A Gold Market Bubble Myth Research Paper Example | Topics and Well Written Essays - 750 words

A Gold Market Bubble Myth - Research Paper archetypeOn the other hand, Marc Feber debunks that idea by explaining that golds appreciation to $1,900 an ounce reveals that there is no bubble. It is because the fundamental bank continues to increase money supply which has assisted spur the precious metal to this level. Furthermore, he argues that the gold is not in a bubble as when one buys gold, it is more of insurance in the face of financial market problems and systematic failure (Qt. in Chanjaroen). The prices of precious metals, such as gold, platinum, and silvern atomic number 18 driven by a wide range of factors. These factors may include, debt levels, currencies, money supply, inflation, CDS spread, interest rates, and legend demands from other sectors, such a electronics, solar appliances, and jewelry. Recently, investment demand proved to be the essential device driver as investors used precious metals in comparison to the dollar as a store of encourage considering infl ation, general hedge, and currency depreciation. Signification demand arises from buyers in Asia, pension funds, diversification and investment demands from hedge funds, and central banks monetary demands(Durden). Debt Level Increase vs. precious metal (Bloomberg Industries) (Source Durden) The major factors contributing to such demand are concerns about an economy on a global scale, inflation risks, and risk of currency debasement. Moreover, gold has unceasingly been the preserve of the smart money. Risk aversion and wealth preservation concerns considering currency depreciation are the primary reasons that drive precious metal demand. However, there is no greed trade or public purchasing of gold in an expectation of guaranteed profits or return. This was the case with the Nasdaq bubble or the recent original estate bubble that had a huge impact on western countries. Retail demand as a result of hype is negligible however, it is increasing. Moreover, increasing demand on the glo bal level is dealt with by very small supplies as supply is slightly lower than in 2001 (Durden). Furthermore, historical context provides sufficient evidence that gold resurgence has a long way to go.