The New York Times continues to demonstrate that we are not close to a 1999-type blow-off top in the gold bull market in Uncertainty Restores Glitter to an Old Refuge, Gold. Any article that says the following reflects skepticism or something stronger:
Since ancient times, gold has been deemed intrinsically valuable, holding its worth even as governments fell and currencies collapsed, while seemingly casting a spell on its owners. . .
True believers note that gold has risen in each of the last nine years, and that while the Standard & Poor’s 500-stock index is down 13 percent since 2001, gold is now worth nearly five times what it was then.
For all its newfound respectability, gold still manages to bring out the inner survivalist in its adherents. Gold bugs like Peter Schiff of the investment firm Euro Pacific Capital in Westport, Conn., envision a black market arising in the United States, with merchants refusing paper money and insisting on gold instead, while Mr. Hathaway, the gold fund manager, says the credit system has entered “the end game.”
“People probably still think I’m nuts,” Mr. Hathaway said. “But I’m not talking to myself in an isolation chamber anymore. We’ve got company now.”
Casting a spell? The message is that investors in gold or Moonies or wiccans.
The inner survivalist?
The Hathaway quote is almost certainly out of context; as written, it makes him appear to be saying that he has a few nuts who now agree with him rather than that doubts about the orderly functioning of all the assets and liabilities floating around are widespread.
The worst of the article relates to the following quote:
To be sure, gold buyers have always been motivated by fear. . .
Since ancient times, gold has been deemed intrinsically valuable . . .
This is just plain wrong.
Since ancient times, gold has been money. Diamonds and other gemstones have been "deemed intrinsically valuable"; gold has been the medium of exchange. Not only has gold always been money until the modern age, but the IMF and the U. S. Government continue to treat it as intrinsically valuable.
Owners of gold are motivated by the desire to retain purchasing power. What emotion(s) drive that desire is (are) not so simple as the author of the article alleges.
Governments like electronic money even more than paper money, as the margins on electronic money are essentially 100%. To say that people who want to own gold are the fearful is like saying that people who own umbrellas are afraid it might rain.
Actually, it does rain, and governments do inflate and default.
Gold is a financial umbrella. Many people just don't want to stay home without it.
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