Paul Wallace
Gold may no longer back currencies but it has lost none of its allure. Astronomers recently added fresh lustre when they revealed that colliding neutron stars—as well as supernovae—are the universe’s gold factories. Less exotically, the disclosure that $300bn is tucked away in vaults in and around London appealed to our inner gold bug. But does it make any sense to invest in gold?
Even when the gold standard prevailed in the late 19th and early 20th centuries, the case for investing in the precious metal was weak. Gold was certainly a store of value. But the very backing of currencies by gold ensured price stability anyway. And if prices were stable it made better sense to secure yield rather than to hold an inert hoard of gold. In Jane Austen’s novels, written while Britain was off gold during the Napoleonic wars, it was income such as Darcy’s £10,000 a year rather than piles of guineas that was seductive.