Gold Will Outperform realestate and equities(stocks and mutual funds) if we face Inflation or Deflation
History has taught us that certain assets perform better during
inflation, while other assets thrive in a deflationary environment.
There is a common perception that hard assets and commodities do well
during inflation and poorly in deflation, whereas and bonds and cash
have contrary performance. However, it is a misperception to lump gold
into the hard assets category since it performs equally well during
deflation.
Gold is a monetary metal with unique characteristics that preserves
its purchasing power both during high inflation and high deflation.
This is because gold offers protection both against depreciating
currencies as well as deflationary busts, bank-runs, insolvency and
other deflationary scenarios since it does not have any
counterparties.
You will see that gold outperformed virtually all other asset classes
both during times of great deflation, between 1929 and 1940, as well
as during times of great inflation, during 1968 to 1980.
Government bonds did reasonably well, but gold was the clear winner.
Real estate and equities got crushed.
During the highly inflationary times of the late 1960s and 1970s, real
estate did reasonably well, but yet again, gold was the clear winner.
Equities were flat and bonds were negative, but if you factor in the
high inflation rate to these returns, they also got crushed.
During 1982 to 2000, a time of low to moderate inflation. Stocks and
bonds were the best performers while real estate and gold did poorly.
Today, the world is in a struggle between two giant forces of
inflation and deflation. On one hand we find ourselves in a great
deleveraging process. Economic growth is slow or negative, companies
are going bankrupt and countries are on the verge of default. This is
highly deflationary! However, on the other side of this equation,
governments and central banks worldwide are trying to re-liquefy the
system through money printing, quantitative easing, bailouts, and
other schemes, and this is highly inflationary.
We are currently at a standstill, and it is not yet certain which of
these two forces will prevail in the end. Some parts of the economy,
like real estate and derivatives, are deflating, while other parts of
the economy, such as up commodities and food prices, are inflating. If
deflation prevails, bonds will do well, and if inflation prevails,
hard assets should do well -- but in either case, gold will be the
clear winner.
Remember, the safest wa to invest in gold is to buy physical gold or
to hold it in the National spot exchange. For more information and
guidance, mail at mkhalid77@rediffmail.com
From:http://seekingalpha.com/article/312141-inflation-or-deflation-gold-will-outperform
inflation, while other assets thrive in a deflationary environment.
There is a common perception that hard assets and commodities do well
during inflation and poorly in deflation, whereas and bonds and cash
have contrary performance. However, it is a misperception to lump gold
into the hard assets category since it performs equally well during
deflation.
Gold is a monetary metal with unique characteristics that preserves
its purchasing power both during high inflation and high deflation.
This is because gold offers protection both against depreciating
currencies as well as deflationary busts, bank-runs, insolvency and
other deflationary scenarios since it does not have any
counterparties.
You will see that gold outperformed virtually all other asset classes
both during times of great deflation, between 1929 and 1940, as well
as during times of great inflation, during 1968 to 1980.
Government bonds did reasonably well, but gold was the clear winner.
Real estate and equities got crushed.
During the highly inflationary times of the late 1960s and 1970s, real
estate did reasonably well, but yet again, gold was the clear winner.
Equities were flat and bonds were negative, but if you factor in the
high inflation rate to these returns, they also got crushed.
During 1982 to 2000, a time of low to moderate inflation. Stocks and
bonds were the best performers while real estate and gold did poorly.
Today, the world is in a struggle between two giant forces of
inflation and deflation. On one hand we find ourselves in a great
deleveraging process. Economic growth is slow or negative, companies
are going bankrupt and countries are on the verge of default. This is
highly deflationary! However, on the other side of this equation,
governments and central banks worldwide are trying to re-liquefy the
system through money printing, quantitative easing, bailouts, and
other schemes, and this is highly inflationary.
We are currently at a standstill, and it is not yet certain which of
these two forces will prevail in the end. Some parts of the economy,
like real estate and derivatives, are deflating, while other parts of
the economy, such as up commodities and food prices, are inflating. If
deflation prevails, bonds will do well, and if inflation prevails,
hard assets should do well -- but in either case, gold will be the
clear winner.
Remember, the safest wa to invest in gold is to buy physical gold or
to hold it in the National spot exchange. For more information and
guidance, mail at mkhalid77@rediffmail.com
From:http://seekingalpha.com/article/312141-inflation-or-deflation-gold-will-outperform
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