Gold has been on a record-breaking climb over the past few months as the dollar weakens. The precious metal is seen as a good hedge against a weak dollar and potential inflation because of its stable store of value.
Just over a year ago, gold prices hit a low of around US$700. That was at the height of the financial crisis, when investors were dumping stocks and commodities across the board. The US Dollar has weakened steadily this year as low interest rates encourage investors to buy assets other than cash, like stocks and commodities, and potentially reap higher returns.
I think there’s a bubble in gold as usually the drive to gold is a flight from currency based on fears of inflation. The gold seems to be becoming the favourite investment around as the traders are afraid of the crisis In such an environment gold looks like a good investment to save one’s assets and to multiply them if you trade with a considerable leverage.
However, there is one problem with investing in the gold now — it’s already way overbought.
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