Dr. Mark W. Hendrickson,FloydReports.com
The price of gold has gone on a tear this summer,from slightly under $1,500 per ounce to well over $1,800 per ounce,and it looks like it wants to go higher. What gives?
Well,if you bought gold last spring,you’re looking pretty smart. And if you bought gold a decade ago at $300 per ounce,you’re looking like a whiz. Imagine buying a stock 10 years ago,having it appreciate fairly steadily over the decade,and then watching its price increase in less than two months by more than your original purchase price. For a commodity to increase at such a rate is truly extraordinary,even portentous.
For an investor,gold is an insurance policy,a way to preserve some purchasing power regardless of what happens to the official currency or a country’s banking system.
For a society,the rising price of gold is not a good thing. When investors flock to gold,it means they are not investing in wealth-creating enterprises. Money (which is what gold is once again becoming) is the oil that enables a country’s economic engine to run smoothly. Gold can’t make our country wealthier any more than engine oil by itself will get you from point A to point B,so while owning some gold may be individually prudent,it won’t make our country more prosperous.
Gold is a barometer that warns of financial and political storms. When its price goes up,as much as it has this summer,it is telling us that our country is in deep,deep trouble. “Gold’s meteoric rise” is just another way of saying “the dollar’s sickening plunge.” Because the dollar is our normal frame of reference,we think more in terms of the price of gold rising than the value of our currency falling. Gold provides a mirror image to the dollar,and the golden mirror is telling us that the Federal Reserve Note is critically ill.
Actually,the dollar has been sick for a long time. Forty years ago this month,President Richard Nixon “closed the gold window”—that is,the United States defaulted—yes,“defaulted.” Nixon broke our country’s solemn promise to….