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If the price of gold was left to a physical supply/demand measure, for industrial and jewelry utilization, the price may not be much over $400.00 an ounce.
Which probably means gold has gone up on 100% pure speculation.
When gold becomes a mania and is tipped by every “expert” Tom, Dick and Harry on TV, it becomes similar to a chain letter (which is illegal) and it can be hyped up until the most gullible participants come in at the end of a long period of hype, because they feel they have missed out on a quick profit.
As with chain letters, the ones who hold on the longest and come in the end lose out and the ones in at the beginning and have sold out, make most of the profits.
Since ETFs in gold came on stream such as GLD, it has become far easier for speculators to trade the yellow metal. With the help of expert media hype and sensationalism, gold continues to climb to new heights with each fear-mongering headline.
What makes gold special are the myths that surround the glittering metal as a safe haven in times of currency devaluation fears.
However, those myths may have held some credibility before Forex markets. Currencies can be traded 24 hours a day, so if investors have fear about one currency they can easily swap out of it with an ETF traded on the stock market or a currency commodity traded on the Chicago Mercantile Exchange.
The mania for gold and other “precious ” metal commodities will continue as long as speculators can be sucked into the be-lie-f the metals have some special mystical value that can save them from Armageddon.
Eventually, all bubbles pop and when they do, a few go home with new trophy homes and billions of dollars in the bank and a lot go broke.
Let the speculative buyers be-aware. All that glitters may cost them their life savings if their golden idols have foundations of sand, which can sink at any time the wind (sentiment) blows in another direction.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Is Gold at $1000 Overpriced?