I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Saturday, 5 June 2010

Gold could easily double from its current price of about $1,200 an ounce because it's really a hedge against financial instability

Lots of gold bugs burrow into the precious metal because it's thought to be the ultimate hedge against inflation. Given that the U.S. national debt just passed the $13 trillion mark (or about 90% of GDP), it's not too hard to imagine a dark day of reckoning for the purchasing power of the almighty dollar not too far down the road.

But it turns out that gold isn't really much of an inflation hedge at all, which explains how a big-time deflationist like David Rosenberg, Gluskin Sheff's bearish chief economist and strategist, can be so bullish on the yellow metal.

"The widespread consensus that gold is an effective inflation hedge is not on the mark," Rosie told clients Thursday. "Our statistical analysis shows there to be a fairly loose link even if gold is a store of value. We also know that in the deflationary 1930s, the Sterling price of gold doubled."


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