The period after Bretton Woods was irritating to many Keynesian economists, who had suggested that the price of gold would collapse upon the abandonment of government sponsorship.
To their chagrin, gold became a competitor currency. With a use case fortified by millennia of experience and challenges, gold has proved — in the words of Spandau Ballet — indestructible, as the price rises over 2019 have once again demonstrated.
Over the long term, gold has an uncertain case for investment returns. However, when the world economy shakes, gold has proved to be an admirable monetary and conflict hedge. Gold should serve investors well if we enter a downturn (geopolitical, monetary or fiscal). As gold is a competitor currency, it will do best when its rivals struggle.
So when does gold work? Gold tends to do well in low-interest-rate environments, when there are severe downturns in equities, as shown in the table below. However, this may not be perfectly rational. Find out why – download to read the Gold: You’re Indestructible report.
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