genuine qu - why bearish on gold?, page-2

The following is the last paragraph from an article by Satyajit Das who has a great understanding of banking and derivatives markets IMO, but gold?

Full article here,
http://www.marketwatch.com/story/gold-hasnt-lost-its-midas-touch-2012-08-27

Gold bugs haven’t lost the Midas touch

Satyajit Das

.................Bad-news bulls

Gold bugs excitedly speculate about gold prices reaching $2,300. But even at that level, gold would merely match its January 1980 peak price after adjusting for inflation; in other words, the holder had earned nothing on the investment for almost 30 years!

Indeed, the gold price adjusted for inflation is the same as the price in the Middle Ages. Dylan Grice of Société Générale summed up the case for gold as a store of value: “A 15th century gold bug who’d stored all his wealth in bullion, bequeathed it to his children and required them to do the same, would be more than a little miffed when gazing down from his celestial place of rest to see the real wealth of his lineage decline by nearly 90% over the next 500 years.”

Gold prices can also be highly volatile. In late 2011, after reaching record levels, the gold price fell nearly 20% very quickly.

Warren Buffett observed that if stock investors are driven by optimism about prospects, then “what motivates most gold purchasers is their belief that the ranks of the fearful will grow.” Harry “Rabbit” Angstrom, the central character in John Updike’s novels about American suburban life, spends $11,000 on the purchase of 30 Kruggerrands (a South African-minted gold coin). Rabbit explains the purchase to his wife: “The beauty of gold is, it loves bad news.”

In chaos, war or collapse, gold reasserts its grip on humanity.

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My comments,

As an investor as opposed to speculator Gold Bug.

His arguments against Gold here are easily countered.

There is a time for every investment IMO.

Das mentions gold going down 90% over 500 years, the US dollar has achieved a greater decline in value in less than 100.

He refers to Warren Buffet and his optimism in stocks, if you think it is a good time to be optimistic for stocks, go ahead and buy some, but compare how gold has performed against Berkshire Hathaway over the last ten years first.

The Harry “Rabbit” Angstrom comment, “The beauty of gold is, it loves bad news.”
There certainly seems to be plenty of bad news around these
days so is he making an argument for Gold?

And his last comment,
In chaos, war or collapse, gold reasserts its grip on humanity.
So he is making a case for Gold again?

Seems he is arguing both ways.


What most people fail to understand is that the value of Gold does not change, the value of other stuff does.
It is like a universal constant.
It is where you get on and where you get off, that matters if you wont to prosper.

Confidence is the driver of gold.

Hope this helps.