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Gold An Investment Rationale

Gold An Investment Rationale

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Published by prenti123

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Published by: prenti123 on Feb 08, 2010
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07/13/2013

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The crude oil is one of the factors for inflation. As the prices of crude oil increases there is
upward pressure on inflation. In order to hedge against the inflation people invest in gold . so we
can say that there is no direct relationship between gold and crude oil prices. It will be more clear
from the following discussion.

Gold has almost always been the most-highly-sought-after universal store of wealth.
The seemingly magical yellow metal is the de facto standard by which every other form of
money and wealth in history has been measured. Empires and currencies rise and fall, but gold
stands strong, monolithic and proud, casting an enormous shadow over all of monetary history.

40

So we can say that the gold is the king of all the currencies. Where as the demand for crude oil is
in elastic. Now paper currencies loose their purchasing power with time but this doesn’t happen
with the gold. So during inflationary period when other currencies loose their value more gold
can be purchased with gold due to its purchasing power stability.

So during high crude oil prices, high inflation, and decling equity

market gold can be stored to hedge the inflation.

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