It’s all over the news. The world’s financial markets are in turmoil. The eurozone is teetering. The U.S. is heading off a fiscal cliff. Gold bugs are cheering the demise of paper money, and copies of Ayn Rand’s epic novel Atlas Shrugged continue to fly off the shelves – both literally and in cyberspace. Is the world really about to end? Do you need to stockpile gold bullion in preparation for a complete financial collapse? Maybe, but probably not. What you do need is an intelligent approach to money management going forward.
Another common assumption is that gold surges during times of inflation – thus aiding in the perception that gold is a good hedge against inflation. However, the graph shows that 35 of the last 50 years, gold didn’t provide any significant protection from inflation. In fact, sometimes, investors actually lost money playing the inflation card.