Good question. If there were an easy answer then we would all be billionaires. Bill Fleckenstein reflects on the subject:
There has been an endless amount of chatter about the price of gold being too high (it's not) and perhaps representing a bubble. It also seems that fair amounts of ink and windage have been wasted on worries about the gold trade being "too crowded."
In my daily column on my own Web site, on Sept. 17, I noted a remark by Dennis Gartman of The Gartman Letter that the gold market was "terribly, egregiously, preposterously, shockingly overpopulated."
That day, gold closed at $1,014 an ounce. Here we are, about two months later, and gold is more than 10% higher.
In a bull market, worrying about an idea being too crowded with like-minded investors is not very productive. More likely than not, it will help to eliminate you from a winning position.
At some point, when the gold market is finally reaching a top, it will, in fact, be too crowded. But we're almost nine years into this bull market in gold, and to me it seems that there are more people of the mind that "the trade" is too crowded than there are who say it isn't.
I wish I knew where gold is headed. But I can give one bit of insight into the recent increases in the price of both gold and silver. In our research on the precious metals, we found that their prices correlate closely with measures of expected future inflation. It is not surprising, given the Federal Reserve's loose monetary policy, that investors would expect the inflation rate to increase.