Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Saturday, 26 January 2013

Gold And Silver: A Wealth Hazard

My latest column in Mint Indulge seems to have touched a raw nerve with Goldbugs. Full article here. Excerpt below.

 
The fascination for gold and silver has transcended millennia and ruined many a rational investor. After falling out of fashion at the start of the 1980s, both gold and silver have staged a comeback with nominal prices near all time highs (graph 1).
photo
Perhaps, it is some primeval hoarding instinct that clouds our judgement as soon as we behold these shiny metals. The modern investor who considers himself above such atavistic impulses is only rationalizing his purchase of precious metals by proclaiming doom-laden end of world scenarios. The perilous state of the global economy and voodoo central banking has unnerved investors and made them seek out the comfort of traditional stores of value. In addition, gold and silver have enhanced their lustre in the eyes of investors by outperforming almost every other asset and returning an annualized 17% and 20%, respectively, since the start of 2003.
 
However, your chasing the herd, which itself is blindly chasing returns, may lead you by the shortest path to the poor house. Moreover, the investment case has become muddied as gold and silver prices have stalled with only a 4% increase last year. In conjunction, more contrarian voices are being heard, notably Warren Buffett’s, who called gold a sterile asset, compared with productive investments in companies.

Go to full article.

1 comment:

  1. Difference between 1980's and now is that every month they are printing billions of dollars from thin air. Means the dollar is losing its value, that is the reason for the rise in gold value.

    ReplyDelete