HedgeFundLIVE — $1,500 yesterday, April 19th, 2011, in response to Standard and Poor’s lowering the outlook of the United States’ debt to negative. In addition, the uncertainty around the value of the dollar caused investors to flee towards Gold. Gold has had a strong run this year, rising from levels of $1,100 to $1,500, representing a 30% return. Gold is a good hedge but I feel this steep increase is based on unjustified fear around equities. Also, Gold is pricing in high levels of inflation. However, the monetary policy of the Federal Reserve could prevent high future inflation. Historically if you look back at how gold performs post-recession, it pops and then takes a dive. Looking at a graph after the 1987 crash, you can see gold increased to near $500 and less than a year later drop substantially to around $390.
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