Gold has reached bubble territory and is “poised to burst,” according to a recent report from Wells Fargo.
Analysts at the firm, led by Dean Junkans, wrote that “We have seen the economic damage” of previous bubbles and “feel compelled to ring the warning bells.
Well Fargo went on to say that “There could be substantial risk to gold once the fear that the world is coming to an end subsides. We are worried about the downward risk.”
Although the recent strength in gold could clearly justify caution for gold invstors, the firm did not back up its call with hard evidence. Nor did it provide a target price for the yellow metal, or a timeframe for when gold would reach such a level.
Gold still represents only about 1% of global financial assets,well below historical norms. Secondly, sentiment toward the yellow metal remains below levels often associated with intermediate term tops in the gold price. Third, Junkans did not discuss the fundamental factors behind gold’s ascent, and why he feels they no longer appear favorable for the yellow metal.
Furthermore, the firm’s track record on gold should be considered before giving some credibility to its prediction. In this case, GoldAlert has never before come across a report by Mr. Junkans. Therefore, we are unsure if this week is even the first time he has made a call for a gold bubble to burst, or if he has been bullish or bearish in the past.