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Because other investors do.
by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 07:09:07 AM EST
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But that's worse than generating a housing bubble.  At least there is some underlying need for new houses (to replace old and cater for increasing population/changing needs) - which, while it can be suppressed at times of recession - will nevertheless gradually eat away at any market overhang when the level of building goes below long term needs.  

No one is "consuming" gold, in the sense of making it disappear, and new stuff is being mined all the time.  There is a limit to how much gold even the glitterati can wear.  So how can a rapid and sustained increase in gold prices not be a bubble - especially if some dealers are "selling" gold they don't actually have?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Nov 26th, 2009 at 07:25:21 AM EST
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Gold is special. It glints just so.
by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 07:36:07 AM EST
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Frank Schnittger:
So how can a rapid and sustained increase in gold prices not be a bubble?

It is a bubble. That's what it's for.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 26th, 2009 at 07:57:10 AM EST
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