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If the price of something has risen by 45.06% in the space of a year, does that mean it is a price bubble?
Not necessarily, but it’s a question worth asking.
Take a look at the chart for gold priced in US dollars below:
Even in the last two months the price has burst through the USD$1,000 level and is now trading comfortably at USD$1,164.
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As Shae noted in yesterday’s 60-Second Market Round Up, “The price of gold has hit record highs as a result of the Reserve Bank of India (RBI) decided to buy 200 tonnes of bullion.”
Today the price of gold has gone a touch higher. This morning it’s trading at USD$1,092.60, or AUD$1,200.66.
So while the Indian central bank buys ‘hard assets’ in the shape of the shiny yellow stuff, the US Federal Reserve remains busily giving away almost free money.
This morning the Fed decided to keep interest rates as they are – close to zero.
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Over the past week or so your editor has been reading a book.
Yes, perhaps contrary to the opinion of some, we can read.
Actually, it’s taken us about two weeks to read it.
You may recall that several weeks ago we admitted not knowing nearly as much as we should about the Great Depression of the 1930s.
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“A mere $400bn went missing in the UK debt-savings boom of 2000-2008. Not to worry…”
SEEMS WE’RE NOT the only ones trying to figure out this week where the last decade’s record consumer borrowing went.
“Where did all the debt go?” asked Bank of England economist Spencer Dale in a speech this Thursday in Exeter. Sadly for US and British households, however, let alone savers and investors, he had fewer answers than even we do here at BullionVault.
“Household debt as a proportion of income increased from 100% to 165% in the 10 years to 2007,” Dale noted of the United Kingdom. “[Yet] this big run up in debt was not used to finance a surge in spending,” he added, as if taking his cue from our Wednesday essay, and scribbling his speech the next morning as the train crawled through Reading.
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You can come out of the shelters now.
Uncle Ben Bernanke has sounded the all clear.
“The recession is very likely over,” he said.
What a trusting lot we are.
The market listened in awe when he said there was no bubble in the US housing market. And they trusted the instincts of the “student of the Great Depression” when he presented his ingenious proposals to prevent the next depression.
Only great minds like Uncle Ben and George W. Bush could have formulated a plan that involved giving billions of dollars to Wall Street firms while simultaneously allowing millions of people to be thrown out of their homes.
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