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2008-06-05 17:52:41 |
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Can Gold counter inflation & currency fluctuations?
So gold is often bought to counter the effects of inflation and currency fluctuations. In fact extensive research from a range of economists has consistently shown that, in spite of price fluctuations, gold has consistently reverted to its historic purchasing power parity; and during periods of financial, economic and social turmoil, gold has been a safe refuge when the value of other assets was all but destroyed.
In volatile and uncertain times, we often witness a ‘flight to quality', as investors seek to protect their capital by moving it into assets considered to be safer stores of value.
Gold is among only a handful of financial assets that is not matched by a liability. It can provide insurance against extreme movements on the value of traditional asset classes that can happen in unsettled times.
Some recent examples of the refuge afforded by gold include:
In 1997/98 the Government of South Korea asked its citizens to allow it to buy their gold holdings in exchange for local currency debt instruments. The Government raised over five million ounces of gold in this way which it sold for hard currency. As a result it was able to service its external debt.
Fearful of the implications of the forecast electronic and communications disaster surrounding Y2K, there was a flight to gold in 1999.
The first quarter of 2002 saw a flight to gold by Japanese investors as they awaited the withdrawal of government guarantees on bank deposits.
Gold's liquidity is one of its critical investment attributes. Gold can be traded around the clock in larger size, at narrower spreads and more rapidly than many competing diversifiers or mainstream investments.
Courtesy: World Gold Council site www.gold.org
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Chana futures slipped after a moderate start on Wednesday following profit booking by traders. However, all over sentiments remained bullish due to firm demand. |
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Silver futures extended previous gains on Wednesday in the domestic futures market on account of continues buying by speculators tacking firm global sentiments. |
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Jeera futures edged up against previous closes on Wednesday due to improved demand in the spot market. |
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