When it becomes difficult to find reporting about the gold price like this commentary($) by Mark Williams in the Financial Times (alternatively, here), you’ll know that we’re near the end of the secular bull market that is now just ten years old, but, until that time, the prevalence of this type of thinking toward the metal – the fundamental misunderstanding of the historical nature of money and hubris on a grand scale regarding the monetary system that is now in place (which, in itself, is both remarkable and naive given what’s happened over the last few years) – then, you know that gold prices have much higher yet to go.

Few silver linings when gold bubble bursts

Beware of bubbles. Tulips, the dotcom boom and pre-credit crunch real estate have a lot in common; they are assets that were in vogue, became overbought and eventually fell to earth. And now it’s gold.

Historically, two-thirds of gold demand comes from the jewellery industry and from countries like India and China. The remaining demand is generated by investors, manufacturing and the dental industry. But over the last four years, gold has staged a spectacular price rise and won many new investors. Everyone from hedge funds to individuals has jumped in, seeing gold as a way to improve portfolio diversification. Today portfolios often allocate 5 per cent or more to gold. A decade ago such an allocation in sound investment circles would have been heresy.

Well, tick off “List of prior asset bubbles” for this anti-gold rant, but, for some reason, this piece is missing the most important argument against the metal that is now an industry standard – gold earns no interest and pays no dividend.

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Everyone’s talking about a “gold bubble” again and how its bursting will wreak havoc on those foolish investors who succumbed to the lure of tulips, dotcom stocks, housing, and now … a shiny yellow metal. But, the funny thing is, this latest bubble seems to keep bursting and re-inflating – unlike other bubbles that stay burst – and the most recent price increases still haven’t surpassed that seen either two years ago or four years ago.

An odd “bubble” indeed and the reason why, here, it’s called the “Recurring Gold Bubble”.