What do you think that, When will the Gold Bubble Burst?

Gold has appreciated so much in the past few years. Since last more than 100 years, gold has never ever appreciated this much. So What is the reason for appreciating Gold this much?

Well, this is because the US Federal Government is printing Trillions of Dollars and pushing it into the circulation. And this newly printed money is diluting the purchasing power of the existing dollars in the economy and this ultimately drives the gold prices higher.

Up to 2007, The Monetary Base of US Federal reserve was US $ 800 Billion and at that time the Gold price was Rs.7000 per 10 grams. But after 2007, The US Government has doubled this monetary base to almost US $ 2 Trillion and thus today in 2009, the Gold price is Rs.15,000 per 10 grams.

In other words, The Gold has not appreciated. But Money is depreciated in comparison to gold. In 1971, President Nixon has removed the gold standard and the US Dollar became currency only. It means that, US Government can print money anytime according to the need of economy and businesses.

The Current Gold Bubble is the result of the printing of literally $ 1.2 Trillion in the economy by federal government. So the Gold price will go high like this until the US Government stops printing money. The Gold Bubble will burst when the US Government will stop printing more money and absorb the already printed money from the Monetary system.

Absorbing the printed dollars from the world economy is the one and only way to burst the gold bubble. Because right now US Dollar is the terribly flowing currency in the world. And right now the liquidity in the monetary system is pushing the gold prices up.

Now, we have to wait and watch that, when will the US Government will absorb the liquidity from the monetary system and that day the gold bubble will burst…!!!