Tuesday , 18 June 2024

Gold as a Safe Haven is Worthless!

So says David Berman (www.theglobeandmail.com/globe-investor/markets/markets-blog/) in edited excerpts from an article* entitled Gold Is For The Fool – If You Are Looking For Safety which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. 

Berman goes on to say, in part:

We learned this lesson before, when gold – pitched by some observers as the safest thing going, next to matches and tins of beans – fell alongside just about every other asset when investors feared the onslaught of a global recession in 2008. [Back then] gold began to fall long after stocks began their slide, and it bottomed out a little earlier as well. Still, it fell 29 per cent from peak to trough…providing little comfort to investors looking to it as a store of value during troubled times.

We are now seeing a similar pattern. Gold peaked above $1,900 (U.S.) an ounce in early September, about four months after the shine came off the S&P 500 and investors began to fret over the latest twists in the European debt crisis and the U.S. economic recovery. It has since tumbled more than 13 per cent in little more than two weeks – an alarmingly sharp decline that puts it near the front of the pack among poor-performing assets this month, eclipsing U.S. stocks, Canadian stocks, European stocks and even crude oil. (Silver, often linked with gold as a precious metal, has done worse, falling nearly 29 per cent in recent weeks.)

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[The fact] that gold would settle back is not a huge concern among safety-conscious investors [as] any investment can correct but what is a concern is that gold has fallen at a time when investors have most needed it as a portfolio stabilizer and that its decline appears to be linked with asset tumbles elsewhere.

There are many theories about gold’s correction:

  1. that it is falling as leveraged investors are forced to meet margin requirements or
  2. that inflation forecasts are being scratched out in favour of deflation forecasts – but what is more likely is
  3. that gold has become a speculative, high-risk investment that just doesn’t cut it when investors become nervous. In other words, it behaves a lot like a stock.

The U.S. dollar – which gold enthusiasts deride as a product of an overactive printing press – is one of the big beneficiaries of the recent turbulence, as are U.S. government bonds. The U.S. dollar index, which measures the greenback against a basket of currencies, has bounced to a seven-month high, rising 6 per cent in September. At the same time, bonds have surged in price, sending the yield on the 10-year Treasury bond to multidecade lows last week. These are the havens investors have been looking for to offset declines in the stock market.


Gold might rebound in the days or months ahead [just as it did] from its low point during the last financial crisis to its recent high when it surged nearly 170% [but] those gains, [however,] largely coincided with a recovering stock market as well. Gold has been a valuable investment over the past number of years, but as a haven, it has been worthless.


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  1. You don’t know what you are talking about. Paper money is nothing but paper. It is supposed to have the full faith and credit of a government behind it and that is it. If the government that issues the paper money is bankrupt then the paper is paper and nothing more.
    Gold may go up and down relative to a paper money, but if the paper money goes worthless, the gold will have an intrinsic value based on man’s desire to own it so I say, paper money (cash) is useless because it does not have any economic value if the government that issues it is bankrupt.
    In a time of crisis paper money will loose its value, but gold will retain a value. We need people to believe in paper money in order for it to retain a value, but if the issuer of the paper money is bankrupt, then the issuer’s creditors will declare that paper money useless or decreased in value, or worthless.
    It is better for a person to accumulate gold (and silver) in order to retain the purchasing power he or she created by means of work or investment at a time when paper money had value by virtue of a government which had a balanced account or a surplus of money due to productivity of the government or nation – so think very hard before you say gold is useless.
    You have no fear because you believe in the current system and believe it will contiune as is. There is a law in physics which states that an entity which is corrupting will eventually destroy itself is the process of corrupting is not reversed.
    Good luck with your paper money!

  2. Gold is a useless investment. It does not have any economic value. Nobody can eat gold to survive. Its value is when economic activities are profitable. At the times of crisis, it will lose its value just as cash. We need somebody to accumulate it to keep its price high and he is flush with cash. On the other hand it is better to accumulate other metals which are of use industrially. Their value will go up in due course. even silver is more valuable than gold.