As we wrote back in May, we are not fond of the yellow metal. It has no productive purpose, although lately, with the ever skyrocketing price of gold, supporters have claimed that it could simultaneously protect against inflation (Central Banks using quantitative easing to monetize governments' debts) and deflation (caused by a double-dip recession). Again, how something can simultaneously protect against two fundamentally different views of the world is beyond our comprehension.
We certainly hope the price action in the past few weeks (racing to recent higsh of over $1,900 / oz before crashing to ~$1,600) will serve as a stark reminder of the inherent speculative nature of gold. Remember, in 2008, gold actually fell along with the value of all assets. If anything, you should buy gold equities (with low-cost production or unrecognized assets), since they actually generate cash flows from their productions of gold.
- The Aspiring Analyst
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