Why on earth should gold become more valuable during times of economic uncertainty? I confess as commodities go, the factors driving precious metals have always escaped me. (and please no one respond ‘because the demand increases’)
Gold has been considered precious for thousands of years, and the physical gold itself is also extremely long-lasting. This is therefore thought to be less likely to change than the value of many other things (stocks, bonds, etc.) which have much shorter lifespans.
Of course, gold has not always had the same relative value to other assets over that time period. So you could be buying it at a relative high and be forced to sell at a relative low. But ISTM that that’s the thinking, anyway.
Gold is considered a store of value, partly for the reasons that Fotheringay-Phipps mentioned. Unlike most materials, gold is inherently valuable.
A lot of people mock those who buy gold, calling it a bad investment. That’s not the point. Gold has never been intended to be an investment in the usual sense, regardless of what sales ads may say. It’s a place to put your money when other forms of wealth are going down in value.
In addition, it’s highly portable–only gems surpass it as an easily portable form of inherent wealth. Until very recent times, a traveler was never sure what forms of paper money might be accepted at any given place, but gold was always accepted.
One thing that amazes me with many who push gold, is that when they buy it, often they do not physically take possession of it. Do these folks think when the world really collapses they will be able to cash in their ownership paperwork and pick up the gold they own?
Not everyone is a doomsday prepper. If the dollar falls you’ll be able to collect and in the mean time your life savings isn’t under the mattress.
ETA - by “falls” I mean loses value, as it did during quantitative easing. The dollar fell and gold value exploded.
One way to look at it is that the value of gold is unchanged but the price has increased reflecting the lower value of the money used to buy it. It’s not all that simple, but uncertainty reduces the value of money because money lacks inherent value.
I understand that gold looks nice and is a useful substance that can be used in the manufacture of electronics, but don’t all commodities have some inherent value? I mean you can make coffee with coffee beans, corn muffins with corn and lubricants out of petroleum. What sets gold apart from other commodities - is it that it doesn’t get consumed?
Like anything else, gold is worth what someone will pay for it. After some doomsday situation, gold would have no value at all, since for most of us it only has a decorative value.
Essentially, people buy gold as a hedge against fluctuation currencies in the hope/expectation that it will maintain its value. Unfortunately for most, they buy it when demand, and therefore price is high, so when things settle down, they are either stuck with it or have to sell at a loss.
As with stocks and shares, and currency too, the time to buy is when everyone else is selling. Any American who bought a few million GBPs the day after the Brexit vote, would be sitting on a tidy profit today.
What sets gold apart is that most people believe that gold has intrinsic value. It’s completely circular, of course.
Especially because is actually has NO intrinsic value. It’s one more commodity - and a relatively useless one for the everyday Joe - and no more special than any other.
Over the years, I’ve regularly seen ads on daytime news broadcasts (like CNN) by gold sellers. No matter what the market conditions are (bull market, bear market, recession, etc.), the sellers have some argument which comes down to “now is the perfect time to buy gold!” Needless to say, that leaves me a little skeptical about their argument. 
The price of gold, apart from the usual market forces, are subject to the public’s fear and panic. More than any other commodity, it goes through crazy jumps and falls that are often contrary to logic. It also can be manipulated by high-level speculators; their machinations make big chunks of money for them, but it won’t help you at all.
Industrial materials like steel, copper, aluminum, cement, and wood are inherently valuable. They have real purposes and uses.
The value of gold is based on nothing but a web of lies. All you can do with it is sell it to a greater fool.
Not entirely true. Gold has a number of legitimate uses beyond jewelry, including in electronics and medicine.
That said, those uses undoubtedly play only a relatively minor role in its price and demand.
The premise of the OP is faulty.
The biggest run up of gold prices in the past 10 years was in mid-2011. OTOH, there was a decent drop in late 2008. Guess which year had the biggest global economic meltdown since the Great Depression?
Do not, for one second, ever assume that gold prices track economic problems. They may or may not.
“Gaming” commodities with such simple (or even complex) rules is a surefire way to lose money.
Gold prices are one of the least reliable indicators of the world economy out there.
I’m by no means an economist or even for that matter very familiar with economic principles, but I’m hardly the first person to suggest there’s a correlation between gold prices and market uncertainty.
http://www.wsj.com/articles/gold-prices-buoyed-by-continued-uncertainty-after-brexit-vote-1467286166
Unlike coffee beans gold does not go bad over time. It also is in much more limited supply, we can’t just clear more land to grow gold on. It is a commodity, but it is also a natural resource. Gold is expensive to produce too, the ground isn’t full of nuggets and thick seams, a substantial portion of it’s price has to cover those production costs. It still costs more than it should compared to other valuable metals because of that irrational desire known as Gold Fever that draws people to possess it.
Was this a typo for … “sold a few million GBPs the day before the Brexit vote …” ?
Gold does have several very unique properties: it is the most malleable of all metals, and is more ductile than platinum by some measures. It is one of the best conductors of electricity but unlike its sister metals (silver and copper) does not corrode or tarnish. It is denser than any common element except tungsten. Its unique properties lead to several uses: Gold is used for electric connections in smartphones. It’s used to coat satellites and astronauts’ visors to reflect the sun’s rays. It finds application in dental fillings and, of course, jewelry. Gold leaf was the material of choice for electrometers until recently; I think some instruments still rely on gold leaf. Gold salts are useful in the treatment of rheumatism!
None of which explains the very high price of gold, but can we at least put to rest the falsehood that this metal has no special uses? :smack:
If there is an apocalyptic dystopia in our future, I’m not sure what I’d recommend as a store of easily transported wealth, but my guess would be to place gold very high on the list (at least when the ammunition for your guns runs out).
Unless you run into an electrical engineer who wants to trade supplies, nobody will want gold in the apocalypse.
If you can handload (or use a muzzle-loader), you can always cast the gold for bullets. :rolleyes: