This is a pretty interesting article on the price of gold:
The first half of the article largely gets it wrong (I believe). It isn't until the second half that he makes two really good points:
So I'm basically talking myself into copper at this point.
HT: Greg Mankiw
The first half of the article largely gets it wrong (I believe). It isn't until the second half that he makes two really good points:
- A lot of gold's increase is being driven by the economic expansion of "emerging markets." As countries become better developed, their central banks require more gold reserves for currency stability, and that increases demand and therefore price. That's his point. I'd take that a bit further and suggest that this also presents reduced demand for the US dollar, and increases the probability that the world could return to commodity-backed currency in the future.
- Gold is sensitive to interest rate futures. I am still kind of cautious on gold, because I think if I invested in it now and the U.S. decided to pursue saner economic policies, I'd lose my gold investment in the short-run. Sadly, I am a short-run investor at this stage in my life, thanks to upcoming financial commitments.
So I'm basically talking myself into copper at this point.
HT: Greg Mankiw
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