1 - Gold should be the equivalent value of a good suit. At current levels gold is worth more than a good suit and is therefore overvalued. 2 - When you're cab driver is telling you about gold you know it's in a bubble. 3 - Gold has hit record highs, therefore it's in a bubble. 4 - Get out of gold. It's the contrarian thing to do. 5 - There are too many speculators in gold. It's all speculative hype.
My retorts:
1 - Who says gold should be worth the equivalent of a good suit? Gold is worth whatever it's worth. For many years gold was worth less than a "good suit". It may be worth 5 good suits in the future. Big deal. Suits schmoots. 2 - I've never heard this from cab driver, bus driver, shop assistant or any regular person. If I mention gold investment people look at me like I'm speaking a foreign language. The average investor may know about gold, but the average non-investor is more likely to remember what they ate for dinner on the first day of last month than what the spot price of gold is. 3 - If I based my decisions on buying stuff simply because the price was higher than it was one month ago, there wouldn't be many things I could buy. 4 - I've never understood contrarianism simply for the sake of contrarianism. Sure there is a good argument for having too many people on the one side of the boat, but I'd prefer to analyse the fundamentals before making knee jerk contrarian plays on anything. Just because a bunch of people are on the same side of something, it doesn't make them wrong. If most people believe the world's financial system is unhealthy does it mean they are wrong and that one should take a contrarian stance? 5 - There are speculators in everything when there is money to be made. I'm sure they account for a decent portion of the gold market, but I believe the core foundation of gold holdings are the investors.
At the end of the day I think it depends what you believe in. Financial markets are about confidence, and gold is the inverse of this as it represents lack of confidence in something. Confidence is linked to trust, and trust is not built overnight. It takes time to restore trust, and sometimes it can never be fully restored. Unfortunately governments and fiat have violated the trust of honest people and treated them like playthings for too long. People will wake up and break the cycle.
