Is the Gold Bubble About to Burst? – Investors Beware of Gold Investment Scams

Some experts are saying that gold will be the next bubble to burst. They may have a point. According to The Street, before the financial crisis, in January 2007, gold was priced at $650 per ounce. The average price of gold had fluctuated between $300 and $500 per ounce during the 10 years prior. Today, the price of gold was approximately $1352 per ounce. That is over 100% growth since 2007.

Is gold overpriced? I have no idea. What I do know is that investors are obviously buying a lot of gold-linked investments and based on my experience representing investors who have been defrauded, I predict that these investments are being mis-sold to investors. I am sure that sales agents who are earning a healthy commission, are telling investors that the returns on gold are guaranteed or that the investments carry very low risk. That is simply not true.

While it is true that historically, the price of gold has gone up in bad economic times, that does not mean that gold currently is not overpriced. Consider the following comparisons of the price of gold per ounce to prior recessions in U.S. history:

Historical Recessions
January 1980- November 1982: The price of gold appears to have declined from $655 per ounce in 1980 to $376 per ounce in 1982.

July 1990- March 1991: The price of gold appears to have fluctuated between $383.51 and $362.11 per ounce.

November 2000-October 2001: The price of gold was approximately $279.11 per ounce in 2000 and $271.04 per ounce in 2001.

Judging by history, it seems to be just a matter of time before the price of gold falls significantly from its current ultra-high values and investors will be left holding the bag.

Keep this general rule in mind: Rewards sell investments, not risks.

In other words, if your financial advisor tells you to invest in gold and focuses on the rewards but minimizes the risks, you need to ask more questions and probably get a second opinion.

If you believe that you have been a victim of bad financial advice or worse, financial fraud involving gold investments, feel free to contact us for a free consultation.