We scanned a familiar headline in The WSJ earlier today that gold was up yet again. Specifically, “Gold for December delivery, the most actively traded contract, rose 0.2% to $1,144.10 an ounce … [and is] set to end the week higher by more than 2%.” And according to Kitco, the current gold spot price was up 54.22% for the past 12 months as of 12:55 PM CT on Friday. But where does this particular gold rush leave other commodities? Not to mention actual demand from a manufacturing and industrial standpoint? In our view, there’s never been a greater disconnect between the price of gold as an investment vehicle and perceived safe haven relative to true commodity demand in the industrial markets.
Jason,
I think that the general public is not clear what Gold is. It is a hybrid between real money (purchasing power) and a commodity. In fact, all money comes into existence through commodities. The public determines what commodity best serves the purposes of money which primarily is to support exchange. In prison, it may be cigarettes. Over the course of history, people chose gold.
Now, we are on a paper standard brought forth through government declaration and power. All paper systems have eventually failed. Today, we face the most significant financial crisis of our lifetime. In the uncertainty, people are seeking safety. Gold generally does well during crisis. We are not out of this crisis and our government’s action is to devalue the currency.
For anyone really interested, “What Has Government Done to Our Money?” by Murray N. Rothbard is especially illuminating: http://mises.org/money.asp