IMO the visceral response seems to be because buying gold is typically promulgated by people who use the term “fiat currency” as a pejorative. They sneer at “fiat currency” partly because it’s only worth what someone says it’s worth, yet they refuse to admit that gold’s relative uselessness means it’s… wait for it… only worth what someone says it’s worth. What is the intrinsic value of a little stamped circle of shiny metal?
and this is the other part of it. how is gold a “hedge against extraordinary times?” I mean, honestly. Preppers love to promote it as some sort of safety net, but if we really experience a SHTF or TEOTWAWKI event, we’re going back to bartering for things people need. not trading bits of shiny metal.
that ship has sailed; we’ve long been making “ultra fine components” out of semiconductors.
Assumes facts not in evidence.
anyway this is beside the point. advocates for buying gold say it’s security in case the SHTF. But if the shit ever truly does hit the fan, we’re not going to be trying to find gold so we can make ultra-fine corrosion resistant components. We’re going to be trying to make sure we can eat. and we can’t eat gold.
Two comments, one a personal bugaboo, one analysis.
Personal bugaboo: gold can be wealth or it can be currency. It cannot be both. The mistaking of currency for wealth is one of the chief driving forces of inefficiencies in the world economy. Money - M0 through M4, depending on the definition one uses - is a means of providing accounting convenience but is not itself a source of wealth. Wealth, instead, is the total goods one owns/control. My iPhone 6+? Wealth. The amount of dollars in my checking account? Money. Two very different things. Gold can be one or the other…it can’t be both.
Sorry. Touchy subject.
Analysis: Look at the pattern of sales and sales effort if you wish to see if large players are counting on the price of gold to move. If there are 10 ads on FoxNews per hour talking about the awesomeness of owning gold and asking people to call this number now to buy some? They’re counting on it to go down. They own gold. They want to sell it. They wouldn’t be doing so if they thought the price was going up in the short-term (1-2 years). If that were the case the current owners would be holding on to it instead.
All the signs point to gold being a bad investment and either staying relatively flat or declining against inflation over the short-term.
I haven’t seen one in a while, but even better are those commercials where they want to sell you a coin for $50 which is “clad” with about 70 cents worth of gold.
Diamond is (IMO) pretty similar. It has industrial uses, but none require bright, shiny gemstone-quality diamond. The only reason people will pay a ton of money for a gem diamond is because DeBeers has conned them into thinking they have to.
And what would make it wealth is its value. Which is *perceived *to be high, mostly because there are a lot of people who believe it to be so. It’s not useful enough, considering its scarcity to be directly valuable for much.
Look at it this way… had gold never been discovered until say… .2016, how valuable would it be as a metal, without all the historical baggage?
Other rare metals like palladium and platinum are still pretty valuable, so gold would probably be similar. But nobody urges you to hide a few ingots of palladium under your mattress in case of TEOTWAWKI.
platinum and palladium are incredibly useful as catalyst materials, especially in automotive emissions controls. if Wikipedia is to be believed, almost half of platinum and palladium (and nearly all rhodium) production goes into catalytic converters.
Thinking from China’s PoV : In return of its trade surplus, China gets of have a lot of dollars. But it sees that USA prints more and more dollars at zero interest rate and now the relations with USA are also not the best, and the US(and allies) pressuring them in South China sea. So it looks at something else to hold in place of dollar but finds return on investment on most things is near zero (taking into account the currency fluctuations as well) and risky. Probably the most logical thing that they can see right now is to replace a part of dollar reserve with gold.
Here are price quotes from NASDAQ two hours ago for options on GLD (an ETF intended to track the price of 0.1 troy ounces of the precious metal — the ETF owned 672 tonnes of vaulted gold two years ago.)
Spot price of GLD was $126.20 on afternoon 29 June. Option prices shown are average of bid and ask.
GLD 125 Strike Jan 19, 2018 Call 12.30 Put 10.20 (prof_sd = 28.17; 1.181)
GLD 125 Strike Jun 16, 2017 Call 9.57 Put 7.85 (prof_sd = 21.79; 1.177)
GLD 125 Strike Mar 17, 2017 Call 8.22 Put 6.67 (prof_sd = 18.62; 1.173)
GLD 125 Strike Jan 20, 2017 Call 7.32 Put 5.85 (prof_sd = 16.46; 1.176)
GLD 125 Strike Dec 16, 2016 Call 6.77 Put 5.40 (prof_sd = 15.19; 1.197)
GLD 125 Strike Oct 21, 2016 Call 5.67 Put 4.30 (prof_sd = 12.42; 1.158)
The penultimate column, if my arithmetic is correct, shows what standard deviation is required for a long straddle to be profitable. In the final column I’ve divided that standard deviation by the square root of the number of days until contract expiration.
