Speculative demand from investors has pushed the gold market into a “bubble that is poised to burst” after prices surged to a nominal record this year, Wells Fargo & Co. said.
“We have seen the economic damage” of past bubbles and “feel compelled to ring the warning bells,” Wells Fargo analysts led by Dean Junkans said in a report dated Monday and e-mailed Tuesday.
Gold futures have advanced 26 percent this year, following 10 straight annual gains. The price reached a nominal record of $1,817.60 an ounce Aug. 11 as European and U.S. sovereign debt woes escalated.
Gold futures for December delivery rose $27, or 1.5 percent, to close at $1,785 Tuesday, the highest settlement ever, on the Comex in New York.
“There could be substantial risk to gold once the fear that the world is coming to an end subsides,” Junkans said in a telephone interview from Minneapolis. “We are worried about the downward risk.”
Holdings in exchange-traded products backed by gold rose to a record 2,217 tons Aug. 8, Bloomberg data show. CME Group Inc. said volume in Comex gold futures and options rose Aug. 9 to a record 504,368 contracts.
George Soros and Eric Min dich cut their holdings in the SPDR Gold Trust, an exchange-traded fund, in the second quarter as prices rallied.
