# Why does the value of gold increase during uncertainty **URL:** \ **Category:** Factual Questions\ **Created:** [July 20, 2016, 4:40pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428 "2016-07-20T16:40:39Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [July 20, 2016, 9:24pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/21 "2016-07-20T21:24:55Z")
> [@Cardigan](#): > > 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? Gold isn’t really a commodity, gold is money. It does have utility in electronics, but its scarcity makes it too expensive for widespread use. Tobacco and other luxury goods have been used as a form of currency but they all have their limitations. Yap money is too large to carry around, a valuable painting that is cut in half loses much of its value, wheat will spoil. Corn for example, was a little too bulky for early colonists in the US because of the poor roads and long distances, but they converted it into a more compact, high demand substance - Whisky! ---
**Author:** ![Ignotus](https://avatars.discourse-cdn.com/v4/letter/i/ecc23a/32.png) [@Ignotus](https://boards.straightdope.com/u/Ignotus)\ **Post date:** [July 20, 2016, 10:14pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/22 "2016-07-20T22:14:15Z")
> [@Duckster](#): > > 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? Yeah, I’ve thought about this also. What actually happens when you purchase gold? Do they Fed-Ex a bar of the metal to your home? Or do you merely get a receipt? In which latter case, it seems to me that you could as well have bought some unobtainium! ---
**Author:** ![Flyer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/flyer/32/7298_2.png) [@Flyer](https://boards.straightdope.com/u/Flyer)\ **Post date:** [July 20, 2016, 11:10pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/23 "2016-07-20T23:10:03Z")
For you gold skeptics, here’s an article about the aftermath of the Vietnam war. > [@](#): > > Even through all the adversity he and his family had recently experienced, there was still a glimmer of hope in his eyes. Despite losing his job, his home and his country, he still wore a relieved expression whenever he gazed upon that canvas bag. It was his key to a new life in a new country. It was, quite literally, a golden anchor. > > Gently, carefully, he poured the contents of the bag onto the table in front of me. There, gleaming in the sun, was an enormous collection of golden taels. For those of you who are not familiar with taels, they are a form of gold bullion indigenous to Southeast Asia. Each tael was 1.2 ounces (37.5 grams) of .9999 pure gold. They looked like tiny wafers—thin sheets of gold, delicately wrapped in paper. > > It was Deak-Perera’s job to buy the gold taels from the refugees, and, with the proceeds, issue traveler’s checks. > > Further back in line there was another refugee who was less fortunate than the banker carrying the golden taels. Much like the banker, he was a successful businessman before he and his family were uprooted by war. > > He approached my table with two suitcases in hand. Like his countryman with the taels, he had worked very hard, saved extremely well and carried all his worldly wealth in those satchels. > > But there was one major difference. His wealth was in the form of piasters, the currency of the Republic of Vietnam. These were paper promises of a government that no longer existed. I had to tell this man his piasters were worthless. They would not buy anything—not even a Coke or a pack of cigarettes—in his new country. [http://personalliberty.com/when-gold-was-a-lifesaverliterally/](http://personalliberty.com/when-gold-was-a-lifesaverliterally/) ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [July 21, 2016, 5:48am UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/24 "2016-07-21T05:48:45Z")
That’s just it, isn’t it? It has a value independent of the entity that issues it, unlike paper currencies. Even coins made of silver, as US subsidiary coinage was until 1965, hold their value very well against the staples like food and fuel. A pocketful of change had real purchasing power, today coins are mostly just a nuisance. Very sad. One interesting factor, in the interwar years in Europe the gold to silver price ratio really widened as anyone with assets packed up and left. The reason is silver had quite a discount relative to gold. If you’re even moderately wealthy and bugging out, silver is far to bulky or heavy to make your getaway. Gold is amazingly compact and just the stuff for starting a new life somewhere’s else. Well unless they’ve made posession illegal, as was the case in many countries at various times. Your government at work - criminalizing elements of the Periodic Table. Thanks, fellas. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [July 21, 2016, 6:09am UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/25 "2016-07-21T06:09:07Z")
> [@Common\_Tater](#): > > That’s just it, isn’t it? It has a value independent of the entity that issues it, unlike paper currencies. Sure, but so does copper or wood or even plain-jane printer paper. There’s nothing inherently better about gold itself, except some people believe it is and you can take advantage of them. The point is that faith is a necessary component. If a single country collapses, taking its currency with it, sure, gold’s value will hold up. But so will other currency, like US dollars, or Euros, or British pounds. Those won’t all simultaneously lose all value. If EVERY country somehow collapses and EVERY currency collapses, I’d rather invest in lead than gold. ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [July 21, 2016, 1:38pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/26 "2016-07-21T13:38:11Z")
> [@Cardigan](#): > > 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](http://www.wsj.com/articles/gold-prices-buoyed-by-continued-uncertainty-after-brexit-vote-1467286166) It’s easy to find examples where gold rises during uncertainty. It’s also easy to find examples (like I did) where it drops during uncertainty and rises during stable times. I think the counterexamples speak louder than the examples. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [July 21, 2016, 1:42pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/27 "2016-07-21T13:42:02Z")
