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

A Gold Market Bubble Myth - Research Paper ExampleOn the other hand, Marc Feber debunks that idea by explaining that opulents appreciation to $1,900 an ounce reveals that there is no bubble. It is because the underlying 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 blow (Qt. in Chanjaroen). The prices of precious metals, such as gold, platinum, and silver are driven by a wide range of factors. These factors may include, debt levels, currencies, money supply, inflation, CDS spread, interest rates, and allegory demands from other sectors, such a electronics, solar appliances, and jewelry. Recently, investment demand proved to be the master(a) driver as investors used precious metals in similitude to the dollar as a store of value considering inflation, general hedge, and c urrency 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 globose scale, inflation risks, and risk of currency debasement. Moreover, gold has always 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 buying of gold in an expectation of guaranteed profits or return. This was the case with the Nasdaq bubble or the recent real 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 global level is dealt with by very small sup plies as supply is slenderly lower than in 2001 (Durden). Furthermore, historical context provides ample evidence that gold resurgence has a long way to go.