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Rising gold prices may not last for long

While many analysts have forecast that gold prices will eventually hit $3,000 an ounce, after hitting a record $1,800/ounce last week, economic experts at Kansas State University have warned that it is only a matter of time before the bubble bursts.

business Updated: Aug 21, 2011 21:23 IST

While many analysts have forecast that gold prices will eventually hit $3,000 an ounce, after hitting a record $1,800/ounce last week, economic experts at Kansas State University have warned that it is only a matter of time before the bubble bursts.

The huge federal deficit and a deteriorating economy have made many investors fearful of the US economy entering a period of stagnation, driving stock prices downward, said Lloyd Thomas, an economics professor at Kansas State University.

Thomas compared his gold prediction to the housing market. “People were lulled into thinking housing prices could never fall, but they fell more than 30% in most American cities. The same thing could happen to gold,” he said. “In the last 10 years it’s gone up 17% a year, but the price of things we purchase has only gone up 3% a year. That’s unsustainable. It’s my own opinion that gold prices will collapse — I just don't know when.”