Gold: All that glisters: Part 2
I was surprised to see that the gold depo market has gone bid, at least at the front end, which in theory has eroded the negative cost of carry.
I’ve mentioned before that I don’t get gold. I’ve been reading a few bulletin boards and I can’t help but think another huge bubble is building, pumped up by a load of retail Johnnies being seduced by the notion that gold is something of value.
UK gold buyers are lucky that its value has not dropped against sterling like it has against the dollar. However, if you accept that gold is a currency, which it may be, then the gold buyers would have been better off just selling cable.
I was surprised to see that the gold depo market has gone bid, at least at the front end, which in theory has eroded the negative cost of carry. In practice though, I’m not sure many gold owners do lend out their holding. What I have read consistently over the recent past is that gold is a perfect hedge against inflation. Whether or not the same is true for deflation remains to be seen, but personally, I’d prefer to own government bonds, even if there is a flood of issuance coming. As for gold, it looks like a completely rigged market to me – but that may be because I really don’t understand it.