Note the sudden surge in assumed volatility between the October contract and the December contract! I wonder if there is some event between those dates whose uncertainty affects the market.
That’s true in a verynarrow sense, however because “fiat” currency is a decree by a government demanding that the coin of the realm must be accepted. Gold is more of a free market currency in use for several thousand years, and was never forced upon anyone, a crucial distinction. Paper currencies are relative recent newcomers and could be conjured up out of relative nowhere. Hence the skepticism.
Honestly? It’s been the currency par excellance, when all other payments are refused. Look, I’m not saying this is necessarily a good thing, or I like it, or wish this to happen, nor do I think it will happen again. Gold is a form of barter. A classic example in recent times were Vietnamese “boat people”, this was virtually the only method of payment accepted. Keep in mind that while US dollars were long considered “as good as gold” this was because of our history of gold as money, not in spite of it. A more remote example was on the eve of World War I, tens of thousands of tourists were stranded in Europe as suddenly, letters of credit and other bank drafts and similar financial instruments were refused literally overnight. Admittedly these are extreme examples, but if history is any guide, bad things happen and it is wise to at least give some thought about it. Gold provides diversification to a portfolio of stocks, bonds, and real estate, it’s not an “either or” kind of asset class in the sense that one has to build a bunker and stock it with freeze dried steaks and buckets of wheat. It’s a sensible way to store wealth in a safe and portsble manner. Particularly in an age of outright government wealth confiscation and “bail ins”, keeping a portion of one’s wealth away from the prying eyes of statist wankers is both wise and prudent.
That’s a distinction without a difference. We can’t eat savings bonds, cash, or stock certificates either.
The people who sell gold for a living make money on the spread, they don’t care if gold is going down. They don’t care if it’s going up. That is, if they know what they are doing. VERY common misunderstanding about gold. They don’t buy a big pile of gold and then hope the price goes up.
The profit margins are small, maybe 2 or 2 and half percent on bullion coins and bars.
Next you’re making the mistake of calling gold an “investment”, this is a crucial error. An investment is by definition some thing other than money that one hopes will provide a return. A stock share in a corporation, or a rental unit property is an investment. As such one can’t “invest” in gold anymore than he could in rubles or polish zloty, it’s simply a form of money and at best is a form of speculation.
Here’s where your argument gets really interesting where you make an arbitrary claim that money can’t be wealth? Says who? Many people would argue that’s the whole point, to be able to store one’s wealth over time, a key attribute of money. Modern currencies have the “medium of exchange” part down, though the “store of wealth” part can be pretty sketchy.
If all gold did was maintain the same value, then why buy it?
It’d be no different than putting your money under the mattress.
It’s not a good strategy. You want you money to increase in value. Hence you invest it.
Given gold’s wild and unpredictable swings often unrelated to other economic news, it makes a really, really, really bad currency.
Gold is not remotely at all like money. It’s just another commodity. It’s no different from platinum, pearls, etc. People either buy gold because they need it to make something or they hope it will go up in value.
How many times do people have to ask: What is it about gold of all things that makes people think all sorts of odd stuff?
It’s really low. If you’re worried about inflation eroding the value of the dollar, you might be right over spans of a decade. And it might be that US dollars are going to become wastepaper overnight. But note that even in Zimbabwe the money didn’t become worthless overnight, but over months and years.
If you think gold will stably maintain value over the years while it’s hidden under the mattress it kind of will, but if you bought gold 3 years ago to stick under the mattress you’d have been much better off with dollars.
I think it’s fine for prudent savers to keep part of their assets in precious metals. And I don’t object to calling this “investment.” But some writings are just plain silly.
Correct: money placed under the mattress in 2012 did not maintain its same value — instead it increased in value, in terms of gold. Do you need a cite?
It was gold that lost its value… … *Oh, here let me save you a rejoinder:
*
[del]It was gold that lost its value[/del]. “Unlike the dollar, gold never never loses its value. One ounce of gold is still worth one ounce of gold!” :rolleyes:
When someone tells you that the price of something will only go up, and you should buy it because your cash may be worthless tomorrow, you should laugh and walk away.
Because after all, if gold will only ever go up in value, why are these people selling it in exchange for your soon to be worthless cash?
Here. I have some magic beans. They will only increase in value. For today only, I’m selling them for $500 each. Better get in now.
You mean a $50 dollar bill becomes a $49 bill due to being under a mattress? Like I said: If gold maintained the same value. As in: $50 of gold stays as $50 of gold.
If I wanted some other definition of “same value” I would have spelled it out. The analogy makes it incredibly clear!
