Gold’s recent rally, well above $4,000 per ounce, has reignited debate over its reputation as a safe haven, but according to Bloomberg Opinion columnist Allison Schrager, there is “nothing safe about gold as an asset.”
In a Bloomberg article this week, Schrager wrote that “the jaw-dropping spike in gold prices is a reminder of what primal creatures we humans are — especially the species among us known as active traders.”
Despite its allure, Schrager believes “there is no rational reason for gold to be inherently valuable.”
She remarked that while a dollar can buy things, and the stock market offers ownership in profitable companies, gold offers little beyond being “both shiny and scarce.”
Schrager argued that investors’ attraction to gold reflects “the most primitive parts of our brain” and urged them to “resist this impulse.”
Like other commodities, gold prices are volatile and the Bloomberg columnist believes that the yellow metal only adds risk to a portfolio.
Although gold “has had a good run for the last six decades or so, even compared to the S&P 500,” Schrager stressed that “nothing about it is risk-free.”
The price “is extremely volatile,” and “investors have been rewarded with good returns because they are taking on that risk.”
She also warned that gold “does not even provide a consistent hedge,” recalling that “during some of the worst of the financial crisis in 2008, gold’s price fell 6%.”
“Investing in gold is fine if you enjoy speculating,” Schrager concluded. “But when the argument is, ‘This is a low-risk asset that also beats the market,’ put me down as skeptical. Both things can’t be true.”
