Gold is a Gift, Not an Investment


Posted in: Economics, General, Stock Market, Thought of the Week

Gold is considered a “safe-haven” asset because it has been a store of value and an inflation hedge since the beginning of time. The price of gold skyrocketed from 2009-2012 for this very reason, but to understand why let’s go back to 2009 and walk through the events that led to such strong performance.

The Fed’s Quantitative Easing (QE) program was introduced to weaken the U.S. Dollar (USD) in order to help our economy recover faster from the financial crisis. A common result of a weakening currency is inflation and although paper currency can be printed at-will, gold has a finite supply and is subsequently immune to the effects of inflation. As a result, investors flocked to gold for safety up until October 2012.

Since then, gold’s spectacular rise halted and immediately began a decline that is currently still underway. Gold prices fell 23% in the second quarter of 2013, the biggest quarterly decline since trading of U.S. gold futures began in 1974.

Read this week’s Thought of the Week to hear what our investment committee thinks of gold as an investment.

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As an Investment Advisory Representative working in conjunction with Global Financial Private Capital (GFPC) we are provided weekly thoughts on what is happening in the economy and the market.  Written by our investment committee at GFPC we find these thoughts to be informative and interesting.