Gold Remains Better Than Any Paper Currency
While I have long been (and continues to be) bearish on the U.S. dollar versus most other paper currencies that doesn't mean that I think those other paper currencies are the best investment choice. While the ECB for example pursues sounder policies than the Fed,their policy is onlky sound in a relative sense. The ECB too is inflationary in a absolute sense as they fail to raise interest rates despite the fact that inflation is well above their alleged "ceiling" of 2% and continues to rise. Instead, I have long argued that gold is a better investment alternative now that inflation is accelerating. This is in part due to the direct effect of inflation in terms of depreciating the real value of paper currencies, but even more importantly because of the indirect effect of increasing demand of gold as an inflation hedge.
Anyone who followed that advice would have earned a lot of money as gold is up more than 30% since then, from $750 to $984 per ounce. It will soon break above $1000, probably already this week. Yet that will not be the end of it. Remember during the 1970s, gold rose from $35 to $850, a 24fold increase. At $1000, gold is up only 4 times since the 1999 low. If Bernanke continues his current extremely inflationary policies, gold might very well increase 24fold this time too, which would imply a gold price of $6000 within a few more years.
I now see a story on Bloomberg News entitled "Growing Global Distrust Of Central Bankers" indicating that more and more people realize that with inflation accelerating, government bonds in general and U.S. government bonds in particular suck as investment alternatives and that gold and other commodities is the place to be for investors.The only question is why it took them so long to figure it out.