Over a year ago, on May 6, 2010, this blog launched with a first post on the attractiveness of gold as an investment. On that day the price of gold was just under $1200/oz, and as it became clear that the Federal Reserve was about to embark on another large round of money printing, which later came to be known as QE2, I felt compelled to grab the keyboard and start typing (see articles tagged ‘Gold’ both here and on SeekingAlpha for further reference).
During this time it has been amusing to watch the professional punditry drone on about a “gold bubble” and observe various blogger bets about how gold’s run couldn’t last. The biggest amusement of all, however, has been the disparaging remarks from those such as Berkshire Hathaway’s Charlie Munger, who belongs to a group I’ve taken to calling the ‘gold haters’.
Suggestions from credible policymakers, such as the World Bank’s Robert Zoellick advocating a return to the gold standard, have lit a fire under the barbarous relic’s price this past year. Today, with gold pressing above $1700, or nearly 50% higher in just over a year, I can’t help but comment on how we’ve heard nary a peep of late from the anti-gold crowd.
Where to from here? As long as three key fundamental forces persist then the rise in the price of gold will continue unabated. Those forces are:
- Low interest rates, a hallmark of the current program of financial repression, which is only just getting started and should extend for many years to come.
- Continued central bank purchases of gold by countries such as South Korea, Thailand, Russia, etc.
- More money printing, which we’ve seen in spades of late with Italian and Spanish bond buying, Bank of Japan and Swiss National Bank currency intervention, and the Fed’s rumoured QE3.
Continue reading the full article at SeekingAlpha here.