A decade ago, an ounce of gold sold for less than $260. Two recessions later, that price has quadrupled. Many investors are treating it as a hedge against inflation, encouraged by voices ranging from conservative commentator Glenn Beck to World Bank President Robert Zoellick.
“Waves of popularity or unpopularity are classic cases of greed and fear.”
Richard Leader is president of First Houston Capital. He says gold’s very popularity makes it a poor investment.
“In most financial assets, there’s a means of determining value. There’s some income being generated by a real estate property. There’s a dividend being generated by a stock or a coupon generated by a bond. But in the case of most commodities, and gold is the epitome of that, there’s no income generated, and the valuation is simply dependent upon finding another person who is willing to buy the gold at a higher price someday.”
Leader says that trend can’t continue indefinitely.