txpenguin

Gold: Not an Effective Hedge Against Inflation

In 1913 when the Federal Reserve was created by Congress, gold commanded a price of $20.67 per ounce. If one assumes a current gold price of $850 per ounce, that works out to slightly less than a 4% per year return over the last 95 years. That is a lot better than stuffing paper money in a mattress. Gold might or might not be a good investment at any given moment, but it has functioned very well as a store of value over the years. When its price falls to its cost of production, as it did in 1998 at around $280 per ounce, it is a good buy.