Gold rush - stay away

Warren Buffet said, 'when every one is fearful be greedy and when every one is greedy be fearful'. I firmly believe in the veracity of his claim.

Gold has been the talk of the town for some time now, every Tom Dick and Harry has been following the ups and downs of the yellow metal in the hopes of making a quick buck on the side. Even my grocery vendor is not untouched by this and this scares the hell out of me.

Let me tell you why; not a long time back every body you knew was an investor in the stock market and why not, markets (especially in India) had a dream run from index of 2700 to 21000. Some might argue that if the markets are booming then why not take advantage. I agree that if you can spot an opportunity early on you must exploit it, but the catch is the word 'early'. Most common folks I knew were swept away by the media hype the booming markets got, but these common folks were too late in spotting the opportunity in the markets. Most of them realised it only when the markets were at 18000-19000 levels. Our dear broking houses were no help either. The biggest in the business were seen advising clients to invest even at 19000 levels. Brokers said that their Research (I no longer know what that means in the finance industry) indicated a new level for the markets at 30000. What happened next is well documented. The markets the world over crashed and our Friend the retail investor, the common man, tom, dick as well as harry lost their life's savings.

I have an eerie feeling that the same asset bubble is being created in Gold. Other market opportunities like shares and crude have dried up. To add to the woes the dollar is not doing too great either. So this time all the money is chasing the only conceivable reserve of value GOLD. Gold in itself has no value but is only worth as much as the others value it. Implying that it has no intrinsic value. Yet people are rushing in to buy it at such high prices hoping that it will be more valuable for some one else in future. In short the Bigger Fool theory is working at its best.

Gold prices are moving up like crude oil prices have in the past, FIIs, hedge funds and sovereign funds are buying gold futures left right and centre. But remember, as soon as they make substantial gains they would start dumping the futures and the prices would crash. That is what happened with crude...right. My advice to all individual investors is that stay away from gold, at these levels. This is another asset bubble in the making and would burst shortly.

Instead do some homework, identify good stock and buy them at rock bottom prices, you could possibly land up with multibaggers.