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miju leonardo

Italy

amaeture blogger

Member since July 02, 2013


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    Running a leveraged hedge fund with a long position in gold has not been a lot of fun lately. The price of gold closed in New York at $1,225.20/oz on Wednesday. This was down by 4.1% on the day, lower by 18.6% year-to-date, and down by more than 35% from gold’s peak on September 6, 2011. I have never owned gold. For years, people have asked me if gold is a good investment. My answer has always been the same: “It had better not be.” This is because if gold is a good investment, neither America nor ordinary Americans are likely to do very well. Historically, this has been the case. The periods during which gold has been a good investment (the 1970s and the 2000s) have been terrible for the economy, and awful for the average citizen. Now, has the recent fall in gold prices caused “massive losses?” No. Speculation is a zero-sum game. Think of the gold market as a bunch of guys locked in a room with a fixed amount of dollars and a fixed amount of gold. All they can do is trade gold and money among themselves. For every seller, there is a buyer; and for every loser, there is a winner. Their game cannot impose losses on the people outside the room. Now, wildly fluctuating gold prices do imply large changes in the real value of the dollar, and that is a bad thing. An unstable currency imposes huge costs on the economy, but it does so through misdirection of capital investment (including the development of new gold mines that no one needs), not via losses on commodity spec...