Fool’s gold?

Adella and I were recently discussing what currency we’d use for our savings once we hopefully soon can start to accumulate a little. We talked about the practicalities of having a savings account denominated in euros, pounds, or gold (all of which it turns out are essentially impossible with U.S. banks). So right as we were doing that, my Mom forwards me an article from her broker out of the blue arguing against the continued rise of the price of gold.

It reminded me how, because of my prior involvement in online gold-based payment systems, there were a few years there where I would occasionally be asked whether I thought gold was a smart thing to buy. Why they asked me and not some with actual money, I can’t say. But I remember always making the same two points:

  1. No matter how clever their analyses may seem, no one really knows what the price of gold is going to do.
  2. Anyone who tries to convince you that they really know what the price gold is going to do is at best mistaken and at worst trying to deceive you into buying something.

The author’s point about gold ETFs is a good one, but it’s not like mutual funds that track gold haven’t existed before that, or just stocks like Freeport MacMoRan.

Moreover, if I had to guess, I’d say that the combination of a growing middle class in India, China, Malaysia, and elsewhere, where there’s a strong cultural inclination toward gold as a store of value, combined with the inflation I expect we’ll be seeing here in the U.S. for some time to come, means that $1,000 will not be some sort of magic ceiling for gold.

But then, that’s just my guess. See point number one.