Gold Bubble

Profiting from Gold's Impending Collapse

Wiley, 2012

15 min read

10 take-aways

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What's inside?

Has your investment in gold performed well? Great! But maybe it’s time to sell.

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Overview

Recommendation

Gold has always had a special allure for consumers and investors alike, but speculating in gold can present enormous upsides with concomitantly disastrous downsides. Gold’s precipitous climb as financial markets first roiled and then surged at the start of the 21st century raised alarms with investment strategist Yoni Jacobs. He offers a contrarian and sobering opinion based on his exhaustive research: The high-flying price of gold – that supposed safe haven beloved by spooked investors – will soon plummet to Earth. Jacobs pulls out all the stops – often repetitively so – to back up his claim, and his statistics and data are impressive, though pretty much all focused on his point of view. getAbstract, which never gives investment advice, recommends this thought-provoking look at gold to those worried that their investments could turn to dross.

Summary

Pop Goes the Gold Bubble

In recent years, gold prices have had a breathtakingly steep rise – to more than $1,900 an ounce in 2011, up from around $250 an ounce in 1999. But what goes up must come down. A gold bubble exists, and it will soon burst. While the price of gold may climb even higher for a short while, it will definitely come crashing down, almost certainly sooner rather than later. When it does, gold investors will lose tremendous amounts of money.

Gold tends to appreciate in tough economic times, so its price rise isn’t surprising. What is surprising is the extent of its price climb. So what has led to this “gold surge?”

“Gold has historically been a store of value” – People have universally accepted and prized gold for thousands of years.
“Gold is a tangible asset” – Its physical form conveys a sense of security.
“Gold has limited supply” – And since demand is growing, its price should increase.
“Gold acts as a currency hedge” – Gold is the foil against the possibility that paper monies will become worthless.
“Gold as a fear hedge” – Economic turbulence draws investors to gold...

About the Author

Yoni Jacobs, executive director and chief investment strategist for Chart Prophet LLC, an investment management firm, earned the Chartered Market Technician designation. He has appeared on the Business News Network and CNN.

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L. F. 6 years ago

Disappointing. More or less just a technical reason, golds precipitous rise, to explain why gold will fall. An observation of a point in time and not much use to thinking about the present.

Yoni Jacobs