Gold – although the hardest asset of them all, it has always been one associated with emotions. Maybe too much. A lot of people have a kind of a love/hate relationship with gold, while some are neutral.
This became apparent in the past few days when gold literally sold off. We wrote that the gold price drop was the sharpest one since the bull market started in 2001. How much hurray commentary was published related to gold?
As an outstanding example of this point, one should look at the latest post by Paul Krugman on the NY Times blog. Entitled “Gold Does Not Glitter” it is fascinating to see how much emotion (frustration?) one can read between the lines. Clearly Mr. Krugman was quite concerned with gold’s uptrend, hindering to make his scientific points.
Now even more interesting is the reader discussion associated with that blog post. As one should expect from NY Times readers, those are mostly well thought of comments. Even the comments were cynical and clearly pro or contra gold.
Which brings up another point – if even the Nobel price winner for economics evokes so much controversy about his theory and the real function of the oldest of all assets, then it mostly proves that gold is the most misunderstood of them all. After all, equities can be measured and valued, just like commodities and bonds. But what about gold?
Isn’t it strange that even with a proven track record of 5,000 years functioning as money, while 600 paper based money systems all have failed, gold is still not recognized having a monetary role? What does it tell us?