BOSTON – Gold is a great run lately. On November 9, it closed at a record high of $ 1,409.80 an ounce. The soil as the only safe bet in a world threatened by the European debt and Fed presses run amok.
And just before crucial G-20 meet in Seoul this week, the yellow metal Prestige has a strong impact of World Bank President Robert Zoellick. With a global currency wars brought on a hot topic in Seoul, Zoellick suggested that the Finance Ministers to consider amending a new global gold standard for currencies of the world thinks.
But are things really gotten that bad? Gold is really the answer to what ails us? Or in this digital age, the world economy is based on large metal plates a bit like the promotion of the horse and buggies as a solution to traffic jams in Beijing?
The usual argument in favor of gold is that the nature, value incarnate – that no matter how much debt the U.S. government is due, no matter how much money the Fed prints, and no matter how high inflation rises, gold will retain its value. It is the asset of choice for the worried and distrustful.
Not everyone agrees that gold is so invincible. Billionaire hedge fund investor George Soros has called gold “the ultimate bubble, showing that while” it may go higher, certainly not safe and it’s not going to last forever. ”
As usual, Soros has no shortage of opponents. But that does not mean he is wrong.
unyielding charisma Gold is promulgated by many in recent years, including the Wall Street Journal editorial page, as well as serious investment advisers seeking a safe haven for their customers’ savings.
sometimes for profit – Stars of the populist right gold breathlessly extolled. As Jon Stewart revealed, Fox News’ Glenn Beck is of gold by “the flames of fear” in his show – but is paid by Gold Line, a website where you buy gold.
On RushLimbaugh.com, you will find a “Rush Commodity Center ticker in the upper right corner hawking Krugerrand and the American Gold Eagles. Visit the Commodity Lear Center, a gold merchant (whose ads are feeling worried investors that” it is never worth zero! ” ) And there was Rush’s mug at the top of the screen reassuring.
Wall Street also helped SAP rising price of gold by financial innovation (the same term in connection with mortgage-backed securities and credit default swaps that the economy nearly collapsed in 2008).
This financial innovation, these days, instead of purchasing gold from the real will of the Gold Line and repotting in a basement safe, you can buy stock in an Exchange Traded Fund which tracks the price of gold for you. That means you can log onto the Internet at any time – like any gambler – Put your savings in the yellow metal. This innovation has worked, at least in driving demand for gold. If you want to invest in a fund called GLD at the beginning of 2005, you triple your money now. And these funds will help to drive the trend: their employees are also roughly tripled between 2006 and July 2010, according exchangetradedgold.com.
Of course, investing in the future, not past, that counts. With the ETF you (or speculators) may also sell gold as fast as you can buy. This makes the risk of loss when the bubble burst just as steep.
Despite the hype, a look at gold raises questions about whether it is much more intrinsic value.
Think about what you get when you buy gold shares versus Google example. With Google, you bet on a company with some 23,000 people – smart people who work hard every day to make a profit. From July to September, Google netted more than $ 2 billion and earnings have grown year. (That does not mean Google is a sure bet – successful investing is a matter of timing and patience, not just picking good companies).
Now think about the value that an investment in gold shows. Unlike Google, no gold to buy produce nothing (other than the gold itself). It does not use smart teams of innovators. There is no value to the way Google is growing – a gold bar will always be a gold bar. It will never wake up some morning and a dividend to investors. The economic benefits, in other words, are minimal.
But the real irony of gold is that while many people seem to want (at least for now), very few people need it. Investors buy gold and sit on it hoping to make a profit account for more than half the demand of gold. Of the rest – money that is actually used in trade – about 80 percent is used in jewelry, according to the World Gold Council. Only a fraction of gold, about 10 percent, is used in industry and dentistry. Unlike metal workhorses such as copper and platinum, gold has very little actual industrial applications.
Therefore it is even worse, what if the world were to find that the jewelry, we give our loved ones was a big, dirty secret hideout?
Modern mining is very destructive. Getting the amount of gold in a wedding band usually about 20 tonnes of excavated rock means, according to a study by advocacy group Earthworks (pdf). Gold’s hazardous waste contains toxins such as cyanide, arsenic and mercury, which often leaks into the water and air pollution. While some companies try to get my responsibility, to do this is expensive, and many cuts. From Peru to Indonesia to Nevada, the gold mining industry is filled with the persistent problem of pollution. It also causes a widespread disruption of communities unfortunate enough to live near a security deposit.
This raises the question, why is a metal that is considered as dirty and false as a safe haven? If Armageddon breaks out, people go to shop for jewelry? Or is gold valuable for the same reason, namely, tulips grew in the 17th century in the Netherlands – as a result of a number of abstract, perceived value?
And how quickly people will discover that the emperor has no clothes?
In the short to medium term, gold continued to rise. The price of an ounce can even hit $ 2,000, as advertised on the website of Commodity Lear Center. As we know from past bubbles, if people see that other people rich, they can not help jumping on the bandwagon, or they are too late to enjoy the ride.
Moreover, with so many people still the pain in their 401k retirement accounts, and interest almost non-existent, alternative investments such as gold feel, they keep burning for a while. The Chinese, as many of the new world of wealth creation can continue to buy gold, especially since so few investment alternatives allowed by their government, and because people in emerging markets tend to tangible investments (such as gold and real good faith) of those who question the confidence in the banks, governments and other institutions.
In the long run, Soros seems to say that gold is a bubble. If recent history is an indicator, the price of gold rises in uncertain times, only to crash and sleep when the economy to stay. Investors who bought gold at a murder in 2005. But as this chart shows, if you had bought in the gung-ho market in 1980 – when $ 2,359 in inflation-adjusted dollars, it – you would have lost big-time. Far from being a safe haven, gold is a deep risky investment, buoyed by something more than the hope that its value will continue to rise.
In advocating a stronger role for gold on the world stage, Zoellick World Bank deferred to the wisdom of the market. In a Financial Times opinion piece he wrote. “Although textbooks, gold can be seen as old money, the gold markets are used as an alternative monetary asset today,” Had he been writing in 2006 when property prices rose, he would have a global currency suggested the price of real estate index?
Given that the gold price depends almost entirely on a perception of value – of speculation, in other words – perhaps the world’s finance ministers could find a more solid basis for the global economy
source:globalpost
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