Thursday, December 3, 2009

Gold Records

Gold prices have hit new record highs in each of the last three weeks. Gold prices are going up mostly because investors are anticipating inflation, which reduces the value of money and bank deposits. Gold, they hope, will retain most of its value.

It is funny to see investors reduce their expectations this way. The previous bubble that created the current crash came about because investors weren’t satisfied with investment returns of 5 percent a year, and were looking for ways to bump that up to 15, 20, or 25 percent a year. Most of those investment schemes not only fell short, but actually lost money — take the stock market, for example, which is struggling to hold on to levels it first reached a decade ago. And with retirement funds withdrawing more money from the stock market than they will be putting in over the next ten years, few experts expect stocks in general to be higher in 2019 than they have been in 2009.

Gold might lose a little of its value from one year to the next, but it could do better than what you get in a savings account, where your 0 percent interest will do little to make up for a rate of inflation that could be between 4 and 8 percent. There simply is no store of value that is entirely reliable right now — and that’s one of the reasons more people are looking at gold.