Satyajit Das on Gold
Well known market observer and commentator Satyajit Das has written an article on gold which has been published at Naked Capitalism. As is usually his wont, he is adopting a very neutral tone of voice, with the occasional barb thrown in almost imperceptibly. Both detractors and fans of gold are ribbed a little bit, while Das enumerates their lines of argument seemingly without passing judgment.
Still, we see the publication of this actually quite non-controversial article as an opportunity to add a few comments. Quite early on in his article, Das relates an anecdote from post war Germany that one would do well to keep in mind. He writes:
“As a banker asked an old woman in 1918: “where is the State which guaranteed these securities to you? It is dead.”
Every discussion of the ‘political metal’ gold should probably be prefaced with an anecdote of this sort so as to make clear what the main difference between a market chosen money like gold and government-imposed legal tender actually is: the latter depends on promises that are rarely kept.
What we would like to comment on are a few of the observations Das makes regarding gold’s investment merits as well as his presentation of the lines of argument forwarded by supporters and detractors of a gold standard. In this article we will discuss the 'gold as an investment' portion of his article.
Gold as an Investment
Das begins by enumerating the various avenues open to people that want to invest in gold today, listing their advantages and disadvantages as well as the associated risk factors. This is an excellent overview that highlights all the important points one should be aware of, but most of these things are probably well known to our readers anyway.
