As investable assets go, gold seems to have lost its luster since 2012. The argument is as follows: Gold collects no interest and generates no utility. And with the self-proclaimed recovery of the global economies and stable fiscal policies (not my viewpoint), then gold doesn't even have use in today's modern portfolio.
Why, then, should someone hold onto such a useless metal, one may ask? A very daring question; especially since all of humanity is only seven years past the 2008 financial crisis. But are things really as safe as CNBC and the mainstream say? Further examination is in order.
U.S. GDP has hovered around 2% (1.5% adjusted for inflation) since the '08 crisis. QE1 wasn't enough. QE2 mirrored the same results. The open-ended QE3, only to be boosted into QE4 months later, still didn't yield much growth. That is, of course, unless the growth the Fed wanted to create was in the student loan, auto loan, junk bond, corporate and government debt markets. If so then the QE program was a massive success.
Continuing forward with analyzing this great recovery, the European Union (EU) is a basket case itself. Greece is bankrupt (and will stay that way) and Spain is carrying a roughly 30% unemployment rate. To be said simply, Germans don't seem to like the Greeks and the Greeks don't seem to like the Germans. The chance of Greece abandoning the Euro and EU? Likely. Will global banks have the situation contained as they boast? Unlikely.
Moving forward.
Japanese bonds are yielding nothing (which is still better than the negative 0.75 bonds the Swedes offer) and the nation is over 250% in debt-to-GDP. There are more diapers being sold to seniors than to newborns and the Bank of Japan (BOJ) continues to keep the printing press running at all times. The world's third largest economy should not hold that rank for long.
China has slowing growth, a housing bubble like no other, a scary shadow-banking sector, and the government has slashed interest rates 3 times in the last 6 months to get a fiscal stimulus going. With stocks ballooning and the Chinese civilians disregarding the harsh history lesson that day traders endured in America's great ‘dotcom' bubble days, things are getting too euphoric in Beijing— which almost always precedes a bear market. The world's largest economy (as of December 2014) has many problems of its own— can they afford to keep buying U.S. debt?
