Yet another record day for the ultimate hedge against doom. For the third day in a row, the metal surged higher, this time hitting $1055.
How high can it go? As David Goldman puts it:
What’s the price of the last ticket on last train out of Paris on the night the Germans march in? Whoever is carrying the most cash will get it, and that will be the price. Robert Merton, the great finance theorist, showed that in a multi-time-period model, investors hedge against the prospective change in the investment opportunity set. If sufficient hedges are not available the price of such hedges can be arbitrarily high. As I have tried to show in several recent articles, most recently this Sept. 15 essay at Asia Times, gold is a hedge against the collapse of America’s central role in world affairs.
All investors are thinking the same thing: why not be long at least a little gold? Whether as a hedge against inflation, political strife, or the end of Dollar dominance, it’s easy to come up with a reason to buy it.