About the Flight to Gold

March 04, 2009 | By: Tim Iacono

On Fox News Sunday's round table discussion, Brit Hume started talking about the barbarous relic gold and then, of all things, hyperinflation, apparently under the impression that he had correctly deciphered the message that was being sent by the citizenry in their rush to buy gold coins and gold bars at a pace not seen in decades.

Ask yourself this question. Why is the price of gold, at this moment, so high?

Well, some people say that gold goes up because it's a flight to quality and people are afraid. But, really, that usually results in a flight to cash.

The price of gold is up because people fear one thing - people who have money to spend and who are looking to invest or who are looking to the future - and that is that they fear a wave of inflation, perhaps a hyperinflation.

So the people who are voting with their money are not voting in favor of these policies.

Brit is surely onto something there, and just the fact that he uttered such words on national television will surely warm the hearts of many gold lovers, but he's a bit wide of the mark in his analysis.

The three month surge in the price of gold that came to a screeching halt about ten days ago likely had little to do with the fear of inflation, though, that will come soon enough - probably later this year.

As the latest trillion or so in spending, stimulus, and bailouts have been announced over the last week, the price of gold has actually been falling.

What Brit really should have said was that gold is up because it's a flight to quality that used to be satisfied with U.S. Dollars, but after both parties have done such a horrible job of managing things over the years that, when people get afraid now, they run to cash and gold.

It is understandable that Brit may not be tuned in to the recent changes in the dollar-gold relationship as noted here a number of times recently.

However, what is beyond anyone's understanding is how both parties in Washington could lead the nation down the road we are now on, where, in all likelihood, much more protection will be sought in gold than in the dollar in the months and years ahead

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