Gold Two Steps Forward … One Step Back

Wednesday, August 5, 2015
By Paul Martin

By: GoldCore
GoldSeek.com
Wednesday, 5 August 2015

‘Death of gold’ greatly exaggerated
Vital context: gold rose sharply in years preceding crisis and during crisis
Important to consider gold in local currency terms
In euro, gold is up 2% in 2015, after 13% gain in 2014
Gold at €300 in 2001, rose to €1,400 during crisis and at €1,000 today
History, academic and independent research shows gold is a safe haven
Sharp fall in value of commodities means global economy is weakening

The deluge of negative publicity regarding gold in recent weeks would give one the impression that it was now worthless and serves no function in a portfolio. We believe this publicity is greatly exaggerated and will be seen as folly in the coming months.

In the years running up to the financial crisis of 2008 gold rose dramatically despite the warning signs being widely ignored. It continued to act as a reliable store of value as the crisis deepened and then began to fall back following the stability – temporary, we believe – provided by central banks creating more debt to deal with a crisis of over-indebtedness.

The negative publicity has generally focussed on the performance of the gold price in dollar terms which is not particularly relevant to investors and savers in other currencies.

Gold rose from €300 in 2000 to around €1,400 at the height of the crisis. It has since fallen back to €1,000. In this context, one can see that gold’s function as a store of value and as a safe haven is still clearly evident. Gold’s recent performance in euro terms has been reasonably strong with a very respectable 13% rise last year and 2% gains so far this year.

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