Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

8370e90346f86f380edebe1d_ms7578c.jpg

Is Gold a Good Hedge?

Many gold buyers want a hedge against the risk of inflation or possible declines in the value of the dollar or other currencies. But gold is an exceptionally poor hedge against both of these risks, particularly compared to the alternatives, such as inflation-protected government bonds and currency futures, that are available to investors.

CAMBRIDGE – As I walked through the airport in Dubai recently, I was struck by the large number of travelers who were buying gold coins. They were not reacting to Dubai’s financial trouble, but rather were joining the eager rush to own gold before its price rises even further. Such behavior has pushed the price of gold from $400 an ounce in 2005 to more than $1100 an ounce in December 2009.

Individual buying of gold goes far beyond the airport shops and other places where gold coins are sold. In addition to buying coins minted by several governments, individuals are buying kilogram gold bars, exchange-traded funds that represent claims on physical gold, gold futures, and shares in gold-mining companies that provide a leveraged position on the future price of gold.

And gold buyers include not just individuals, but also sophisticated institutions and sovereign wealth funds. Recently, the government of India purchased 200 tons of gold from the International Monetary Fund.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/RBjy4Bb;
  1. bildt70_SAUL LOEBAFP via Getty Images_trumpukrainezelensky Saul Loeb/AFP via Getty Images

    Impeachment and the Wider World

    Carl Bildt

    As with the proceedings against former US Presidents Richard Nixon and Bill Clinton, the impeachment inquiry into Donald Trump is ultimately a domestic political issue that will be decided in the US Congress. But, unlike those earlier cases, the Ukraine scandal threatens to jam up the entire machinery of US foreign policy.

    0
  2. krueger21_trumpamericamediocre

    Making America Mediocre

    Anne O. Krueger

    America owes its economic strength to its private sector, which has long benefited from an absence of undue influence by politicians and the state. But under US President Donald Trump's administration, discretionary decisions by policymakers are increasingly giving some companies advantages over others.

    0