Quote:
Originally Posted by critikal
Those "drivers" you've brought up are all about governments being stretched thin which has nothing to do with gold specifically whatsoever. In that type of environment gold is not the only asset class that will go up. Although money has gone to gold because of currency fears, this is not a good thing for current gold investors. People who have parked their money in gold because of current fears are whimsical and will move over to the next "hot" asset class (tech stocks, real estate, whatever). As soon as economic news is dominated by some other trend, gold investors will be hurt.
The problem with investing in gold is that it's an asset that pays no dividend and actually costs money to store. When you invest in stocks, bonds, real estate etc., you get the same price appreciation from currency inflation, but are also entitled to dividend payments. Over the long run gold should only rise with inflation. I think there are much better asset classes to support your investment thesis than gold.
Unless you're just a shill or anti-government troll.
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Not getting the final comment.
But the reality is that there remains a mispricing of risk in the global economy.
It is true that governments are stretched too thin - this is a risk partially being accounted for in the price of gold but also being expressed in the currency markets. The only thing that is maintaining the U.S. dollar - is that the Euro is winning the UGLY pagaent at the moment.
1. The U.S. government has adopted an unofficial 'weak' dollar policy to attempt to help economic activity. This is a positive backdrop for gold investors.
2. Excess money remains within the global economy with the massive stimulus and low interest rates. This is a positive backdrop for gold. As fixed interest investors have excess supply of offerring, some default risks and poor macro outlooks - appetite for paper remains low. Which effects returns and expected returns for current and propective holders.
3. Equities remain over-priced - global growth in its best scenario is anemic. So the prospect for large Returns on invested capital is remote.
4. Real estate - is not a meal upon which investors want to feast given the last 5-10 years of pre-bubble and bubble experience.
So in a comparative analysis - gold does well versus other asset classes.
The macro environment of risk aversion is positive.
So whilst the historical reasons to invest in gold - as either an inflation hedge or a hedge on the greenback arent as relevant today. Gold bull-run has a better than avg chance of remaining intact for 3-5 years.
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