Thursday 17 April 2014

Obama win is worth its weight in gold

GOLD prices hit their highest level in two weeks after President Barack Obama was re-elected in the US.

The expectation is that the re-election of Mr Obama will mean a continuation of a monetary stimulus in the world's largest economy.

Printing money brings with it the fear that inflation will surge. Gold is seen as a good hedge against inflation.

"Inflation is always and everywhere a monetary phenomenon," the famed economist Milton Freidman said in 1970.

Gold yesterday reversed early losses to hit around $1,729 an ounce, its strongest since October 23.

But do not get too carried away.

Anyone investing in gold should not put more than 5pc of the funds they have for investment into the precious metal.

Also, be aware that gold does not pay a dividend, so the only gain is capital appreciation.

Gold has had an extraordinary run in the last few years since the collapse of Lehman Brothers, but it is the nature of things that this run will not last forever.

Some US investment analysts feel gold prices are close to their peak already and early next year prices will top out.

So prices may continue to rise for a while, but just don't bet the house on the rise going on and on.

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