Do we really want $5,000 gold?

FOOD FOR THOUGHT
Do we really want $5,000 gold?
What does $5,000 gold really mean? Perhaps social chaos and, if so, who really wants that?

Author: Lawrence Williams
Posted:  Friday , 26 Feb 2010

LONDON - 

General talk of gold as a potentially spectacular investment as opposed to an inflation hedge glosses over the true picture.  Over the ages, gold has kept up with inflation pretty well, and it will probably continue to do so in the future, but it may not make you wealthy, just protect whatever wealth you have.  True there have been periods when gold has outpaced the decline in currency values due to inflation, but that is usually when it is playing catch-up from a period of underperformance.

Now some ultra gold bulls out there are predicting $5,000 gold - or even higher.  While we think this unlikely in the foreseeable future, think what this means if it should come about.  It can only really happen if there is an equivalent decline in the US dollar - or the onset of hyper dollar inflation.  While some predict this also, the likelihood of a Zimbabwe situation with trillion US dollar notes buying less than a loaf of bread is hopefully rather more than we can see ahead.  If that should happen then $5,000 gold will be the least of what we should expect from the gold price.

Do we really want $5,000 gold?