Hi Jay. I fully agree with your conclusions about the coming universal debasement of fiat currencies, but I think that gold is an inferior investment to commodities in general and energy in particular. The reasons:
Gold's production costs are far below its price, and this is already stimulating vigorous exploration and development worldwide. A corollary to this is the probable return of hedging.
The second is that, unlike many other commodities (energy comes to mind), industrial and jewelry demand, which constitutes the lion's share of gold demand, has a high price elasticity.
The third is the overhung of the CB gold. Many of them are as determined as ever to reduce or even eliminate their huge gold inventories.
So the case for gold rests squarely on revival of investment demand, which currently is a small fraction of jewelry demand.
Gold will do OK, of course, if there is commodity inflation, but, I think, not as well as an index of commodities or, in particular, energy. |
