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Ignore Government-Issued Stats, Gold Is Still An Inflation Hedge

by Jack Adamo

“History gives us the answer in recent disasters like the Weimar Republic and Zimbabwe, as well as examples going back at least as far as ancient Rome.

So, we have a simple progression here.

  1. Experience and objective third party data tell us that U.S. inflation statistics are a lie.
  2. History tells us that all fiat currencies eventually fail.
  3. Today’s rate of exotic monetary adventurism is unprecedented.

These obvious truths lead to one inescapable conclusion: Gold may be somewhat overpriced at the moment (or not), but with all financial assets inflated by Fed policies, the price divergence between hard assets and financial assets with no toehold in the real world must eventually be closed.

Commodity guru and self-made billionaire Jim Rogers agrees. He warned of an overbought condition in gold in October 2011, but said in late June of this year that he was buying again, averring that it might not be “the bottom” for gold, but looked like it was near one. He also said “Europe, Japan, America and the U.K., are all frantically trying to debase their currencies…I’m afraid that in the end, we’re all going to suffer, perhaps worse then we ever have, with inflation, currency turmoil, and higher interest rates.”

In my view, the only x-factor is whether these Central Bank policies lead the world to high inflation, wherein the gold price will explode, or a decades-long period of low-to-negative economic growth, accompanied by deflating financial assets. I’m not sure which it will be, or whether it will be some mutant variant of the two, but gold is an inflation hedge and cash is a deflation hedge; I want to have a good helping of each on hand.”

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