As it continually hits new records, it’s no secret that gold and related exchange traded funds (ETFs) are the trend right now. Many stories on the subject mention the metal’s allure as a "safe haven" in shaky markets, but not everyone agrees.
John Handbury for The Market Oracle is a voice of dissent. He contends that investors aren’t buying it for safety – they’re buying it to make a profit. The metal is subject to the same principles of supply and demand like other commodities, but the supply side differs greatly from oil.
There is enough gold to last thousands of years. There’s no cartel that metes gold to the markets to maintain prices. And gold doesn’t often get used up; it merely waits around until it’s resold.
Handbury says that eventually gold prices will begin to fall and the hoarding that’s taking place now will reverse itself. Those who are bullish on gold will stand by as the price falls to $900, then $800 and perhaps $700, until they realize the fortune is not to be had this time around.