> [@Great\_Antibob](#): > > Sure, but so does copper or wood or even plain-jane printer paper. There’s nothing inherently better about gold itself, except some people believe it is and you can take advantage of them. Gold should be considered rarer than copper and other metals. It is everywhere, but the concentrations are very low making it expensive to produce. Wood can be considered an unlimited resource. It is more expensive than it has been for some species of trees because there are fewer of them available to cut down. Printer paper is made from the least expensive wood and remains inexpensive itself. Supply and demand controls the value of these things, gold is simply unusual because much of the demand is not based on utility, but the supply is still limited which makes it increases in price. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [July 21, 2016, 2:21pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/28 "2016-07-21T14:21:20Z")
> [@ftg](#): > > It’s easy to find examples where gold rises during uncertainty. It’s also easy to find examples (like I did) where it drops during uncertainty and rises during stable times. Can you name a single asset class that has performed better than gold during times of market turbulence? ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [July 21, 2016, 3:51pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/29 "2016-07-21T15:51:28Z")
Sure. Stocks. And gold might be useful for fleeing from a collapsing Vietnam to a larger, more stable country. But if the US collapses, what more stable country will people be fleeing to? ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [July 21, 2016, 4:28pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/30 "2016-07-21T16:28:19Z")
> [@Chronos](#): > > Sure. Stocks. Why do you insist on commenting about a subject you obviously have no clue about? ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [July 21, 2016, 4:47pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/31 "2016-07-21T16:47:18Z")
[https://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp310.pdf](https://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp310.pdf) > [@](#): > > The aim of this paper is to examine the role of gold in the global financial system. We test the hypothesis that gold represents a safe haven against stocks of major emerging and developing countries. **A descriptive and econometric analysis for a sample spanning a 30 year period from 1979-2009 shows that gold is both a hedge and a safe haven for major European stock markets and the US** but not for Australia, Canada, Japan and large emerging markets such as the BRIC countries. We also distinguish between a weak and strong form of the safe haven and argue that **gold may act as a stabilizing force for the financial system by reducing losses in the face of extreme negative market shocks**. Looking at specific crisis periods, **we find that gold was a strong safe haven for most developed markets during the peak of the recent financial crisis.** ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [July 21, 2016, 7:03pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/32 "2016-07-21T19:03:56Z")
> [@Great\_Antibob](#): > > Sure, but so does copper or wood or even plain-jane printer paper. There’s nothing inherently better about gold itself, except some people believe it is and you can take advantage of them …The point is that faith is a necessary component. Nobody with any wealth is going to try and convert their assets into copper or pig iron or notebook paper or the like. Especially in times of great uncertainty. On the eve of World War I thousands of tourists were stranded in Europe, because overnight their bank drafts and checks customarily used were no longer honored, the banking system froze up in an instant. Gold is remarkably valuable and practically uniquely suited for the purpose of money. It is a luxury good for all practical purposes, and it doesn’t spoil or rot and is not consumed, it is very, very difficult to counterfeit. Practically every bit ever mined of it is still around. Anyway the point is government issue currencies can be declared null and void instantly, this was done fairly often in the past, as in the case of scrip issued during the Vietnam war, called military UPC scrip or somesuch. No such pronouncements will work in the case for gold, as it has a near universal acceptance. Its use or posession can be made illegal, but its value will remain. ---
**Author:** ![Buck\_Godot](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/buck_godot/32/6573_2.png) [@Buck\_Godot](https://boards.straightdope.com/u/Buck_Godot)\ **Post date:** [July 21, 2016, 8:00pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/33 "2016-07-21T20:00:43Z")
> [@boffking](#): > > 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. But at some level this is also an advantage if your goal is to insulate yourself from the larger market. If economy falls apart taking manufacturing with it, demand for steel could suddenly drop causing your steel holdings to lose most of their value. The same doesn’t hold true for gold, which is more of a “fiat commodity”. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [July 21, 2016, 8:08pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/34 "2016-07-21T20:08:03Z")
I don’t think any of the other commodities are practical long-term investments. The amount you’d have to pay to store a decent amount of steel or any of the other commodities suggested is enormous, and would undermine the value of investing in them. Those commodities are only useful as short-term hedging or speculating. The point of gold is that a small easily storable amount holds a lot of value. Which is besides for the fact that, as noted above, gold has been considered valuable for thousands of years. All these other things have come in and out of style but gold has remained. Posters have pointed out that there’s no inherent value to gold, but the important point is that this makes no difference. As long as you have a good expectation that it will continue to have this value - and the expectation is higher for gold than for anything else - then whether its value is inherent or not is immaterial. All else being equal, I would much rather have something with no inherent value but with a reliable non-inherent value, than have something that currently has inherent value but which might not have it tomorrow based on societal or technological changes. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [July 21, 2016, 9:48pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/35 "2016-07-21T21:48:22Z")
