All That Glitters is Gold

Issue 11  — March 12,2009

How often is it that the housewife in a rural Indian village outdoes the smart savvy investment banker on wall street. Well she has over the last eight months. Her hoarding of gold has appreciated by a half while the banker’s portfolio has halved. Most often there is an inverse relationship between gold and stocks just like there is for oil and stocks . As a result both gold and oil move in the same direction. However times they are changing. Investments like the weather patterns are witnessing historic changes. Last year oil, stocks and gold all moved up in the same direction. Up. The race was won by oil with stocks coming a close second. Gold ironically got the bronze medal . This year the race continues but the directions have changed. The recession has ensured that growth dips , so stocks fall and demand dips so oil prices fall. The sudden insecurity makes for a gold rush. The green in the yellow metal benefits India most as it keeps the highest gold reserves. Besides that gold is a useless investment . It provides no employment and  generates no demand . It even confuses those who wish to buy it for weddings or sell it to buy a house. Gold is an intriguing story of shock and awe. It glitters whenever there is shock of war, terror, oil supplies, and everyone ( at least in India ) is perpetually in awe of it . Besides gold does well when inflation is on a high and dollar is on a low. Given today”s converse scenario the gold rush has stumped many. However falling demand in India, sale of gold by central banks and a fall in global supply  promises to take the sheen off the precious metal .Having said that a hike in inflation through currency printing , a rising dollar or simply the lack of a better investment option could ensure —  All that glitters will be gold

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