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Main » 2016 » May » 20 » Why is gold - it's fun?
Why is gold - it's fun?



Since the beginning of the year it became clear that the dollar and the US Federal Reserve are not omnipotent, and gold could easily regain its former glory defensive asset and return to the portfolios of investors - on AMarkets materials.




Prices of currencies and other assets (gold in particular) are determined by supply and demand. One of the key drivers of supply and demand - the expectations for the path of interest rates. It often happens that investors can not assess the situation soberly - they judge the rates and the future of the economy at a nominal rate dynamics. The real interest rate (adjusted for inflation) can be much less attractive. Arguing about the attractiveness of alternative asset - gold - investors often say that gold does not pay interest, therefore, it is not as good as other assets. However, the most liquid assets - cash - investor earns interest only if the investor lends cash to someone. Or, for example, if an investor puts money on deposit in the bank - then the bank pays interest (well, if the interest is at least cover inflation).

Theoretically, gold, too, can lend money for interest. However, most investors do not. Speaking of deposits, there is more assurance - the state provides insurance to depositors (although a fairly small amounts, but still).Yes, gold is difficult to earn interest. However, gold and restated hard (unlike currency).

With gold the opposite is happening - manufacturers reduce the pace, consolidating industry, metal supply decreases in the market. All this suggests that gold today - decent for hedging investment portfolios. 

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