“Speculators are overinflating the price of gold, folks… yes, I’m an Austrian. Yes, I believe in a commodities backed currency that is stable and not prone to market fluctuations. But if you’re investing in gold, or thinking that the gold standard is the mythological panacea to inflation, you’re simply blind to history…”
…thus the insults of statist, or paper libertarian, or any other invective is hurled from those who can mentally reconcile their portfolios of gold and silver alongside their Bitcoin investments.
Gold continued to take a battering Monday, shedding more than $100 per troy ounce after China registered weaker-than-expected growth, sparking a new wave of selling on concerns that China and India – the world’s two biggest buyers – may slow purchases.
Gold is on track to post its biggest-ever one-day decline in percentage terms since February 1983.
Gold for April delivery, the front-month contract, was down $144.60, or 9.6%, at $1,356.40 a troy ounce in late morning trade on the Comex division of the New York Mercantile Exchange, its lowest price in more than two years.
The price of gold slumped to $1,400 an ounce in what appears to be panic selling after China’s first-quarter growth came in lower than expected. Other markets were also hit, with silver and other commodity prices and currencies like the Australian dollar are falling too. Photo: Bloomberg
“Everybody that’s bought for the past two years, since April 2011, is losing money,” said Ira Epstein, director of the Ira Epstein division at the Linn Group. “It’s a sea of red,” he said.
Gold’s plunge comes as concerns are fading over global financial stability, higher inflation and the economy as a whole, analysts and traders said. Those worries had provided pillars of gold’s support.
Instead, traders are more aggressively pursuing higher yields after several years of low interest rates left many market participants with paltry returns.
“It’s all about return on money…why would anybody own anything but stocks right now?” Mr. Epstein said.
Here’s the problem — gold may hold value, but you’re investing in an institution of gold. No different than any other institution — say your Federal Reserve? — that holds value not because there’s something intrinsic, but because the “full faith and credit” of that object holds value because a polity says it holds value.
There’s no reason in the world gold should be down.
Yet it is.
Your better bet? Put that money to work and get it into production. This is why investing in gold is about the moral equivalent of investing in your government — because that liquidity is literally sucked right out of the economy. You might as well have converted your money to U.S. Treasury bonds.
…and for all those screaming about TEOTWAWKI environments, when bread becomes more valuable than gold… you’re screwed. No amount of gold will save you in a Zimbabwe or Weimar Germany hyperinflationary environment.
So lessons learned? Austrian economics work, but only to a point. For personal investments, it’s called ROI — return on investment. Buy land, invest in a business, buy annuities, purchase stocks, put your money into production.
Don’t bury it in the backyard. The same argument used against government confiscation through taxation is the precise same argument one could use for buying gold and silver as a hedge. Today’s market should be punishment enough and lessons learned.
