by Mark Hulbert, Barrons
Humphrey Neill, the father of contrarian analysis, famously wrote that "when everyone thinks alike, everyone is likely to be wrong."
That's a sobering thought when it comes to gold, since the belief in gold's investment virtues seems to be almost universal.
For this column I am taking Neill's advice to heart, with help from a new study published by the National Bureau of Economic Research in Cambridge, Mass. "The Golden Dilemma," by Claude Erb, a former commodities portfolio manager for Trust Company of the West, and Campbell Harvey, a finance professor at Duke University, calls the conventional wisdom into question.
I should stress that the study's authors are not predisposed against gold. For example, Erb told me, he frequently bought and held gold for the commodities portfolio he used to manage. Here's a summary of the study's findings:
#1 - Gold as inflation hedge
This is perhaps the most widely held belief about gold, and the one that the study's authors devote the most energy to analyzing. They found that gold does not live up to the widely held belief that gold's price in real terms remains more or less constant.
Over any of the time periods assumed by investors â from the short term to as long as 20 years â gold's real price has fluctuated wildly. Interestingly, Erb and Prof. Harvey told me in separate interviews that this finding ...
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