patrick.net

xenogear3 says

It is a myth that gold tracks inflation.

It certainly didn’t do that during the 80s and 90.
It goes up during the economical uncertainty.

And goes down during the normal time.
As long as the unemployment is 9+%, you don’t have to worry about inflation.

In the 80s and 90s did you really have inflation in the US?
Look at the 70s. Since Nixon kicked us off the gold standard, the price of gold increased and peaked at around $800 an ounce in 1980.

The reason why gold price came down was because Paul Volcker raised the interest rates to a ridiculously high 20%. Dollars became very valuable and dear, gold came down. Think about this for a moment, does Bernanke really have this option to control inflation if it starts heating up the economy? Look at the US fiscal deficit/debt numbers and imagine for a moment what will happen when interest on this debt goes up!

The point is at the end of the day, gold performs well both during inflation and deflation. Gold was, is and will always be considered as a safe haven in times of economic uncertainty.

Note: I'm not saying gold can never be in a bubble, sure gold can get into a bubble phase when there is irrational exuberance about the metal. But we're far away from it.

Look at the chart in this link: http://truthingold.blogspot.com/2011/04/someone-please-explain-to-my-how-there.html

Only a tiny fraction of global investment money is in gold. When the masses start chasing gold, it will shoot the price to the moon. that's when we'll be in a bubble and its time to get out of gold.

state says

you mean when there are commercials for goldline on fox news and there is a gold buying store in every mall? and there are gold vending machines?

lol goldline on fox news has been on like forever..so i don't really look at that as a signal...I would be looking for signals just around me...so many people don't even understand why gold is the asset to be in right now..when everyone starts to 'get' the reasons and this tsunami of capital starts flowing into gold, it will get overheated.

there will be a bubble, but it is not right now. An excellent quote recently by a smart investor:

"The only gold bubble likely to burst is the bubbling ridicule of gold." - Don Coxe, BMO Financial.