Even though U.S. politicos appear ready to reach an agreement on the debt-ceiling front, the fiercely polarized debate has introduced uncertainty into what was previously thought to be an obligation with certainty. Some no longer consider U.S. government debts to be risk-free. Some foreign central banks seem to be speaking with their feet by diversifying away from the U.S. dollar and are considering gold to be a safe-haven asset, and its price has continued on an upward tear. Many speculate that the last-minute compromise might avert technical default, but given the inability of the political machine to reach any pre-emptive agreement, several key questions are raised for gold. For those interested in exposure to the shiny yellow metal, we discuss the primary ways to access this market in the equity-based or bullion-backed paradigm.
Both leading up to and following the market crash of 2008, gold was looked to for a number of reasons. For ages, the metal served as currency and is still likened to a monetary relative. On this basis, the crash prompted disillusionment with financial markets and an immediate interest in gold for use as a safe-haven asset and as portfolio diversifier. Further, gold is a limited commodity that retains purchasing power even under strong inflationary pressures. The loose monetary stance adopted by the Federal Reserve only prompted renewed interest in the metal as an anti-inflationary play.
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