> [@boffking](#): > > 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. Gold has inherent uses, too. More importantly, it’s a very portable store of value. You cannot easily carry a substantial amount of wealth around with you in the form of aluminum. > [@bob\_2](#): > > 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. Maybe. Gold has been money for a long time, and there’s institutional memory to fall back on. Sure, if we’re literally fighting over the last shreds of the world in a _The Road_ style situation, then there’s no use for money. Just weapons and food. But most problems are local, not global, and most don’t reach the point of societal collapse. I bet people in Venezuela or Greece wish they had some gold. Their monetary systems are dysfunctional, but their societies are still just fine. > [@Duckster](#): > > 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? There’s a wide range of scenarios between a fully functioning society and roving bands of post-apocalyptic cannibals. Gold certificates are quite useful in many of them. There are legitimate reasons to own gold. That said, I don’t own any, and I think _most_ of the people who own substantial amounts in well-functioning states are foolish. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [July 21, 2016, 11:08pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/36 "2016-07-21T23:08:28Z")
OK, gold does have some distinctive properties that make it useful for money. Silver and platinum both have the same list of properties. What makes gold better than either of them? And **Surreal** , even in times of great uncertainty, a nice boring index fund of stocks will still outperform gold over any reasonable timescale. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [July 21, 2016, 11:27pm UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/37 "2016-07-21T23:27:59Z")
> [@Chronos](#): > > OK, gold does have some distinctive properties that make it useful for money. Silver and platinum both have the same list of properties. What makes gold better than either of them? If platinum was as well known through history it might have been used for money as much as gold. What makes gold best for money among metals is the high value it has in people’s minds so you need less of it for large amounts of money, which is useful when money is made out of metal. What makes gold better than money is high inherent and perceived value. Even if monetary systems collapse it will still have a high value. I don’t know why people care so much, if monetary systems collapse they have little chance of maintaining possession of their gold. ---
**Author:** ![dropzone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dropzone/32/7515_2.png) [@dropzone](https://boards.straightdope.com/u/dropzone)\ **Post date:** [July 22, 2016, 12:44am UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/38 "2016-07-22T00:44:08Z")
> [@Cardigan](#): > > 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’) Suckers. One may be born every minute, but inflation may have changed that. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [July 22, 2016, 1:10am UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/39 "2016-07-22T01:10:37Z")
> [@Chronos](#): > > OK, gold does have some distinctive properties that make it useful for money. Silver and platinum both have the same list of properties. What makes gold better than either of them? > > And **Surreal** , even in times of great uncertainty, a nice boring index fund of stocks will still outperform gold over any reasonable timescale. Upthread I listed several special properties of gold, _ **most of which are not shared by platinum** _. **Chronos** wasn’t the first to overlook this: Do many of you indeed have me set to Ignore? :eek: In particular, note that the high density of gold makes casual fraud quite difficult. _ **I think gold’s heaviness has been a very important reason for gold’s use as money.** _ The statement “silver has the same list of properties” as gold seems quite odd coming from someone presumably trained in the physical sciences. First of all: silver tarnishes. Gold doesn’t. Gold is more ductile than silver. And, most important of all, \*\*\*and obviously most important \*\*\* gold is … wait for it … _ **rarer than silver.** _ We already have a cite that gold tends to outperform stocks during financial crises(\*). This seems so obvious to me, I won’t bother to defend it. _ **Holy mackerel, people!** _ I’m as happy to laugh at the ignorance of the audit-the-Fed looneys and Illuminati-conspiracy nuts as the next Doper, _ **but there’s no need to to catapult over to the opposite ignorance!** _ _**Gold has been valuable money for thousands of years, and probably (not certainly) will be a valuable money in the coming dystopia, if any.**_ (\* - As shown at **Surreal** ’s cited source, gold may not perform well against the dollar for _some_ financial crises _ **because the U.S. Dollar is itself a safe haven.** _) ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [July 22, 2016, 3:21am UTC](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428/40 "2016-07-22T03:21:21Z")
> [@Chronos](#): > > OK, gold does have some distinctive properties that make it useful for money. Silver and platinum both have the same list of properties. What makes gold better than either of them? Gold is unique in it’s color as well. I don’t think I could tell the difference between a silver or platinum coin. Hand me a gold coin and unless it’s a very good forgery I’m going to know it is gold. [Previous page](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428.md?page=1) [Next page](https://boards.straightdope.com/t/why-does-the-value-of-gold-increase-during-uncertainty/760428.md?page=3)