2008: Biggest stockmarket crash in a century... Gold finishes up year to year. 2009: One of the biggest stockmarket rallies of the century... Gold finishes up year to year. What gives? Is it really true one can not lose in gold? Except ofcourse those who bought at the hights of the early eighties...zzzzzz....
The reason is that unlike most other investment assets, gold serves more than one function. The first is as a safe haven during times of economic uncertainty or calamity, hence its positive performance last year. The second is as a hedge against major inflation or perceived currency debasement, which is why it has had a positive performance again this year. Conversely, gold will decline under two scenarios. The first being a period of relative economic stability with moderate inflation, and the second being a true deflationary environment. The first scenario we saw through the '80s and '90s, hence gold's massive collapse. The second scenario I believe we are highly likely to see over the next couple years, before we get true hyperinflation. So while I can't say whether or not gold has peaked for this temporary cycle, I believe it will have a reasonable decline over the next couple years before shooting to the moon after that.
Agree very closely to what you have said here. Although I wouldn't discount the possibility of limited depreciation during a deflationary cycle that comes before hyperinflation. In other words, it is not foolish to pay for gold today as insurance. If it decreases during deflation, accumulate more, but don't beat yourself for not waiting for a major deflationary price drop.
If there is deflation, the past couple years have shown that the increased risks of owning paper promises from those going down the tubes as well as low interest rates, will cause people to push money into hard assets, because at least they won't go bad on you.
gents ... gold is old news here is da new "bling" www.retrographique.com/images\tinsigns\Food\Golden Bonanza Niblets Corn.gif
Alot of people always use the "high of the 80's" as a way of saying you shouldnt buy gold, but is there really anyone today that is still holding gold that they bought in 1980 for $850 per oz? Or lets go one further. I bet there is not one person today that bought at $600 or higher in 1980 and is still holding that gold "waiting for it to come back" How many ounces actually traded above $600 back then in that 2 month period? Remember this was 1980. Volume would've been pretty light compared to todays standards.
I believe the answer would have to be the Saudi Royal Family. They were buying gold and the Hunts were buying silver back then.