*** begin quote ***
Indeed, another critical fundamental factor that has been sustaining high gold prices might prove far more ephemeral than globalization. Gold prices are extremely sensitive to global interest-rate movements. After all, gold pays no interest and even costs something to store. Today, with interest rates near or at record lows in many countries, it is relatively cheap to speculate in gold instead of investing in bonds. But if real interest rates rise significantly, as well they might someday, gold prices could plummet.
Most economic research suggests that gold prices are very difficult to predict over the short to medium term, with the odds of gains and losses being roughly in balance. It is therefore dangerous to extrapolate from short-term trends. Yes, gold has had a great run, but so, too, did worldwide housing prices until a couple of years ago.
If you are a high-net-worth investor, a sovereign wealth fund, or a central bank, it makes perfect sense to hold a modest proportion of your portfolio in gold as a hedge against extreme events. But, despite gold’s heightened allure in the wake of an extraordinary run-up in its price, it remains a very risky bet for most of us.
*** end quote ***
A gold price of 10k$/oz has terrible implications for the American economy and the average American. It’ll freeze global commerce as the price of oil gets denominated in gold. Hope they’re wrong.
# # # # #