Gold Price Bubble?
Gold’s near vertical rise to new records is starting to puzzle many investors who are trying to square arguments fuelling its rise with seemingly conflicting moves in risky assets like equities or inflation-protected securities. This is not the stuff of a traditional gold rally, some argue, and suggests momentum alone rather than any watertight rationale is driving gold’s recent surge. The commonest answer to why gold has been rising has been that the dollar has been weakening, making the metal, which is sold in dollars, cheaper in other currencies and acting as a hedge for dollar investors. But the strong inverse correlation between the two is fairly recent. As little as six months ago it was not there. Even closer than that — in early October and early November — there were periods when the two failed to march in lockstep at all. So there must be something else at work at well, given that spot gold hit another record high, above US$1,226 (RM4,168) an ounce, yesterday. That w...