Hedging against inflation: gold or I bonds?
Friday, May 12th, 2006
Categorized as: Series I US Savings Bonds
In Inflation worries stir Wall Street, published in today’s New York Times, Jeremy W. Peters and Vikas Bajaj say the S&P 500 stock index fell 1.3% yesterday because of surge of concern about inflation.
The price of gold, which has soared this year and is considered a safe haven during periods of rising inflation, rose 2.2 percent yesterday, to $721.50 an ounce.
Gold is hardly a safe haven. The problem with gold is that its price goes down as fast as it goes up. Many experts think what’s going on with gold is just another asset bubble. The housing bubble begins to pop and the gold bubble begins to expand.
If you’re worried about inflation, the Series I Savings Bond is the perfect investment vehicle. You’re protected from the risk of default, the risk of inflation, and the risk of capital loss. On top of that, federal income tax is deferred and you pay no state or local income taxes.
Or you can buy gold and feel like a hero on the days the price goes up and feel like a schmuck on the days the price goes down.