Is gold too rich for your blood?
As Wall Street reels from the US credit downgrade, investors are once again flocking to their traditional safe haven.
The price of the precious metal continues to shatter the record books, flirting with nearly $1,800 per ounce on Wednesday.
In fact, the last few days have represented its biggest rally since the financial crisis in 2008.
But although gold remains popular among disgruntled investors, those who missed the boat are now asking – is it too rich for my blood? Is gold poised for a major correction?
According to Kevin Burrows, the Senior Vice President of CFAL, the yellow metal still holds a great deal of potential , despite the high price tag.
“You must recognize its been in a 10-year pull market where we’ve seen steady increases, so obviously people wish they had got in years ago,” he said. “But if you’re worried about the global financial system, having gold still makes sense. I wouldn’t say take all of your liquid assets and put it in gold, but it certainly has a place.”
These words of wisdom have perhaps never been so apt.
On Monday, the US credit downgrade by Standard & Poor’s caused the Dow Jones to plummet more than 600 points, sparking fears that the superpower was poised for a double-dip recession. The US market stormed back on Tuesday, only to slip yesterday amid uncertainty in the Euro Zone. Meanwhile, the European markets continue to tumble as countries in the region grapple with the sovereign debt crisis.
In other words, for investors, gold has never looked so good.
While Burrows agrees investors should be wary of the price of gold, he points out there are still plenty of individuals who haven’t yet hopped on the bandwagon.
Thus far, the rise has been steady and orderly, rather than a “parabolic move”, he said, which would indicate a crash or severe correction is around the corner.
“We haven’t reached the phase of a full-blown bubble,” Burrows said.
“The point where you get concerned is when everyone is holding it and making money, not when people are still wishing that they had invested.”