Why Bill Bonner continues to hold gold

Agora Financial founder and highly respected market commentator Bill Bonner is not tempted to sell his gold, despite the worry that deflation might persuade a few investors to sell.

‘If we were speculators, we might consider selling our gold,’ he says, ‘in tune with our deflation now, inflation later forecast. But we’re not gamblers. We hold gold because it represents real wealth, not because we think it will go up in price.

Gold is money

‘We don’t really know what direction it is going. But that’s why we hold it. We don’t know what direction anything is going. The nice thing about gold is that it doesn’t matter. Gold doesn’t go anywhere. It just sits there.

‘If you buy a bond, for example, you have to worry about the credit quality of the issuer. If things get bad enough, he won’t be able to pay up. Your bond could be worthless.

‘Same for stocks. A stock is a share of a company. If the company goes out of business, your stock certificates (assuming you have them) are only good for decorations. Real estate is more reliable. But there are taxes and upkeep to pay. Gold is a better way to store wealth. You don’t pay property taxes on it. And the roof never leaks.

‘Besides, gold is especially valuable when other forms of money lose their appeal. The trend of debt destruction will probably not end soon. And the feds will probably sooner or later follow Paul Krugman’s advice to raise [the Fed's] long-term inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash is a mistake.’

Investment case

Mr Bonner will no doubt reinforce this message in his keynote conference speech to his annual investment conference which convenes in Vancouver next week with ArabianMoney also participating for the first time.

Gold is a store of wealth. You also never quite know when its price will surge. An unexpected geopolitical or natural disaster would always send the price spiralling upwards.

But then an economic catastrophe is more predictable with the scale of US debt only having grown since the financial crisis caused by, well too much US debt.