Gold : A bubble about to burst?

Everybody asks me why is the gold price rising and is it a good time to invest in gold. I myself want to invest in the commodity but based on my past experience and gut-feel I think it is a wrong time to do so. I have two reasons for it.

Reason 1:

I have seen that when everybody i.e., friends, colleagues, neighbours, house maid and even the driver starts talking about investing in something, its a signal that smart money is about to get out of investment and they are looking for simple fools like my acquaintances to leave holding the parcel when the music stops.

Well, this time even the kasai who came to slaughter our goats on eid was talking about buying and storing gold.

Reason 2:

I have a track record of investing at the peak or near the peak. At this moment, I have a great urge to invest in gold listening to people around me and I am fighting it just on the basis of my past track record.

The investments that I have made earlier at the peak have been property in dubai, stocks in Pakistan in 2005 just before the crash and little investment in NASDAQ stock before the 2001 IT bubble burst.

One of these days I will buy a gold coin or at max a gold biscuit. However, people tell me that to really make a buck out of it,  or fight against inflation, I should buy a brick.

Rest assured that whenever I do buy a coin or biscuit, it will be the straw that breaks the camel’s back, bursting the gold bubble.

Academically I understand that gold has zero utility value as it has minimum  industrial use. Its value is derived from ornamental use. In Karachi, it does not even have ornamental value as you become a walking target for thieves and robbers. Most of the people wear imitation jewelry and keep the gold jewelry in lockers. One rarely wears original jewelery unless one is the bride on her wedding.

People talking about US deficits, unemployment rates, and dollar soon losing its value suggest that gold is best store of value at the moment. Even the financial press is full of news about research in gold, funds that are being launch to invest  in gold, gold indexes etc.

If one is in Pakistan, my gut is that one should start investing in farmland or staple foods such as rice, wheat and water if possible and build stockpiles at home since the rumors have it that we will have bigger food crises in the coming years.

Disclaimer: I have no license to dispense investment advice. Neither this post nor this blog should ever be considered as dispensing recommendations or advice.

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