Many experts recommend physical gold as a safe haven and hedge against inflation, yet even with a government shut down and struggling economy, gold prices have still not made a significant jump. This may be a bit of a concern for investors looking for safety in gold, but there are still a number of reasons why this stagnation may only be temporary.
Brett Arends of MarketWatch began asking the folks at the United States Treasury their thoughts on gold. What he found was a group of “firm believers in gold.” When he specifically asked them if they would consider selling some of the country’s gold reserves to pay the bills if the budget crisis were to elevate later this month, they responded with, “Not a chance.”
According to Arends’ sources, the Treasury considered the option of selling gold, but the idea was rejected. A Treasury spokeswoman said, “Selling gold would undercut confidence in the U.S. both here and abroad and would be destabilizing to the world financial system.”
This leads Arrends to speculate that the Treasury views physical gold as the backbone of the financial system and not some meaningless investment. Arrends states, “I thought gold was a joke. Totally over. I thought no one cared about gold. But if that were really the case, why wouldn’t the government just dump the holdings for whatever it could get?”
These statements by the Treasury are very telling. They seem to feel that gold is more valuable than its credit rating. Gold’s potential, especially when compared to that of U.S. dollars, is nicely summed up in this quote from Josh Strauss, gold believer and co-manager of the Appleseed mutual fund, “With gold on the ropes this year, investors are increasingly questioning the intrinsic value of gold. Given the craziness in D.C., it seems to me that investors should really be questioning the intrinsic value of U.S. dollars backed by feckless promises.”