The fiscal and monetary stimulus programs established around the world create the risk of fresh bubbles, according to hedge fund icon George Soros.
And gold could turn into the biggest bubble of all, he recently told reporters.
Countries have cut taxes and interest rates and boosted spending in an effort to pull their economies out of vicious recessions.
While those stimulus actions were necessary, they have brought danger, Soros says.
“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment,” Soros said, according to the London Telegraph.
“The ultimate asset bubble is gold."
Nevertheless, the famed speculator recently more than doubled his position in a gold fund, the SPDR Gold Trust.
Concern about inflation and a weakening dollar sent gold to a record high of about $1,225 an ounce in November. The precious metal’s price has slipped 11.3 percent since then.
But additional government stimulus could send it right back up, Soros says. He says government and central banks are caught between a rock and hard place.
That’s because if they don’t tighten policy soon, asset bubbles could inflate wildly. But if they exit their stimulus too soon, it will be difficult for economies to rebound.
Alan Heap, an analyst at Citigroup Investment Research, also sees gold as a bubble. He forecast in a report that the precious metal will fall to $820 by 2014, TheStreet.com reports.
Speculators are losing interest, as the dollar rebounds, he says.
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