Encyclopedia of Opinion
Question
Is gold a good investment?
Position‹3 of 3

Gold is neither good nor bad, it depends on the circumstances

This position holds that gold is neither a good nor a bad investment in itself — it depends on circumstances. It argues that gold does well in some environments and poorly in others, the key determinant being real interest rates: gold tends to shine when bond yields turn negative.

Supporting arguments · 2

  1. Real rates are the driver of gold
    Gold's performance is not tied to the level of inflation but the level of real interest rates. This goes contrary to what many thought and is called Gibson's Paradox. When real rates are positive, gold does poorly. When real rates are negative, gold does well.
  2. Gold is a good investment when bonds have negative yields
    Gold does well when real rates are negative. Given inflation is positive today and real rates are negative in nominal and absolute terms, gold will do very well. Unsurprisingly, gold prices are highly correlated to the percentage of government bonds trading with negative yields.