Is the Gold Bubble About to Pop?

By Todd Harrison The yellow metal debate is pretty fierce. On one side, you've got a viable view that it's the only true store of value in a world full of fiat currencies. It's a safe-haven, a place to hide. On the other, in the words of Warren Buffett, “It has no utility. Anyone watching from Mars would be scratching their head.” He's got a point; we dig it up, turn around, and bury it in our back yard.
(To see Diane Bullock's article on what companies have said 'no' to a Washington gridlock, click here.)
What's clear is it's a great trading vehicle and it goes without saying that it's been a snazzy investment over the last decade. It was also, for lack of a better word, my salvation coming out of a particularly chilly streak in 2003. "Buy energy and metals, short tech and financials and open a taco stand in Costa Rica," I said at the time, sending shivers through the culinary ranks in Central America. I felt like a hero in the Summer of 2008 when I abandoned the gold camp and shifted my long-term bucket to 100% cash. “All roads lead to deflation,” I said at the time, pointing to the Internet as the most deflationary invention of all-time. That was before Shock & Awe was injected into the veins of the markets, an infusion that shifted the DNA of capitalism. (To see Howard Simons' piece on the FOMC's pledge for short term interest rates, click here.) Stay humble or the market will do it for you, indeed. Be that as it may, I've updated our Bubble Comparison Chart (weekly, from 1985) and the picture, as they say, speaks 1000 words. (To read Ram Seshadri's article on how Solyndra folding means the end of a dream of US leadership in alternative energy, click here.)
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