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Commentary

Gold is a Reasonable Investment: GW

George Washington writes in at Naked Capitalism on whether Gold is a Reasonable Investment.

It’s an excellent compendium of links, articles and opinion on Gold. Some points:

  • Gold, considered a hedge against inflation, does well in deflationary environments too. And if the environment involves devaluing currencies it goes up – like the purchasing power of gold did during the Great Depression and in the last 10 years.
  • There’s some evidence that while gold loses some sheen in the early part of a deflationary period, it climbs in the later part; the Yen-Gold chart is provided.
  • Short term interest rates near 0% are good for gold.
  • Government distrust – of the type happening in the US (we in India have never trusted our governments) – is positive for Gold.
  • It’s the currency-of-last-resort, so panics induce buying.
  • China will buy dips and effectively put a floor on gold prices.

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