Should You Be Buying Gold?

I just finished reading an article on one of the major news media sites talking about the recent decline in oil prices and the rise in the value of the dollar. Both of which I predicted back in October of last year. Overall, it was a very good and positive article, but of course they couldn't stop at that. They had guest commentary from an "economic expert" who said that high oil prices should not be the only consideration when addressing inflation. O.K., I agree with that, it should not be the only consideration. However, he then talked about the high food prices around the world and rising unemployment, both valid subjects for consideration in addressing inflation, but he somehow managed to segue that in to a justification for buying gold as an investment and hedge against inflation. What?

I'm no expert, but common sense would tell you that high oil prices and the low value of the dollar drive prices higher in food and gold. If oil and gas prices are dropping so are the costs of producing and transporting food. If the value of the dollar is rising, it makes our agricultural products more expensive to foreign buyers, leading to demand destruction in exports of our food products. Add to that the increasing unemployment in the U.S., which further reduces demand for high priced food items and the simple rule of supply and demand kicks in. Which all adds up to falling or stagnant food prices. All these things should lead to a halt to the inflationary spiral we've been in for the first 7 months of this year.

So, should it make any sense to anyone to be buying gold right now? Not as far as I'm concerned. When inflation begins to ebb, gold prices drop, as they have been doing recently. If you are considering any investment in precious metals, silver is a more likely candidate. Most of the gold that has been mined throughout human history is still in existence to this day. However, silver is being consumed at an ever increasing rate and as a non-renewable resource, this would present a much better investment opportunity than gold. Gold would have been a good investment when it was selling between $300 and $400 per ounce, that is, as long as you were selling when the price was over $900 an ounce. But now, I don't think so.