• SHARE

Investors don’t really have a handle on what gold is or what it represents. Many erroneously believe gold is some sort of inflation hedge, because of our experience in the 1970s. It’s also not a hedge against stock market crashes, as we discovered in March. Gold is a hedge on government authorities making poor economic choices. Inflation is usually the result of those poor decisions, but people confuse cause and effect here. Gold is a hedge on policy makers screwing up, and there has been a lot of screwing up in the last 20 years.

Gold has significantly outperformed stocks this century, gaining about 555% versus 79% for the MSCI All-Country World Index of stocks and 146% for the S&P 500 Index. This is a direct result of significantly looser financial conditions, and no constraints on monetary and fiscal policy. From a financial perspective, the global economy is in a much worse place than 20 years ago, and there is no evidence that things are going to improve.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW

PHOTO GALLERY (CLICK TO ENLARGE)