your wealth, protect your purchasing power and hedge against inflation remain.
If you’re interested in investing in gold or investing in silver and discovering ways to make extra money in which to do so, click the header at the top of the page or click this link now: Wealth Secrets
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