Gold and Your Portfolio
WSJ says gold is a lousy investment. That might very well turnout to be the case, but the articlehas nothing useful to convince you about that. In fact, its so poorly researched. For example,consider this:
What drives gold prices? It's an alchemist's mixture of fundamentals and fantasy. Gold certainly has industrial uses and it's a hot item for purchasers of jewelry, especially inIndia. But fundamentals don't support the soaring gold picture of late. As Carl Weinberg,chief economist at High Frequency Economics, a Valhalla, N.Y., research firm, notes:"Industrial demand for gold surely is depressed -- along with demand for other industrial materials -- and jewelry demand must be hard-hit by global recession."
One would think he is bringing up the ‘hot item’ in India part to draw a connection to thedemand, but he ignores it in the next sentence and goes on to talk about industrial demand. Itssad that an article that talks about gold says nothing about the price of gold being driven up byfears of depreciation of the fiat currency (USD).I can think of two questions that are important to the average investor saving for retirement:1.How does gold compare with other assets? The reason that question is important is tounderstand if it has a place in your overall portfolio. It would be silly to sink your entire wealthinto gold or for that matter any one asset class.2.Does
know what the difference is between
? For instance at10,000 is Dow a fantasy or is it based on fundamentals?To answer question 2, I've reproduced Prof Robert Shiller's graph. Do those stock prices looklike they are reflecting fundamentals - i.e earnings?