Gold: over bonds is a 'no-brainer'
If they dig deep enough into it today, readers of the Financial Times will find support for gold at the bottom of senior editor John Plender's column, headlined "Fed's Inflation Shift Is Another Blow to 'Safe' Assets":
ft.com
Plender writes: "... it is striking that government bonds this year have no longer been reliably providing relief when stocks fall. Since the start of the pandemic there have been times when the prices of equities and bonds have gone down together. So the notion of carrying a portion of safe fixed-interest assets to balance riskier equity holdings is now suspect.
"This continues a broader theme: As central banks have pumped liquidity into markets through vast bond-purchase programs since the financial crisis, different asset classes have tended to move more uniformly. Fundamentals no longer matter for the overall market indices. ...
"It seems counterintuitive to think of equities as safe. But equally, it is hard to believe that government bonds yielding little or nothing are not a hostage to fortune when central banks are working overtime to generate higher inflation. For long-term investors this boils down to choosing between governmental paper promises and real assets such as property, commodities, and gold. It is, in the time-honored phrase, a no-brainer."
Of course if Plender's analysis is correct, he has just ratified the old and powerful rationale for the longstanding Western government policy of surreptitious intervention in the gold market -- to protect the value of government currencies and bonds.
But in acknowledging that government intervention in markets has canceled fundamentals and that gold should do well when interest rates are minimal or negative, Plender's column is probably the closest the FT, mouthpiece of the financial establishment, can get to economic reality. Putting a critical question to any central bank and reporting the bank's refusal to answer is still far beyond the newspaper's journalistic capacity.
Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org |
