Gold Still Offers the Best Insurance
Source: Mineweb, Lawrence Williams (5/11/09)
"There has been little, if any, disinvestment from gold. . ."
And indeed they may well be wise to do so. Major bear markets of the past have seen big upswings during their progress, sucking investors back in, only for the upturns to end dramatically as some further major financial collapse spooks the markets again and prices tumble.
Gold, which thrives on economic uncertainty, should continue to play a major part in wealth preservation. It thus makes sense for a significant portion of one's wealth to be invested in gold and gold stocks—and maybe in silver, which tends to follow gold but in a more volatile pattern.
At the moment the U.S. dollar is holding up reasonably well in relation to other currencies. Should the dollar start to fall back and inflation pick up, this would be a double whammy in terms of boosting the gold price and this could soar while the purchasing value of other investments, salaries—and pensions in particular—could dive dramatically. This may be almost a doomsday scenario, but one does need to protect oneself against such an eventuality.
There has also been some talk of revaluing gold as a neat way of boosting global monetary reserves and stabilizing the global economy, but this may be a political nightmare and probably won't come about. But again, if more and more people turn to gold amidst continuing economic shock and uncertainty, the markets alone could make this revaluation fact and save the politicians from having to try and push through what could be an unacceptable move.
Overall, gold looks to have more of an upside potential than a downside. Maybe one should sell one's stock market investments in May and go away as the old adage advises, but it may be foolish to sell your gold!