(Bloomberg Opinion) — Investors don’t really have a handle on what gold is or what it represents. Many erroneously believe gold is some sort of inflation hedge, because of our experience in the 1970s.
It’s also not a hedge against stock market crashes, as we discovered in March. Gold is a hedge on government authorities making poor economic choices.
Inflation is usually the result of those poor decisions, but people confuse cause and effect here. Gold is a hedge on policy makers screwing up, and there has been a lot of screwing up in the last 20 years.
Gold has significantly outperformed stocks this century, gaining about 555% versus 79% for the MSCI All-Country World Index of stocks and 146% for the S&P 500 Index.(1) This is a direct result of significantly looser financial conditions, and no constraints on monetary and fiscal policy.
From a financial perspective, the global economy is in a much worse place than 20 years ago, and there is no evidence that things are going to improve.
For the rest of this column: https://www.bnnbloomberg.ca/gold-is-a-hedge-against-bad-government-decisions-1.1524334