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!
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!
For you gold skeptics, here’s an article about the aftermath of the Vietnam war.
http://personalliberty.com/when-gold-was-a-lifesaverliterally/
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.
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.
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.
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.
Can you name a single asset class that has performed better than gold during times of market turbulence?
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?
Why do you insist on commenting about a subject you obviously have no clue about?
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.
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”.
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.
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.
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.
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.
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.
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.
Suckers. One may be born every minute, but inflation may have changed that.
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.)
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.