i'm no investment genius, believe it or not, but here's a noob question: isn't it possible gold's rise has NOTHING to do with the dollar's value or lack thereof? isn't it entirely possible that it's rising because people are buying it? supply and demand? i NEVER hear that mentioned as a reason behind the rise in gold. maybe the more people buy, the more it rises, and the more it rises, the more people are convinced they need to buy. entirely self perpetuating, and on an exponential growth path.
People who buy gold as an investment usually buy it as an alternative to investing in corporations (w/ stocks or corporate bonds), local bonds, treasury bonds, real estate, cash, etc. They do it because they think it will either offer a larger return than these other options, or because they think it will be a better store of value than the other options. Treasury bonds and the prime lending rate from the govt. have had very low interest rates lately in an attempt to keep other interest rates down.
People are investing in gold because the business environment has been viewed as dangerous, or not likely to give a good return. Market crashes have harmed the return people think they will get on stocks. Over the long term gold is almost never a good investment to make money from by holding--like all commodities it fluctuates a lot. This is why oil, food, and other commodities aren't included in official inflation numbers, b/c they change a lot based on things having nothing to do with the actual price level-no rain, oil shortages, etc.
I think people started buying gold as an alternative to real estate because it was a crashing bubble, next was as an alternative to stocks because it was a crashing bubble. Now I think people are buying it a little bit for the same reasons, but also because it has gone up so much. Also, there has been an onslaught of commercials saying how you can sell your "unused" gold, and how you can invest in gold b/c it has increased in price so much--the opposite of what you want to do as an investor. Gold was probably a good investment for quite a while, but now it has doubled in price with no real reason except as an alternative investment. I think gold investment is a bubble because it is a commodity with little real use compared to its market price right now.
There is no reason to think the dollar is going to crash any time soon. It would take at least 5-10 years if China tried to dump the dollar, which people are claiming is a big threat but probably isn't. Even if that happened whatever they decided to go into would be an alternative investment to the dollar, they couldn't do it secretly, and there is no way they would go into gold unless it was drastically cheaper. In that case anyone invested in gold would have already lost their money when it dropped to the low price so it would have been a bad investment. Inflation hasn't been an issue in the U.S., despite what Noory and his type have been saying (for how long?)-2009 had deflation, and 2010 had small inflation which was actually less than the ideal amount.
So, "i NEVER hear that mentioned as a reason behind the rise in gold. maybe the more people buy, the more it rises, and the more it rises, the more people are convinced they need to buy. entirely self perpetuating, and on an exponential growth path." could be exactly right, except I doubt it is on an exponential growth path. Gold would have been a great investment a few years ago, and may be for a while still, just like real estate, stocks, or mortgage backed securities. Why would Noory, or the dozens of other programs who have literally dozens of gold investment commercials a week even question whether it was a bubble?
