Pyrite
Investors continue to buy Gold as hedge against inflation, and because Gold as an asset tends not to correlate with equity markets or other commodity prices.
But Gold is being promoted as a safe place to park assets in the event of a true catastrophe, which is only partially true.
Gold especially tends to inversely correlate with the dollar and other currencies, because its low liquidity risk is thought to be absolute. This year, however, Gold outpaced the dollar, possibly because Gold rises in response to uncertainty regarding currencies, even if the currencies themselves continue to rise—an unusual combo).
People will always wear jewelry and, as many a 40’s European emigree could attest, gold and jewelry paved well their journeys away from tyranny at a time when their other assets were, uh, unavailable.
Gold remains a good investment for speculators, but it worries me that brokers and market blowhards (often the same folks), who profit from Gold trades, are pushing the commodity as a true hedge against chaos.
In the case of refugees bartering grandma’s ring for food, gold has certainly proved a worthwhile asset. But owning gold tucked away in some bank seems less to the point. In the event that terrorism or computer malfunction render illiquid one’s cash and equity holdings, electronic gold holdings will be similarly worthless.
