Emerging market economies need to shy away from the U.S. dollar and U.S. treasuries, and instead invest more in gold, this according to one Harvard profession.Tuesday, in a commentary for Project Syndicate, Kenneth Rogoff, professor of Economics at the Ivey League university and former chief economist at the International Monetary Fund, recommended that emerging economies boost their gold reserves to about 10%, which would still keep them below some developed country’s gold reserves.
“Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns,” he explained.
While the precious metal may have some short term downward gyrations this spring and summer, the stage is set for a rebound in price from 5 year lows.
Perhaps individuals should consider the advice of Marc Faber - "be your own central bank".