Sigmund

Gold Loses Its Shine

During periods of rampant increases in the monetary base, gold tends to increase in price. Thus, the market tends to view gold as a hedge against potential general price increases. Viewed another way, the market sees gold as vehicle to be used to preserve purchasing power. Other commodities and securities can be viewed the same way. As a commodity, gold uses are largely limited to electronics and jewelry. In the current situation it appears to me that every portfolio should have a large percentage dedictaed to investments that provide for the preservation of purchasing power. Price charts that are equilibrated in gold are very interesting. I would be inclined to track and velocity of the monetary base and the rate of change in excess reserves. The price declines that have been recently incurred are more a result of liquidations to delever. The process in force at this time is that of repairing balance sheets. So, it is my view that every safety deposit box should have an ingot.