Letters to the Editor

Get ready for next bubble to burst -- in gold market

As many of us have experienced the reality of the real estate bubble and eventual bust, I wanted to inform your readers of the next bubble that we are experiencing. The current bubble forming is the gold market. Prices have reached an all time high of about $1,300 an ounce. Gold has produced an annual return of 23 percent in the past five years. To continue that analysis, the price of gold has a 17 percent annual return in the last 10 years. In 1975, the U.S. eliminated the gold standard, this process started in 1970 and the price of gold was $36 per ounce. By 1976, the price increased to $126 per ounce. From 1976 until 2000, the rate of return on gold was 2.98 percent, very much in line with inflation. Even if you used the price from 2005, the rate of return for the past 30 years would have been 4.3 percent. If history is an indication of the future, the price of gold should be around $575 per ounce. So is there an explanation in the jump in price? Money has flowed into the gold market at unprecedented levels. This is the same cause of the real estate bubble. I cannot predict when the bubble will burst or how high the price will continue to grow. But not being aware of the current situation could cause huge losses in the future. Grant Dybdahl Bluffton

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