History simply does not support the belief that you can get significantly richer by buying gold.
If you had bought gold at $264 and change at the end of 2001, you might not say that. Or if you bought shortly after Bretton Woods was dismantled, and watched it go to $850.
Gold does not have intrinsic value so it cannot 'hold' its value. In fact, the price can be very volatile. In this day and age, it simply reflects the health or sickness of paper currency and thus the health of an economy.
The POG has gone up recently because the dollars in circulation have increased so much and there is a tremendous amount of uncertainty infecting the global financial system. It is telling us that we have a sick system, that we need to be very careful. If you listen, the POG will tell you a lot.
If the appropriate measures are taken, such as increasing interest rates, tightening lending, implementing appropriate regulation of the Wall St. scamsters, and doing the necessary to wring out excess leverage, the POG would crash.
I think of the economy as a patient and the POG as a thermometer. The sicker the patient, the higher the POG and vice versa. The Swissie, because it is the rationally managed currency of a rationally managed country, serves much the same purpose.
The dollar will go much lower because BurnUndKaput is doing exactly the opposite of what should be done. The phobia of a recession or of the failure of some marginally ethical I-banks has never existed before. The excess of leverage has to be wrung out of the system sooner or later. This cannot be avoided. It will hurt, but not as much as the pain which will be felt if we continue on the course on which we are set. |
