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Economic News, Data and Analysis

All That Glitters

Why the heck is gold still seen as a “safe haven” investment? Gold prices are rising on war fears, but have fallen $50, or about 13%, over the past month. (See article below.)
Looks to me like gold prices are more of a betting-on-war casino game.
Central Banks and international organizations (like the IMF) own – literally – tons of the shiny stuff. The gold would be much better used if it were made available to the public in the form of jewelry, electronics, etc., rather than sitting idle in vaults around the world.
How much better? Somewhere around $355,885,676,597 better. Don’t believe me? Run the simulation yourself!

Forbes.com: UPDATE 4-Gold edges up as Iraq on brink of war
LONDON/HONG KONG, March 19 (Reuters) – Safe-haven gold attracted fresh buying on Wednesday as Iraq appeared to be on the brink of war, traders said.
Gold prices were expected to be skittish as a U.S. deadline for Saddam Hussein to go into exile by 0115 GMT on Thursday ticked away.
The precious metal, which traditionally acts as an insurance policy for investors in times of trouble, had the potential to advance further if war broke out.
“The use of military action against Iraq is pretty much a foregone conclusion now and the start of which will give gold an upwards surge,” said James Moore, metals analyst at TheBullionDesk.com.
[Gold up about 1$ to 338.75, but down from 288.50 last month.]
During the 1991 Gulf War, gold prices initially spiked at the start of allied military action to evict Iraqi forces from Kuwait but then quickly slumped as the campaign proved to be a swift victory.
Gold gained $45 to $415 when Iraqi forces invaded Kuwait in August, 1990, then fell by $40 to $366 when the allied campaign started in January, 1991.

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Filed under: Economics, Microeconomics, Policy

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