In principle, holding gold is a form of insurance against war, financial Armageddon, and wholesale currency debasement. And, from the onset of the global financial crisis, the price of gold has often been portrayed as a barometer of global economic insecurity.
So, does the collapse in gold prices - from a peak of $1,900 per ounce in August 2011 to under $1,250 at the beginning of July 2013 - represent a vote of confidence in the global economy?
To say that the gold market displays all of the classic features of a bubble gone bust is to oversimplify.
There is no doubt that gold's heady rise to the peak, from around $350 per ounce in July 2003, had investors drooling. The price would rise today because everyone had become convinced that it would rise even further tomorrow.
Text: Kenneth Rogoff, Project Syndicate (via Business Standard)
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