Thread: Is Gold a Reasonable Investment?

Is Gold a Reasonable Investment?


September 29, 2009
Washington's Blog



This essay rounds up arguments for gold as a reasonable investment.

China

Commentators such as Ambrose Evans-Pritchard and Byron King argue that China's hunger for gold will put a floor on gold prices.


Specifically, they argue that China will "buy the dips" in gold prices, effectively putting a minimum on how low gold prices can go.


Inflation


It is conventional wisdom that gold is a hedge against inflation.

For example, noted inflationist John Williams advises buying gold.

Axel Merk argues that gold is a better buy than TIPS as an inflation bet.

And Taleb advised buying gold in May, since currencies including the dollar and euro face pressures.


Deflation

If gold does well during times of inflation, it makes sense that it would perform poorly during deflationary periods.

But Examiner.com points out that such an assumption is probably untrue.

Specifically, as Examiner.com writes:


Eric Sprott - who manages $4.5 billion in assets, and correctly predicted in March of 2008 a "systemic financial meltdownâ€

Who can afford gold now? And where would they get it and store it?