A Not So Golden Opportunity
CHICAGO, Nov. 16, 2010 /PRNewswire/ — “During the last two years, the price of gold has risen 88%, twice the pace of the broader Commodity Research Bureau Index which increased 44%. This suggests something less fundamental and more emotional is at play,” says Adolfo Laurenti, deputy chief economist at Mesirow Financial, in his November issue of Themes on the Global Markets.
In his November newsletter, Laurenti notes, “Many investors view gold as a ‘safe haven,’ which will protect them from currency debasement during periods of rapid inflation.” He examines the reasons behind gold’s recent rise, compares that to previous rallies and considers the evidence of gold’s reliability:
- The strong performance in gold prices reflects a broader story: the rise in commodity prices driven by Asian demand, which has recovered quickly from the world financial crisis.
- Investors who bought gold near the peak in the early 1980s may have beat inflation, but others less fortunate in their timing suffered negative returns for nearly 20 years.
- Laurenti warns that, “Gold is a speculative, emotional, risky and extremely volatile investment. It has few industrial uses, no earnings stream and no cash flow.”
“If your goal is to protect the long-term value of your savings and investments, then an excessive concentration in gold may exacerbate rather than dampen the risks associated with market volatility and economic uncertainty. Buying gold as a hedge against poor monetary policy alone might not only fail but could be downright dangerous,” concludes Mesirow Financial’s deputy chief economist.
The November issue of Themes on the Global Markets, as well as archived issues, can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with more than $43 billion in assets under management and 1,200 employees in locations across the country and in London. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its Web site at mesirowfinancial.com.
SOURCE Mesirow Financial