GazTops

Gold Is Shining in 2009

I'm a Goldbug myself, so don't get upset, but....

Gold is NOT a hedge against inflation, it is a hedge against unanticipated inflation caused by instabilities in government, natural disasters or supply shock.

Would journalists stop being lazy and typing up the same old inflation mantra, it's just not true. If you really think it's a hedge against inflation, why did Gold drop from $800 to $250 between 1978 and 2000 despite rampant inflation?!

Commodities vs. Dollar ETFs: What the Future Could Hold

Apologies, I meant to continue. Gold/Silver is a hedge against unanticipated inflation (i.e. a hedge against government – more specifically, against incompetent leaders and a malfunctioning state.)


On Jul 02 08:51 AM GazTops wrote:

> I'm a Gold/Silver bug, and even I know that Gold/Silver is not a
> hedge against inflation!
>
> Ask any lazy financial journalist or fund manager why you should
> invest in gold and they will trot out the line: “It’s a hedge against
> inflation”. This is a poorly-thought-through and, indeed, deceptively
> inaccurate cliche to rest.
>
> The 1970s was a period of inflation and the gold price rose. Thus,
> in the minds of many, gold rises in times of inflation. But the period
> from 1980 to 2000 saw unprecedented growth in the supply of money
> and credit – in other words, more inflation. Yet the gold price fell
> by 75% from its 1980 high of $850 to $250.
>
> The latter was also a period of asset-price inflation, where the
> prices of houses and stocks rose with the expansion of credit, while
> the cost of mass-produced goods (particularly electronic goods) and
> food (in proportional terms) fell. Gold was no hedge against this.
> Apart from a Sony Betamax, it was about the worst thing you could
> have owned. Even plain old depreciating cash was a better place for
> your money!

Commodities vs. Dollar ETFs: What the Future Could Hold

I'm a Gold/Silver bug, and even I know that Gold/Silver is not a hedge against inflation!

Ask any lazy financial journalist or fund manager why you should invest in gold and they will trot out the line: “It’s a hedge against inflation”. This is a poorly-thought-through and, indeed, deceptively inaccurate cliche to rest.

The 1970s was a period of inflation and the gold price rose. Thus, in the minds of many, gold rises in times of inflation. But the period from 1980 to 2000 saw unprecedented growth in the supply of money and credit – in other words, more inflation. Yet the gold price fell by 75% from its 1980 high of $850 to $250.

The latter was also a period of asset-price inflation, where the prices of houses and stocks rose with the expansion of credit, while the cost of mass-produced goods (particularly electronic goods) and food (in proportional terms) fell. Gold was no hedge against this. Apart from a Sony Betamax, it was about the worst thing you could have owned. Even plain old depreciating cash was a better place for your money!