Fears of asset bubble push up gold prices.
By Daniel at 3 December, 2009, 6:16 pm
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Check this one out:
globeinvestor.com/servlet/story/GAM.20091203.RGOLD03ART1942/GIStory/
Gold pile-on stokes fear of asset bubble
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The stunning gold rally, however, is now stirring fears of a potential asset bubble. A senior official at China’s central bank warned of such a possibility yesterday.
“We must keep in mind the long-term effects when considering what to use as our reserves,” Hu Xiaolian, a vice-governor at the People’s Bank of China said, when asked if China had plans to increases its gold holdings to diversify its foreign exchange reserves away from U.S. dollars.
“We must watch out for bubbles forming on certain assets, and be careful in those areas,” Mr. Hu said.
Speculative “hot money” from hedge funds and other investors taking a long position on the gold price has also hit record levels in recent weeks, suggesting the commodity’s rapid surge could evaporate just as quickly.
Sheryl Purdy, vice-president at Leede Financial Markets Inc. in Calgary, is telling her clients to resist buying gold, gold mining companies or gold exchange-traded funds at these prices.
“For me, this is a strong sell signal. For the clients I have holding gold positions, I’ve already advised them to lock in [profits]. I’m not buying at this point,” she said.
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