Bubbles have hit tech stocks and U.S. home prices in recent years - are gold and Treasury bonds next?
Here’s a rundown of a few asset classes that some experts fear are currently in bubble mode:
Gold. Gold has been trading at record highs recently, hitting about $1,230 an ounce on Friday in New York.
That’s way up from the roughly $720 an ounce the metal fetched in late 2008 - and especially from the $280 or so that gold sold for a decade ago.
Precious metals have been rallying amid fears that heavy borrowing by Uncle Sam will spark inflation, weakening the U.S. dollar’s value vs. gold.
But economist Nariman Behravesh of Lexington-based IHS Global Insight thinks the metal is caught up in a bubble.
“There’s no inflation, the dollar is not that weak and given how soft U.S. economic growth is, it’s hard to justify gold at these prices,” he said.
U.S. Treasury bonds. Yields on the benchmark 10-year U.S. Treasury bond have tumbled from 5.32 percent in June 2007 to as low as 2.53 percent as of last Friday as the U.S. economy stumbles.
A soft economy lowers interest rates by reducing loan demand and minimizing inflation fears.
But low rates have created a rally in bond prices, which move in the opposite direction of yields.
Oil. Oil prices doubled over the past 18 months as investors theorized that a world economic recovery would increase demand.
Oil soared from less than $40 a barrel in early 2009 to more than $80 per barrel in recent weeks.
However, prices have since dropped back, with oil for September delivery settling at $73.46 a barrel Friday in New York.
