Will Commodities Be The Next Economic Bubble?

Traditionally, the price of commodities fluctuates with public confidence in the economy. When the economy is considered healthy and robust, commodities generally only rise with the rate of inflation, if at all. However, in times when public confidence in the economy is low, commodities have traditionally risen.

We have now experienced an extensive period of economic distress, both with the United States, and internationally. Most major economies have suffered, many European economies, such as Ireland, Portugal and Greece, have shown signs of peril, and the unemployment rate remains at disturbingly high numbers. Not surprisingly, both the price of metals as well as the price of oil have risen steadily. In fact, it seems that gold has been steadily rising in price, and is at a record high of over $1400 per ounce. The price of oil has risen to one of its highest prices during a period when there was neither an interruption of supply, or some sort of threat, now exceeding $90 per barrel. The average price of a gallon of unleaded gas in the United States now exceeds $3.00 per gallon, and in parts of the country, are far higher than that. As much as that concerns Americans, that price is still a "bargain" when one compares it the price elsewhere in the world, where in many places the price exceeds the equivalent of $8.00 per gallon.

It should not surprise anyone that the "grifters" (defined by Matt Taiibbi in his book, Griftopia, as those that take advantage of the misfortune of the majority) have seized the moment, and are aggressively pursuing investment in gold, that they describe as a secure investment, and oil futures. Those who have followed commodities understand that he commodity market is not nearly as liquid a market as stocks, and that prices fluctuate, sometimes by dramatic amounts. Have their been people who have made large profits by purchasing gold? Absolutely, especially if they bought it a few years ago, and have sold it recently. However, like most investments, there is no profits taken unless and until you sell the investment. Will gold continue to rise, as the "grifters" are promoting? perhaps yes and perhaps no, but at some time, it will level off, and if history is any guide, may drop in value dramatically. While some become elated when oil prices rise, because they claim it shows an upturn in business, I believe that it is more often another "grifter" scenario.

Will commodities at some point become the next bubble casualty? No one knows for sure, but very few things go up forever. My advice - - investor beware; if it looks too good to be true, it probably is not.


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