It isn't rocket surgery. Gold appeals - and thus rises - when the better
alternatives don't...
DURING THE 1980s and '90s...when US consumer prices rose at what would
have been record rates if it hadn't been for the '70s...the price of gold fell
by three-quarters.
Peering back at the recent past therefore, analysts and economists all agree:
When looking for a sure-fire "inflation hedge", you surely won't find it
in gold.
Thing is, however, US investors and savers didn't need an inflation hedge
back in the 1980s and '90s. Not in gold,
at least. Because the better alternatives - productive assets such as real
estate and stocks...or the "risk-free" assets of cash, Treasuries and investment-grade
bonds - all paid way more than inflation anyway.
Who needs a lump of dumb metal if just holding cash pays 4.5% real returns
each year on average, as it did in the '80s?
Why bury your savings in a rare, deeply liquid but unyielding asset when stocks
keep rising by one-fifth per year - and paying a 2.4% yield each year on top
- as they did in the '90s...?
And why buy and hold anything else when stocks, cash, bonds and property all
fail together, as they have so far this century...?
It isn't rocket surgery. In two of the last four decades, people have twice
turned to buy gold...pushing
the price higher...when alternative stores of wealth failed at the task. During
the intervening two decades, gold wasn't required.
And today? Second-guess where the major alternatives will head - cash, bonds,
stocks and real estate - and you might just work out what to do about reliably
rare, indestructible gold.
Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold today vaulted
in Zurich on $3 spreads and 0.8% dealing fees.
About BullionVault
BullionVault is the secure, low-cost
gold and silver exchange for private investors. It enables you to buy and sell
professional-grade bullion at live prices online, storing your physical property
in market-accredited, non-bank vaults in London, New York and Zurich.
By February 2011, less than six years after launch, more than 21,000 people
from 97 countries used BullionVault,
owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical
silver (US$129m) as their outright property. There is no minimum investment
and users can deal as little as one gram at a time. Each user's unique holding
is proven, each day, by the public reconciliation of client property with formal
bullion-market bar lists.
BullionVault is a full member of
professional trade body the London Bullion Market Association (LBMA). Its innovative
online platform was recognized in 2009 by the UK's prestigious Queen's Awards
for Enterprise. In June 2010, the gold industry's key market-development body
the World Gold Council (www.gold.org) joined
with the internet and technology fund Augmentum Capital, which is backed by
the London listed Rothschild Investment Trust (RIT Capital Partners), in making
an $18.8 million (£12.5m) investment in the business.
Please Note: This article is to inform your thinking, not lead it.
Only you can decide the best place for your money, and any decision you make
will put your money at risk. Information or data included here may have already
been overtaken by events - and must be verified elsewhere - should you choose
to act on it.
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