The continuing rise in gold prices doesn't make much sense to me. It is supposed to be a hedge against inflation, but inflation is dead. The US dollar isn't plummeting against most foreign currencies.
Maybe people just are scared and want something solid in their hands instead of stock certificates that they can use for kindling.
Thomas Sowell: There are no solutions, just trade-offs.
"Most of us own truths too painful to confess. We drink too much. We lust inappropriately. We envy. We covet material goods, when every study shows experiences count for so much more. Confessing them, even just to ourselves in the long, dark teatime of the soul, is too distressing.
The collective subconscious of the financial markets is no different. It knows pension systems are bankrupt, water wars are coming, China will best the West, Keynesian stimulus is a surefire way to stoke inflation, gold is saying something, and the banking community remains as rapacious as it was prior to the credit crisis. "
Inflation is reportedly "Under control" --- but that's the problem ---- it shouldn't be given insane levels of government spending (that's what the analysts think). Pull a rubber band up while you anchor it...... pull as far as you can. What happens when the anchor lets go? That's what you're seeing in the price of gold. Investors are trying to guess how high the rubber band will fly when the anchor (fed policy) let's go.
If you're poor (like me) - buy silver, instead.
Financial markets historically used gold as a hedge against inflation. With broadened financial market participation, the price of gold represents both hedging behavior and speculation. The speculation is what's driving prices well beyond what's rational.
Incidentally, this is a very good time to be collecting coins.
Disclosure - this is not meant to be financial advice - please consult a professional financial advisor.
OK, that way makes sense. If you have cash sitting on the sidelines and you don't trust the stock market, 2% bonds don't excite you, gold does seem to be on the uptick.
Thomas Sowell: There are no solutions, just trade-offs.
