By Brett Arends
MarketWatch BOSTON-The gold is in a bubble. Anyone will tell you. I have been saying that gold was a - oh! - U.S. $ 500 per ounce.
But it is a very peculiar kind of bubble. It is the only one I found where so few people seem to have the asset.
During the dotcom bubble, one was a lot of people with technology stocks. Taxi drivers told one of the dotcom they had.
During the housing bubble, one was met with people ordinary people who swapped their homes for other more expensive using indexed rate mortgages, buying new condos they planned to sell quickly to bag a profit and collect their "capital" dummy through mortgage refinancing.
But who is really gold? I hear constantly about the gold bubble, but every time I wonder if anyone has any gold, they say, "no, no, oh no, it's a bubble." Such a huge bubble.
If gold falls prey to a "bubble" does not seem to have reached its peak yet. Indeed, it seems that would be to get into large phase explosion.
Will this happen? Is the question of all. But there are reasons to believe he would. Gold enjoys some of the key features needed for a bubble, even the phrase "this time is different."
Central banks around the world are printing more dollars, euros, pounds and yen. The gold coin can simply be less pathetic than all others. Banks can not print more gold, so you should probably raise its price when other currencies fall.
And then there's China. In its rise to superpower status, the Asian giant will have to diversify their currency reserves. Right now the Chinese are too dependent on the dollar. Have little amount of gold. If you change even a little, the price will become stratospheric.
But there are problems with the gold that makes it very difficult to buy with confidence. Gold is volatile. Nobody knows what it's worth. Constantly ask the fans of the yellow metal on a sensible pricing, and can not say. And you can forget all superstition. Despite what they say the true devotees of the metal, gold is not money more "real" or "real" than any other. As does not generate any income, the gold market is in fact a pyramid scheme fraud. Their income comes entirely from the next buyer in line.
(And know that many of those who now boast of have "been gold since 2001" in fact have been in possession for several decades more than that. In the decades of eighty to ninety lost their shirts when gold collapsed).
If you still want to bet on a hobby, has a variety of options.
One is to buy in stages to go little by little, so to speak. If you buy $ 10,000 in gold, and is terrified of doing the day before it reaches its maximum, then buy in tranches of U.S. $ 1,000. (I would suggest that this seems a good idea now, because gold has risen a lot lately. The dollar may be pronounced by a leap). A second option is to buy shares of specialized mining of gold, whose price has not risen as much as the price of the metal. John Hathaway, manager of the Tocqueville Gold mutual fund, said many large shares of gold mining, in particular, are cheap on the precious metal.
A third strategy is to buy call options at prices above the market ("out of the money" call options) in the iShares Gold Trust, an exchange-traded fund that has a tenth of an ounce of gold per share. This is a particularly high risk bet that gold will perform vertical quickly. The options allow you to win big in a hobby, while risking a small fee.
The iShares Gold Trust trades around U.S. $ 150 per share. Purchase options at $ 200, valid until January 2013, cost only U.S. $ 6.52 per share. If gold exceeds U.S. $ 2,065 per ounce this time, earn the equivalent of U.S. $ 206.52 in the GLD and have a profit. The disadvantage is that if there is a boom, you lose your bet. But in this case your risk is limited to U.S. $ 6.52 per share.
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