Six Good Reasons to Own Gold Today
by Alexander Green, Chairman, Investment U
Investment Director, The Oxford Club
Dear Investment U Reader,

In 1999, the price of gold hit a 20-year low near $250 an ounce. It stayed below $300 for the next two years.

But a genuine bull run began in the first half of 2001. Gold reached $720 last year. And the spot price hovers near $740 today. Is it headed higher still?


Although the price of “the barbarous relic” is notoriously unpredictable, there are good reasons to think so. Here are just a few:

1. The U.S. dollar is weakening. That makes the metal, typically denominated in dollars, cheaper to buy in other currencies. (Euro-denominated investors think gold still looks cheap.) Gold traditionally rallies as the dollar falls.

2. Inflation fears. Only a few months ago, Bernanke was openly fretting about the possibility of higher inflation – and saying the Fed’s bias was toward tightening rates. Yet he has cut rates dramatically to lessen the credit crunch resulting from a meltdown in mortgage-based securities. Needless to say, the Fed’s action was inflationary. And gold is an excellent inflation hedge.

3. The emergence of China and India. A flourishing middle class in both emerging giants is increasing the demand for gold. (Jewelry fabrication was up more than 50% in India alone last year.) People everywhere like gold watches, gold coins, and gold wedding bands.

4. Supply constraints. Around the world, discovery rates are falling. Mines are being depleted and mining companies are producing lower grade base metals.

5. Geopolitical instability. There are plenty of hotspots around the world today. But gold is viewed as a safe haven during times of political or economic calamity. (That’s one good reason we own it in our Oxford Anti-Terror Portfolio.)

6. The trend is your friend. Good traders know better than to fight the broad trend in an asset class – and clearly gold is on the rise right now.