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What You Won't Find at the Center of the Gold 'Bubble'

Nicholas Colas and Beth Reed|ConvergEx Group Strategists
Friday, 1 Oct 2010 | 1:24 PM ET

We recently did some firsthand investigation into the likelihood of a gold/silver bubble by heading straight to a source of the would-be bubble—the precious metals mecca that is New York City’s 47th Street Diamond District. (Track Gold here)

Gold coins and bar
Gazimal | Iconica | Getty Images
Gold coins and bar

Surprisingly, absent from our findings was any sort of bubble-like human behavior.

Yes, the booming asset prices are there, but just as critical to any bubble is the bad behavior that launches it into the stratosphere.

Think subprime jumbo mortgages sold to part-time hairdressers or 10x oversubscribed IPOs for profitless dotcoms.

We tried every way possible to get salespeople to lure us into unwise, non-economic precious metals investments, but with no luck. Yes, we know this is “anecdote” rather than “data.” But the utter absence of heavy-duty hustling and cajoling in what precious metal bears call a bubble leads to a common-sense conclusion: this is no bubble.

Not yet, anyway.

See the attached full report for additional details.


Nicholas Colas and Beth Reed are Strategists at ConvergEx Group, a leading technology company providing products and services to asset managers and financial intermediaries globally. Its products and services span the investment life cycle and center on the development, marketing and servicing of technology-based solutions that enable clients to achieve improved investment results through operational and workflow efficiencies, execution and analytical tools, and highly personalized service.

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