Gold Inflation Hedge Is A Myth: Duke Professor

Kitco News speaks with professor Campbell Harvey of the Fuqua School of Business at Duke University about the fair value of gold. Harvey co-wrote a controversial academic paper with Claude Erb called The Golden Dilemma, which explored the 'myths’ related to gold prices. Harvey suggests that gold is not actually a good inflation or currency hedge. “It is a myth that gold is an effective hedge against unexpected inflation,” he says. “I would submit that many people make a mistake in buying gold expecting that it will hedge inflation, and it doesn't.” The paper also offers a fair value for the yellow metal. “We came up with the idea that over the extreme long-term, the real price of gold is approximately constant. We suggest the fair price is about $800,” he says. “But, we don’t actually say when that would occur.” Finally, Harvey explores the correlation between interest rates and gold prices. “If you look at recent history, there is a remarkable correlation between yields and the price of gold,” he says. “[The data] suggests that if interest rates go to 4%, which is not unreasonable…it suggests gold would drop below $1000.” Tune in now for more on gold prices and the 'stories’ associated with the yellow metal. Kitco News, January 27, 2014. (show less)

Kitco News speaks with professor Campbell Harvey of the Fuqua School of Business at Duke University about the fair value of gold. Harvey co-wrote a controversial academic paper with Claude Erb called The Golden Dilemma, which explored the 'myths’ related to gold prices. Harvey suggests that gold is not actually a good inflation or currency hedge. “It is a myth that gold is an effective hedge against unexpected ... (read more)

 
 
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