CHAPTER 63 Man’s Addiction to Gold1
I am not a gold bug. Gold is an artifact from early history. So much so, it is deeply rooted in the collective human consciousness. The last time I wrote about it was more than two years ago on January 16, 2010 (Chapter 62, “So, the Gold Bug Still Bugs You”). Then, as now, I am not the most optimistic about gold as an investment. But I am a realist. Over the past 50 years, capital gain on gold averaged 2 to 5 percent annually over each decade. Stocks were a better investment—about double to three times the gold “yield.” This is not surprising, since gold has no real intrinsic value. It is sterile, making it difficult to value—one can’t assign a credible price-earnings ratio (PE).
So long as there is love, lust, and guilt, there is a demand for this “barbaric relic” (Lord John Maynard Keynes). But in this uncertain world, many see it as a sexy investment. That’s why gold scams thrive. It is still scarce, readily malleable, and will always command a price. Since the summer, even the darnedest optimist got worried as prices lurched down to US$1,500 a troy ounce (from a September 2011 high of just above US$1,900), wondering whether the decade-long bull-run had ended. No longer. Since US Fed launched its third quantitative easing (QE3) in mid-September 2012, gold has yet to catch its breath, rising 12.5 percent by October 6 to its highest level in nearly a year at US$1,795 per troy ounce. As reported, in terms of euro and Swiss franc, gold hit ...