Are We In A Gold Bubble?

Are we in a gold and silver bubble? The pundits who have come out in the media and Internet lately would have you believe so. Of course, history does not support their position or they simple do not understand current events. Will gold and silver keep going straight up? Of course not, it will follow it natural course of moving higher and retracing before moving higher again.

Those that contend that it is not an opportune time to be investing in gold and silver take the position that the metals have increased in value to a point were that its is not sustainable. They fail to see that the U.S. dollar has been precipitously falling and gold and silver have gone up almost identical percentage. In another words, gold is doing exactly what it is supposed to be doing, protecting your purchasing power caused by currency devaluation.

This week the first shot in war by countries to devalue their currency was fired by Japan. The United States is preparing for quantitative easing 2. These are elegant terms that simply mean that central banks around the world are planning to print more money to get out of the economic quagmire we have been in for more than two years.

Under this scenario gold and silver are clearly winners and will continue to go up as investor seek shelter in tangible assets. The demand for gold and silver continues to increase as investors lose confidence in the ability of governments to control deficit spending and reignite the economy.

A dollar in 1913 when the Federal Reserve was created is worth a mere penny. Gold on the other hand has maintained it's purchasing power. In another ten years it almost certain that the dollar will be worth less and gold will continue to shine as it has always done.

Investors have choices, you can park you wealth in cash an pray that the unrelenting money printing finally ends. Purchase government or corporate bonds, which derive their value from the good faith of the issuer and we have seen many cases where that is not worth much. These bonds return after inflation are negative since the interest rates are so low.

Buy stocks and strap in for a ride as your wealth can disappear overnight. Stocks are simply pieces of paper that derive their value from the fact that someone is willing to pay you a certain amount for your shares. They have no intrinsic value and someone can pay you 90% less tomorrow if that is what the perceived value is.

You may receive a small dividend for holding the paper, but in most case it very little.

Lastly, you can sleep soundly by investing in gold and silver. Since they are tangible metals that have always have been considered a storage of value and maintained their purchasing power. I think that the decision is a no brainer and the participants of the gold markets have been casting their votes.

I have traded the markets for many years and enjoy writing articles about Investing in Gold and Silver And Related Topics. Please check out my other articles Investing In Gold and Silver