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In just five years time, gold has tripled in price, hovering near and above record highs throughout the month of October. Following a slight correction in November, the metal is on the move once again, rallying on European debt crisis concerns. When you add to that the U.S. dollar's debasement by the Fed's stimulus measures, the rush to gold is certainly understandable.
And if you factor in inflation, it doesn't even look all that expensive -- gold would still have to rise by a factor of 6 for reserves to fully back the greenback.
But is this kind of growth really sustainable? According to Financial Times' James Mackintosh, probably not, likening gold's five-year growth spurt to the market run-up leading to October 1929 -- and we all know what happened then.
For one, there simply isn't a whole lot of demand for the pricey metal in industry. And even if jewelry sales hold strong, it's only a tiny piece of the overall picture -- in Mackintosh's estimation, gold won't be able to keep up the pace without a lot of inflow from the "hoarding," or investing, faction.
Assuming this theory is correct, investors may want to ready themselves for gold's run to come to an end. But exactly when that will be is anyone's guess -- that's the trouble with bubbles. It could be next week, next month, or even next year.
Mackintosh reminds us that "in 1979, after gold had enjoyed a run-up close to the past five years' gains, it still had time to go truly ballistic, with the price more than doubling once again before the bubble burst."
Short of a crystal ball, there's no sure-fire way to know when to hold and when to fold. But seeing what the insiders think can at least clue you in on the stocks to watch.
A company's management team privy to intel the rest of us can't get our hands on -- so if they're buying up their employer's stock, it's a pretty good sign of things to come.
We located four gold and materials stocks that have seen insider buying over the past few weeks -- will you be gilding your portfolio with them? (Click here to access free, interactive tools to analyze these ideas.)
Insider trading activity sourced from AOL Money. The list has been sorted alphabetically.
|Alcoa (NYSE: AA )||Aluminum||James Owens (Director) bought $127.3K worth of stock on 10/20|
|Metalline Mining (NYSE: MMG )||Industrial Metals & Minerals||Duncan Hsia (Director) and Gregory Hahn (CEO) collectively bought $18,023 worth of stock between 10/14-10/27|
|Noranda Aluminum Holding (NYSE: NOR )||Aluminum||Kyle Lorentzen (COO), Richard Evans (Director) and Layle Smith (CEO) collectively bought $158,752 worth of stock between 9/14-11/8|
|Vista Gold (NYSE: VGZ )||Gold||William Eppler (Director) bought $92,134 worth of stock between 9/1-9/14|
Interactive Chart: Click on the time line to compare the performance of Alcoa, Metalline Mining and Vista Gold Corp.
Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.