This notion that gold is a protection against hyper-inflation is completely off base.
The only way hoarding gold is going help you is if the U.s. economy completely collapses and we revert to bartering. Gold has become nothing more than a fear trade. You might hear pundits on T.V. preach to you that gold is a hedge against inflation, or commercials touting their golden eagle coins as a great investment.
Wrong and wrong: If it was such a great hedge it wouldn't have taken a hit from $1,900 an ounce to the $1,200 area in a year.
This happened in the very same year that the U.S. went through an unprecedented Quantitative Easing, best described as intentional inflation. What it boils down to is fear speculation. Yet isn't speculation and inflation the exact things that people want avoid by buying gold?
Yes, I screamed to stay away from securities such as the SPDR Gold Trust (GLD) and when the commodity was hitting $1,900 an ounce, but at $1,350 the thesis still rings true.
Other than jewelry and hoarding there is no real use for gold any more. We left the Gold Standard in the U.S. during the Nixon administration. Regardless of how you feel about it, the cat is out of the bag, and there is no going back. Matter of fact, not one country in the world is still on the gold standard. I ask you, other than fear, what makes gold worth more than silver or copper? They both actually have more uses like construction and cell phones.
I understand there will always be the fear of not having a sense of control over your world. The idea of having something substantial in your hands is compelling. One might feel that a $1 gold coin in their hand is worth $2 paper dollars if all goes to hell. If that's the case, buy silver and canned stew.
You'll be better off if things truly get out of hand, and you'll have something to eat.
David Meyers is the owner and operator of Common Man Investor.
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