Gold provides ‘essential insurance’ against financial crises
As bank shares continue to plummet, the price of gold continues to soar, with prices last week hitting a seven month high of $953.30 per ounce.
Former editor of The Times, Lord William Rees-Mogg, expects this trend to continue as investors seek to protect themselves against future shocks in the stock market.
“People buy gold when they are nervous about the economy, and they are right to do so because gold is a unique commodity,” Rees-Mogg wrote in his Sunday Times column.
Gold provides “the best insurance against future shocks”, Rees-Mogg said, echoing Barclays Capital’s comments that gold has gained in price for eight successive years.
He pointed out that since Gordon Brown started selling the Bank of England’s gold reserves in 1999, gold prices have risen by over 200%, whilst shares in the UK’s biggest banks have dropped as much as 90%.
Investors must “never forget the value of gold” in times of crisis, the Lord said.
He warned that gold, like any other commodity, can become overvalued, but added that it is a much better “store of value” than liquid assets held as currency, such as the US dollar.
Rees-Mogg concluded that gold must once again underwrite the world’s economy if it is to remain stable: “Governments need to create a new world system, in which gold, as a stabiliser, should play its part.”
In the meantime, “For individuals, gold remains the best insurance against future shocks and the best store of value.”
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