The Real Cost of Owning Gold

By Lewis Braham - 2012-09-27T20:30:53Z

Photograph by Nelson Ching/Bloomberg

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Opportunity Costs

With interest rates near zero, bank accounts and CDs yield virtually nothing. If rates were to rise to 6 percent, would you still want to own your gold--which yields nothing? "Low interest rates make for a strong gold price because the opportunity costs are little," says Adrian Ash, head of Bullion Vault, a London-based gold dealer. "The critical thing is to see how interest rates are relative to inflation. Having cash pay nothing versus 2 percent inflation makes gold almost a no-brainer." If rates exceed inflation, the opportunity cost of owning gold may be too high.