Cycle investing is all about buying an asset when it is undervalued, staying disciplined and not sell when the price rises, then having the fortitude to sell when you feel the asset is overvalued. See every asset goes in cycles. It cannot raise forever- even gold. If the price of gold rose up forever, you would soon have enough to where one ounce can buy all the real estate in the world. So even though gold is rising in price (and value now) - it is currently at about $1660 an ounce- at some point the price and value will inevitably have to come down.
So how do we know if gold is undervalued or overvalued at this time?
There are two camps of thought on this. There is one camp that says that gold is in a bubble, it is overvalued, and you should avoid it at all cost. Many liberals and progressives fall in this camp. On the other side is the camp that feels that gold is extremely undervalued and now is the time to buy.
To best determine who is right, a good investor does a great deal of research and analyst. One source of reliable information is the CPM Group's Annual Gold Yearbook. Below are two graphs from the latest edition.
This first graph shows that since 1990 the global financial assets has risen in every asset class from stocks (represented as gray in the chart as equities), government debt securities(T-Notes, etc), private debt securities, and bank deposits.
This chart shows that despite the rise of the gold price every year since 1990, gold is still only about 0.7 as a percent of global financial assets. It can be concluded by looking at the charts that since 199 the world's financial assets have risen- even gold. However, gold as a percentage of global financial assets is still very low. A bubble is when the price of an asset is overvalued - much like real estate prices in the United States were overvalued a few years ago and tech stocks were overvalued in the early 2000's. In the case today, the price of gold is is increasing but compared to the percentage of the world's assets it is not rising tremendously and is still a small amount. If anything,the world is awash with too much paper assets and not enough gold assets.