Thursday, October 14, 2010

Gold as "safe money"

The last post here closed with a reference to gold as "safe money". That is the motivation of investors now and a reason for gold's increase in value. That was the context of the comment, but of course in a broader context it's wrong. Gold is not money. Gold can be highly volatile. Gold, like any commodity, can collapse in price. It can be consciously or unconsciously manipulated by speculators.

"Safe money" is more generally viewed as being short to medium term U.S. treasuries. At the moment the main risk there is devaluation of the U.S. currency and the potential for yield that is below inflation. Oops, what's really safe. At least gold can be held, touched, fondled, and stored away Midas-like in a safety deposit box.


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