Fear factor driving gold higher

October 5, 2010

“Gold is not an investment. It doesn’t pay you interest and it doesn’t increase wealth,” complained one investment advisor recently as he perused exploding client demand for the yellow metal.

“It’s just a cautious asset for scared investors,” he grumbled as he waved a chart showing prices had once again hit an all-time high.

Some anecdotal evidence suggests he may have a point.

Bankers at this week’s Reuters Private Banking Summit said investors were loading up on gold to the tune of some 7 to 10 percent of their portfolios.

The traditional motive of hedging against inflation was conspicuous by its absence.

The wealthy were buying gold because they were worried by the possibility of deflation, by a collapsing dollar or by the threat of prolonged financial turmoil.

Many were getting exposure through gold-backed exchange traded funds or gold stocks related stocks.

And one couple even bought a tonne of the stuff and drove off with it.

“If we did have a global financial meltdown, what do these people think they could actually do with the gold,” said the investment advisor.

As for the pair with a tonne of gold — worth well over $40 million at current prices — let’s hope they hid it somewhere safe.


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Eventually, Fiat Money will collapse if it continue to carry zero intrinsic value. Nixon Shock had removed the Gold peg. The amount of paper money is no longer justifiable to the worth of real economic activities. We can’t abuse the system forever. One day it will collapse. So, the most practical solution to ensure survival is to keep gold as security. Gold is proven to survive the test of time. Gold is to be used as medium of exchange. Fiat Money will not last the test of time.

Posted by antikmalaya | Report as abusive

Investment advisor made this statement in the article: “If we did have a global financial meltdown, what do these people think they could actually do with the gold,” said the investment advisor.

This is why I handle my own investments. Compare yield in gold to yield in stocks for the past 10 years. Gold made 10%-15% more than stocks and didn’t decrease in purchasing power. In the economic climate that we have now gold is safety and it makes wealth for the investor.

Posted by Magnoliabel | Report as abusive