Recently, even unexpected sources have been expressing support for gold investment. The Economist, a highly reputable magazine, has taken note of this trend, with its New York bureau chief Matthew Bishop authoring a book on the topic, entitled In Gold We Trust? The Future of Money in an Age of Uncertainty.
During a recent interview with the Wall Street Journal, Bishop was asked about the perception that gold investment is an outdated concept. He stated that he believes gold has gained renewed interest because people have lost faith in government-backed fiat money. In Bishop’s view, gold provides a practical and necessary way to protect wealth against currency devaluation. Governments are likely to devalue fiat currencies, he explained, all fiat currencies’ stability requires governments to keep their promises, which they rarely do, however with gold that’s not an issue as there is no counterparty.
What makes Bishop’s work unique is that he has no vested interest in the topic. As per company policy, he is prohibited from making any investments, and his aim is to raise awareness that the current economic crisis is a structural problem that cannot be solved through short-term measures like tinkering with interest rates.
Bishop describes the current economic downturn as a “deleveraging type” that will take several years to recover from, which he has based on historical data. Therefore, he suggests that in such situations, investors should consider converting a significant portion of their securities to cash. However, holding currency carries too much risk in the present context, so it is wiser to invest in gold.
Despite The Economist’s aversion to making forecasts, Bishop was pressed for his opinion on the price of gold in the near future. He predicted that gold would be higher at the end of the year, and that it would continue to rise in the next five years.
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