Thinking About Thinking

The Case For Gold & The Case Against Gold

Posted in Economy, Pop Culture by larrycheng on November 19, 2009

I’ve been looking unsuccessfully for an article that succinctly lays out both sides of the debate on whether gold is a good asset to own.  So, I’m here to ask for your assistance in pulling together an article that outlines the key points on both sides of the debate.  I have some ideas, but I’m sure you have more.  Just leave any points of view, good articles or predictions in the comments an they will be added to the article.  I hope that this article proves to be useful to readers regardless of your current point of view on the topic.  If you’re formulating your own opinion on a given topic, hopefully it’s helpful to get the full spectrum of opinions on the topic.  And, if you already have a strongly held point of view, surely it’s good to pressure test your convictions with an opposing view every once in awhile.  So, here we go: 

The Case For Gold

  1. The devaluing of fiat currencies around the world through unprecedented fiscal stimulus will cause an increase in the price of gold.   
  2. Gold is a safe haven currency that tends to rise in precarious economic times like these.
  3. International governments will diversify out of their US dollar reserves and buy gold thereby driving demand.
  4. Hyperinflation is on the horizon – and that drives gold prices. 
  5. The growth of institutional and retail investment demand for gold. 
  6. Lack of growth in the supply of gold from mines. 
  7. Fiat currency has no intrinsic value.
  8. Others?

The Case Against Gold

  1. Gold doesn’t pay interest.
  2. Gold goes up when there’s inflation, and deflation is the far greater risk today.
  3. A safe haven asset like gold goes up when Armageddon hits, and we have avoided that. 
  4. Over the long run, history shows that gold is not an appreciating asset. 
  5. Asset prices are inflated by the dollar carry trade – gold will come crashing down
  6. Too much hype – sell high, buy low. 
  7. Gold has no intrinsic value.
  8. Others?

The Price of Gold/Oz.

  • $1,141.70 (11.19.09 – date of post)

Gold Articles

  1. Buy Gold, Not Miners: Jim Rogers
  2. What’s John Paulson Buying Now? Hint….Think Gold
  3. “I Don’t Believe In Gold,” Says Nouriel Roubini
  4. Others?