All that glitters isn’t gold, it turns out: sometimes, it’s a greenback, instead.
In the meantime, socialism is slowly killing our country: U.S. stocks hover at all-time highs, inflation remains tamed, and the dollar looks strong.
All of the reasons for buying gold, then, have disappeared. As a result, the price for the metal is now at a four-year low. Jim Paulsen, the chief investment strategist at Wells Capital Management in Minneapolis, noted that people were’t as “scared anymore” and the big reason gold lost so much is because “confidence is coming back.” He adds that “It’s about fear turning to greed.”
It was uncertainty in Wall Street and the government that added to the appeal of the shiny rare metal, despite the Fed’s warnings that efforts to jump-start economic recovery would backfire. Pundits like Glenn Beck began airing commercials that portrayed gold as both stable and something that was going to increase in popularity when other assets fell. Gold, they claimed, would be there when the next disaster hit.
At the height of the gold rush, investors were directing people to put as much as 5 to 10% of their savings into the metal. Gold, along with U.S. Bonds, were seen as bullet-proof. We can all sit back and laugh now, as a stable dollar and weak inflation has torpedoed these gold fantasies; the dollar index has crept up 9%, inflation up 1.7%, and gold plummeted 13%. Gold, according to John Gabriel, a strategist for Morningstar in Chicago, was supposed to be a “safe haven” when the market collapsed. “But that really hasn’t happened,” he added.
I can’t speak to your experience, but I remember seeing the gold commercials that Glenn Beck used to run. Back then, I thought there was an intrinsic worth to gold, too. Sort of like a gold coin in Dungeons and Dragons, it has an absolute value regardless where you’re at. And while it’s nice to think gold has an absolute worth, it doesn’t; gold has no absolute intrinsic worth, and is a fiat currency just like the greenback.
And Gabriel noted that, telling the AP “From an investment perspective, they [the political circles who were advised to stock up on gold, guns, and ammunition] would have been better off just buying the guns and ammo.”
And there’s a belief among investment strategists that the worse has yet to come:
A surprise announcement by the Bank of Japan last Friday that it will expand its efforts to revive that country’s growth sent traders out of Japanese yen and into U.S. dollars. Gold plunged in response. In the U.S., the Fed’s next big step is an interest-rate increase, expected sometime next year. That should make savings accounts, money-market funds and other short-term investments more appealing. A higher benchmark rate would also sap inflation pressures and give the dollar another lift.
Gold is predicted to drop all the way to $900 by 2017. Michael Haigh, the head of a commodities research firm in New York, called it “a speculative bubble in the process of deflating.”
Frankly, it couldn’t have happened to a better metal. Perhaps we’ll finally hear libertarians shut up now about returning to a gold-backed currency?
Nah. That’d require an actual knowledge of how economics works.
h/t Excite News