We have been very amused with all the news coverage over the recent steep drop and the small subsequent rise in gold prices. The last time we checked gold had very little economic impact (unlike the oil price spike in 2007) as it is not used in any meaningful way outside of jewelry.
We have been consistently asked on several occasions about our opinion on gold. Our problem with gold is that we only know how to value assets with coupons, dividends, or earnings. We believe that gold is a very speculative investment that over time will yield a return that mirrors inflation, which is validated in the chart from Morningstar below.
If you really want to hedge against hype inflation, which we don’t think is in the cards, then commodities (wheat, corn, oil etc…) is probably a better bet than precious metals.
Our opinion hasn’t changed…. Buyer Beware!