Wednesday, March 17, 2010

Gold Makes USA Today Again, But In Thr Hands Of A Skeptic

Matt Krantz doesn't think much of gold as an investment, but he still took a question about gold ETFs for his "Ask Matt" column. That says something about the spread of the gold-as-hedge-asset meme.

To his credit, he's polite about his own opinions, and adds the case for gold in his answer:
Gold is the favorite asset for nervous people trying to preserve their wealth. Since gold is a metal that's been considered to have value for centuries, it's a typical fall back when the economy is looking scary.

Gold bugs point out that the yellow metal is almost the perfect asset no matter what you're worried about. Worried that the government's deficits will result in runaway inflation? No problem. Gold, in theory at least, works for that. Fearful the dollar might lose its position as the world's default currency? Again, gold works. In fact, moves in the value of the dollar has been a bigger driver behind the price of gold, according to an analysis cited by USA TODAY's John Waggoner here.

As Waggoner points out, if you're really worried the value of the dollar will contract, even though the currency's value has been rising this year, then maybe 5% of your portfolio in gold might make sense....

It could be respect for his colleague, though.

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