Reading the comments tacked on to Financial Times’ stories is often more interesting than the stories themselves. ‘Investor Maximus’ pithily added to an FT story on 2 October this year, headlined ‘Why Buffet is wrong to dismiss the benefits of gold’, that “Gold is the asset to hold when every currency is equally crap”. Which hit the nail on the head. When all else seems to be going to hell in a hand cart, then gold remains a friend, perhaps the only friend.
If you do a thorough search of the Financial Times you can find many more stories predicting the end of gold as an investment and store of value, than stories that actually look at some concrete data supportive of gold, such as this one from 2017, which identified that the gold standard – the tying of a fiat currency to some value of gold – “produced fewer catastrophes for Britain”. That latter story concluded: “None of this is to say that the gold standard is necessarily better — stability can be overrated and growth is worth having — but the data suggest the standard arguments against gold, and the standard arguments in favour of the flexible and “counter-cyclical” state we have today, need serious revision.”
The FT, which after all is a news paper, can never make up its mind whether gold is a good thing or a bad thing. Its views on gold, and much else besides, ebb and flow, a tidal depiction of the world as it currently is. It is therefore a bad guide to where the world is headed.
But at least FT journalists do a lot of reading, and make their livings (and reputations) by bringing good ideas to wider notice. One cannot hope to read everything – and the FT is perhaps most useful for pointing readers into wider, and sometimes deeper, knowledge.
Thus a recent piece about gold in the paper – ‘Gold is looking more attractive’ – caught my eye, largely because it was so unusual. Largely based on a speech by Ray Dalio, it correctly identified today’s truly massive public and private indebtedness; the vast quantitative easing (i.e. money-printing) that governments continue to indulge; the end to ‘austerity’ now signalled by all the major political parties contending for votes on the 12 December general election in the UK; the financially engineered (artificially created, that is) ‘growth’ that has been the achievement of governments everywhere from Brussels to Beijing since 2009…All of these mean, says Dalio, that “the world is leveraged long, holding assets that have low real and nominal expected returns that are also providing historically low returns relative to cash returns (because of the enormous amount of money that has been pumped into the hands of investors by central banks and because of other economic forces that are making companies flush with cash)” and that the investments “that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold…I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.”
The FT being the FT it cannot avoid ending the article with a dismissive reference. “No wonder gold bugs abound” says the journalist. The gold “bug” is the way the FT always dismisses those who hold gold as quasi-bonkers, as if rational thought and gold are incompatible. And no-one is suggesting that all of one’s assets should be put into gold; it is, after all, largely a defensive asset, although one that, thanks to Glint, can now be used as real money.
Yet it must also be asked – who should we trust more? Ray Dalio, the 70 year-old American billionaire (the world’s 58th wealthiest person as of June this year) and co-chairman of Bridgwater Associates, or a rather poorer journalist’s throw-away line in the FT? It’s a rhetorical question, of course.