Saturday, June 29, 2013

The curious case of GOLD - A Gold bubble?

Gold price has dropped significantly the past few months hitting a low of $1180 before recovering back to $1235. Gold price was at a high of $1837 in 2011. That is a 33% drop till now.

The above shows a 20yr chart of Gold. The recent drop is the worst in 20 years. Back home in Singapore, if you notice, there were already signs that Gold had formed a bubble and a crash is coming. How do i know?

The answer lies with more and more people without financial knowledge are investing in Gold. In Singapore, we saw an increase in the number of  firms who promise a guaranteed return if you invest with them. These firms typically use Gold as a luring point and attract people to put their money with them. As Gold is a rather safe asset and a hedge for inflation, nobody thought that Gold price will go down. The marketing point was that as long as there is inflation and prices are going up every where, then Gold price would go up also.

Before the recent huge fall in Gold prices, some of these firms promising a guaranteed return on Gold investment shut down and the owner disappeared. This left investors stranded and they lost all their money. Examples of 2 such companies in Singapore are Genneva Gold and The Gold Guarantee. With cases like this happening, it gives us a strong hint that Gold prices are at unsustainable levels  and the bubble might burst soon.

Watch this video to find out more on the recent Gold scam in Singapore by The Gold Guarantee:


Family losing close to a million in the Gold scam? It is really happening. 
You'll realise some investors are old people and most likely they do not know anything about Gold. Its quite saddening to see how people lost all their savings and money to firms like this. It is important to have knowledge and educate yourself on the financial instruments before investing. You'll save yourself from all these scams. 

Then the question is why would people invest their hard earned money with these institutions? Most likely is due to greed of having higher returns. These institutions can promise a guaranteed return of more then 10%p.a. In the first year you may get your returns as promised but the next following year, they may disappear along with all your money. 

The next bubble? Maybe housing bubble in Singapore and some parts of Asia. No one knows for sure but i do know that more and more firms are into property investments similar to the Gold case. This is something to be aware of. These firms are promising 12% return PA investing in properties. Watch out for similar scams like this. 


  1. It is always so easy to blame other people for our troubles.

    Take responsibility for our own investment decisions. If we choose to trust the research and recommendations made by others, well, we have to take responsibility for making such a decision.

    We have to accept the consequences of our choices, be they good or bad.

    1. Hi AK71,

      Yup, we need to take responsibility for the choices we make and learn from the bad ones. All these scams can be avoided if we think rationally. If something is too good to be true then most likely it is.