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Wednesday, 26 December 2012 10:15

As Gold ATMs Get More Popular, Is Gold Still "Still Worth It" ^Featured

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Reggie Middleton at Emirates Palace in Abu Dhabi

Last spring I took a trip to Abu Dhabi and Dubai on a fact findng mission. It was interesting, as the luxury centers in those cities are arguably unmatched in terms of opulence bling. On the topic of bling, there were several vending machines of interest, one of which in particular caught my eye.

When I was there (March '12), the gold was priced above spot (or at least above what I was able to get it for), but the ability to buy ingots retail, relatively anonymously for cash did intrigue me. The UAE is a cash town, so this should not be a surprise. Now, the question remains, is gold still a worthwhile pursuit considering its run up and subsequent recent correction? Will it really provide practical hedge against the inflation that so many see coming down the pike? Well, let's dabble in the BoomBustBlog archives for some insight...

As excerpted from Deflation, Inflation or Stagflation - You Be the Judge!

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges. Click graphic below to enlarge.

inflation_correlation.png

As you can see from the excerpt above, unless gold breaks its historical correlation with inflation vs other assets, it stands to be outdone as an inflation hedge. Then again, there are many moving parts to this puzzle. We explored an interesting, in depth (although admittedly self serving) perspective on this topic in Trading Physical Gold: Is Gold In A Bubble? - BoomBustBlog