This is the top “Latest News” item on Kitco dot com, a precious metals site, on a day when gold lost 100 points, fairly dramatically.
I don’t know, it just seems a peculiarly pointless thing to say. But then I’m not au courant with the vagaries of gold trading, so I post it here for passing interest.
Gold does weird things to people.
Many years ago, I attended a seminar with a financial advisor. Somebody asked about investing in gold.
He replied " sorry, I don’t discuss gold. I have learned from experience that people who follow gold don’t treat it as an investment–they treat it like a religion.
That’s why it makes sense to say “nothing changed about gold except the price”. Gold investors won’t be dissuaded by a minor price drop for something that sells for $2300 an ounce. They’re never going to voluntarily cash in their gold.
I suppose that, in the sense that gold is finite and the Earth can only have less and less mine-able quantities of it as more of it is extracted, that its value could be greater as it becomes scarcer.
But yes, it is odd that so much value is put into gold. Especially since it occupies a niche space - gold is of little practical value when the economy is normal and paper currency is worth a lot. It is also worthless in an apocalyptic scenario where people are fighting for survival (food, bullets, medicine and useful items would be the only currency.) It’s the in-between where it’s useful.
There’s the middle man tho’.
Zombie apocalypse happened, Joe needs bullets. Sam needs food. Sue has gold. She buys the bullets. Trades Joe the bullets for food. Takes her cut of the food. Sells Sam the food for more gold and finds John has medicine. Buys the medicine from John. Takes her cut of the medicine and sells the rest to whoever has the most gold. Before you know it, Sue is the richest one there. Taking her cuts, asking for more and more gold for what she’s able to buy.
“It’s not what happens to gold.
It what gold makes happen.”
(I don’t have gold except for jewelry but I’ve talked to some hoarders and this is what they say)
What does Sue do with all that gold?
Builds a tower? 
Those who don’t study history are doomed to repeat it.
All you need to do is look at Germany after WWII to see what happens when an entire economy goes into the dumpster.
This is where it falls apart. Sue has gold, but whoever has the bullets doesn’t need gold. They need food. Sue’s gold is suddenly worthless.
If Sue was in Germany after WWII, she might find someone who will give her food for gold, but it’s going to take a LOT of gold to buy just a little food. Gold won’t get Sue through the collapse of the German economy. International businessmen are happy to buy up Sue’s gold. They can get it cheap. And since they have business contacts in countries whose economies aren’t a total dumpster fire, they can trade that gold for things that actually have value. But individuals like Sue are totally screwed. Having gold doesn’t help her much at all.
Now fast forward a couple of decades, and if Sue managed to hang on to any of that gold through those rough years, then Sue would find that her gold once again has value. But that’s only after Germany has rebuilt its economy.
In a global zombie apocalypse. Sue is screwed.
But none of that stops Sue from hoarding gold before the apocalypse happens. Sue hasn’t studied history, and never learned the lesson that gold becomes as worthless as any other currency when the economy goes into the dumpster.
But it’s shiny.
To state the obvious, the price of gold goes up when the money supply goes up, because there’s more money chasing fewer goods, and there’s more demand for a durable store of value.
That being said, I’m not sure if gold is a superior hedge to TIPS or something like that. I don’t own any gold at all, though sometimes I think it would be fun to own one gold bar like a video game, or maybe a few Morgan dollars or something with collectors interest.
The Big Lie™ is that gold has some kind of “intrinsic” value.
How is it in a niche space? I see gold everywhere: one people’s necks, ears and wrists, in the windows of successful shops on every city block and in every mall. Gold is one of the most important raw materials of the jewelry industry, which in turn is one of the oldest and most lucrative industries in the world.
Gold is incredibly useful. Without it, humanity has no bling.
.
God has industrial uses, too. Switches, relay contacts, and connectors that are used for low-level electrical signals are plated with a thin layer of gold.
True, but jewelry is still the main engine behind gold’s value. Almost 80% of the world’s gold is used in the jewelry industry.
I’ve told this story before , but it bears repeating. A friend told me the story of his father fleeing China during the revolution. He was a high official in the nationalist government, and had a ticket for the last plane to Taiwan, but the guard refused to let him through. It was every man for himself- the ticket was worthless, cash was worthless, his position and authority were worthless- but the gold bar he carried got him through.
Gold has no intrinsic value, but unless society returns to a truly preindustrial level, it retains perceived value, especially when you consider that a total collapse of society is much less likely than a disruptive change in management.
I saw one video where the creator was buying gold coins to buy a house because somehow a buying price of 100 gold coins is different than 100 X current price of gold.
It’s an article of faith, to the gold crowd, that gold’s value is constant. It’s also an article of faith to them, that gold constantly increases in value. One would expect that a drop in the price of gold would challenge both of those articles of faith, but then again, one would expect that those articles of faith would challenge each other.
Presumably, he bought that gold bar back when things were stable. Presumably, back when things were stable, he could have also bought an AK-47. I’m guessing the AK-47 would have been a lot cheaper.
Let’s go straight to the dark part: If things have truly fallen apart, whoever has the bullets doesn’t need Sue, and now has the gold.
The idea as I see it often discussed really is not about something on the scale of true general system collapse, but more along the lines of a Zimbabwe style hyperinflation and/or run-of-the-mill civil war where somewhere after enough steps there is someone who will carry out trade in the old ways. Of course, another flaw in the thinking of many of the gold bugs is that they are not actually holding any gold. They are holding pieces of paper or even worse, virtual documents in the cloud that they hope they can trade with.
Right. That’s a good use case for gold. My government debases the currency? No problem, I leave for another country whose system of trade either uses gold, or is convertible to gold.
The crucial point there is that it depends on being able to flee to some pre-existing gold-based or currency-based economy. If you’re a gold investor in Zimbabwe you run to the US where you can get greenbacks. But if the US government has collapsed, then nobody’s collecting federal taxes anymore. That means dollars are no good, meaning the world’s reserve currency has collapsed, meaning most other currencies have probably collapsed. So your gold’s worth is now entirely pegged to its jewelry and industrial value, for which demand has also collapsed with the economy.
On the other hand, let’s not forget that gold is both denser and harder than lead, so if bullets are the currency of the realm, gold does make a decent bullet. It sounds incredibly wasteful and expensive in these times of plenty, but maybe not so much in the post-apocalypse when bullets and lead are in high demand and no longer being industrially produced.
I sort of recall a short story on that basis. Maybe O’Henry.