I have been thinking for some time that the gold rally is nearing its end. If you have some of your portfolio in gold and have enjoyed huge returns over the last couple of years, I think it is time to cash in and buy stocks. "Bulls make money, bears make money, but pigs get slaughtered."
Don't be a pig in the gold market.
The following article about Fed Chairman Bernanke's comments on gold prices reminds me of Alan Greenspan's "irrational exuberance" comments at the height of the 1990's tech bubble.
Bernanke Puzzled by Gold Rally
By Jon Hilsenrath
Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk.
In this case, it might instead be a risk against risk broadly. Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes. Yields on Treasury bonds tend to rise when investors worry about inflation, but those yields have been falling recently. Inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low. And other commodity prices are falling. Gold is breaking records, but copper prices are down 17% so far this year.
“I don’t fully understand movements in the gold price,” Mr. Bernanke admitted. But he suggested it might be another example of investors fleeing risky assets and flocking to assets that are perceived as less risky, not only Treasury bonds, but also ones like gold.
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