If gold is such a great investment, why are all these companies so desperate to sell it?
This is what always amazes me about some of the “gold bugs,” who seem to have taken Econ 101 pass/fail, and didn’t do very well. They say things like, “You should invest in gold because it’s the only investment that has real value.” They seem to be operating under the misapprehension that gold is *intrinsically *valuable.
You can’t eat gold, you can’t create shelter with it (not as a practical matter, at least), and you can’t drive it to work.
Gold has some industrial uses, though the manufacturing processes have become much more efficient. There was a time, for example, when the RAM in a computer (old mainframe era) was worth a small fortune because of all the gold in it. Now, gold is used to plate contacts, but the layer is so thin, its thickness can be expressed in numbers of atoms.
If people decided that gold wasn’t pretty, and stopped making jewelry with it, we’d be left with only a few industrial uses.
For the most part, gold is valuable only because a lot of people think it is.
If I landed in some post-apocalyptic world, I’d rather be sitting on a warehouse full of canned food than a warehouse full of gold.
Hey man when they finally do invent the philosopher’s stone gold will be no more valuable than lead, and you’ll be immortal. I’ll bet you’ll feel really silly spending eternity poor with worthless metals.
Dave Ramsey says (I’m paraphrasing) that gold is like the Snuggie–they advertise it on late-night TV, and if you buy it you’ll look really stupid. Like most of Dave’s advice, that’s oversimplified but good advice to the average investor.
I figure that if the dollar truly fails we’ll be screwed six ways from Sunday anyway, so having a bunch of shiny metal bricks around isn’t going to help anything. Maybe I could throw them at the people coming after me for my pantry.
Being about as dense as lead, I reckon it would make some mighty fine buckshot. People keep overlooking that for some reason.
Of course. I’m just suggesting in response to the OP that he ought not run out and buy gold in response to radio ads just now.
Yes this is the most plausible scenario in which gold does well. Gold’s glory years in the late 70’s were during the last stagflation; if there is a repeat of that gold will do well again. Personally I don’t think this is likely. There is a lot of excess global capacity which will constrain firms from raising prices and there is a lot of unemployment which will constrain workers from demanding higher wages. Plus inflation expectations unlike the 1970’s remain low.
The only scenario I can see where inflation rises is through a 70's style oil-price shock and the most plausible scenario for that is an Israeli attack on Iran which triggers a major war. Again I don't think such an attack is likely but it is possible and would create serious havoc in the world economy and financial markets. So investing a bit of your money in gold could be considered as an insurance policy against this scenario.Please be assured that my public persona as a trailer-trash peckerwood hippy belies a sharp financial acumen, and my assets are shrewdly invested in solid, secure, Triple-A rated investment banks and insurance companies.
About twice as dense, actually. Lead’s around 10 times water; gold is 20.
The thing about “investing” in gold is that, sure, it protects you against inflation, but it also “protects” you against interest. And even as far as protecting you from inflation goes, the economy would have to get a lot worse than it is before the stock market can’t keep up with inflation.
Real investments like stocks will typically range from just barely holding their own, to making you a tidy profit, and may in extreme cases lose you a little money or make you a huge profit. Gold, by contrast, will always hold its own (that is, do about the same as a real investment in a bad economy), but will never do better than that.
By the time everybody is talking about buying gold, it is time to sell. Buy when others are afraid to buy, sell when others are eager to buy. Gold has jumped the shark until the next Panic.
Go look at levels of historical gold production. More gold has been mined in the past 100 years than in all the rest of history, or some such. Yet all of it every mined would easily fit into a WalMart, with plenty of room left over. And the mining of gold continues at a breakneck pace. Good land is not made as fast and is a better investment. Just don’t buy within 100 feet of sea level.
“He was under ‘full sail,’ prospering at last, and in the Adams tradition, he began buying more land, seldom more than five or ten acres of salt marsh or woodland at a time, but steadily, year after year. (Among his father’s memorable observations was that he never knew a piece of land to run away or break.)”
- John Adams, David McCullough
Exactly.
But that was before generations of people lived in a society where gold wasn’t being used for money. And the fact is, most people don’t HAVE more gold than a ring or two. Most people aren’t likely to accept a system that automatically makes them penniless.
Eventually, perhaps, gold would have a good chance of making a comeback. Probably due to some warlord proclaiming it the local currency rather than people just deciding it. But for some time I’d expect barter not gold to be the standard of exchange; a box of ammunition would be more likely to get you that wheat than a gold coin that farmer might not think anyone else would accept as currency.
Especially if you put the ammo into a gun and pointed it at the farmer in question…
-XT
We can synthesize gold but it will then be radioactive. Start at Synthesis of noble metals (Wikipedia).
The question you should all be asking yourselves (especially if you are as naive about physics, chemistry and alchemy as I am) is whether exponential technological progress will soon produce a hitherto unconsidered method of producing real gold artificially. It’s already happened with diamonds.
Farmer : “Boy, do you know why agricultural societies, farmers like me won out over rugged individualists like yourself ?”
Bandit : "No. Now shut up and- "
Farmer : “Numbers.”
- Multiple gun cocking noises from behind the bandit *
Actually, I think the question can be reduced to “how long will it be before we can assemble and operate a particle accelerator that produces artificial gold at a cheaper price than it can be obtained otherwise?”
Anyone have the skinny on this future technology?
Probably either never, or a very long time. Gold just isn’t that valuable; a particle accelerator can only make tiny amounts for a huge investment.
What gets me about gold is how people percieve it as a ‘safe’ investment. It is one of the most volatile investments you can make and someone who wants a safe store of value will be dissapointed. Prices fluctuate wildly at times, the attraction is that thos price fluctuations come at times that can offset the risks of owning other types of investments.
As a general rule you are best off buying an investment when no one is talking about it, and best off avoiding it when discussion of that investment permeates the popular media.