Gold value continue to rise, Warren Buffet is skeptical

Published: 27 February, 2012 14:21

Buffet Warren

The price of gold is constantly rising

Despite the small dips during the latest period of time, the price of gold is currently on its way of reaching new heights. And there are many analysts who sees gold as a safe
investment in troubled times. They expect the time to buy and the peaks to be high for some time, as long as the actual interest rate is as low as it is.

The summer peak

In the summer of 2011 the gold was priced at record levels. During the fall it was to slow down, however, during the first months of 2012 the price of gold had gone up by 14%, and on the 23rd of February it landed at $1,784 per troy ounce.
The development is expected according to most analysts. In times of financial turmoil, gold has a tendency to increase in value. This applies, not at least, as long as the interest rates are low enough, which they are at present. In many parts of the world the real interest rate is even negative, when inflation is higher than the market rate.

Buffet critical

One who does not believe in a persistence gold price is Warren Buffet. He cautions about saving assets in the precious commodity. It has a large weakness as the placement does not lead to any production. Unlike buying agricultural land, or shares of a company, gold is just nothing other than gold. The weight of a single goldbar will always remain the same. It is an unproductive product to be, and means that this is comparable to the tulip bulbs that were so sought out in the market during the 1600s.

Other fears

The investment of gold lies in the hope that someone else, at a later stage, will pay high for this unproductive commodity. Buffet believes that when gold is bought, it is not an active placement of capital. These purchases are rather the result of concern; in this specific case, the fear of the fact that the value of a specific currency might continue to decrease. The gold buyer is likely to be hoping that more people would worry about the unstable development on the currency market, and that the interest for gold will thereby increase even more.

There are also people who buys gold just because other people of buying gold, and just for the sake of buying.
As the value of gold continue to increase, it will generate an interest to jump in on the upgoing trend. This means that the price will rise further, but only to a certain level. Eventually, the bubble pops and the gold price would fall.

Investing in gold

As with all investments it’s about finding the right moment to buy – and not to forget – the right moment to sell your gold. Here we have also gathered some of the reasons why you may want to consider to invest in gold.

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