The Gold Fever is Cooling Down

The gold price took a down slide in the past few weeks. For some people, gold is the only valid refuge for market turbulence. Those people advocate a flight from bonds and stocks to gold in order to avoid losses. Unfortunately the myth that gold is an effective protection against inflation might be over. For that matter gold has some defects:

i)             Possible excess of supply: with national banks like the bank of Cyprus ready to sell gold in order to pay its debts;

ii)            The practical uses for gold are very limited: The main application for gold is Jewellery and few industrial applications.

The real protection for inflation is always the goods and service market, it is where the inflation has its origins so it makes sense that you start looking for protection there.

Warren Buffet, the most successful investor of the history of investment, always defended that he sees no added value in digging to get gold and then digging again to hide it. He might just be right.

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