Why gold?

[lendaddy]

I certainly open myself to being educated on this...

The recent fascination with gold got me wondering why. I mean it's practical value as a precious metal (electrical contacts, jewelry, etc..) is but a tiny fraction of it's current value. Our currency is no longer backed by it. So why are people stocking up on it?

Gold was at one time the universal currency simply because everyone accepted it and I imagine a religious connection/validation of value. A guy would take gold as payment simply because he knew the market down the street would accept it from him for his feed or whatever.

But here we are in the 21st century and I just don't see that ever happening again. It's just like a gentleman's agreement, with no practical backing isn't it? How is this different than Tabs spoons or baseball cards? What do you think they would be worth in a massive crash?


What has happened recently to institutional ownership in gold? Is it down? Seems like it would have to be for all these private citizens scooping it up. Have the institutions realized they have a realistically worthless metal accounting for their wealth and are unloading it in favor of practical assets?

Just rambling.

[Porsche-O-Phile]

Convention.

You're right though, and I've wondered that myself. It's pretty and shiny but has only a few practical uses.

I suppose you could stock up on plutonium - there's always a market for that.

[Joeaksa]

If the economy and world goes in the crapper, or we have a nuke war, paper money will be worthless in many cases. Thats where gold comes in.

Many of us have stocks of some precious metals or jewels stashed away but unless you are someone like "SloPat" hunkered down in a bunker somewhere do you really have enough to survive for long at home.

Had someone put a fair amount of money into gold 3-5 years ago it would have done well, but then the markets have also done well in this time. Personally my gut does not say that we are anywhere near needing to convert to gold anytime soon.

[id10t]

Joe - I have a feelign that if TSHTF or TEOTWAWKI happens, that lead, copper and brass will be more valuable than gold... of course, TP will probably have an incredible value, esp. compared with todays prices...

[on2wheels52]

Gold has been valuable for three thousand years. The demand vs the ease of mining have supported the price. As the formerly marginal gold mines start up for some of that $900 AU I expect prices to deline a bit and stabilize.
Jim

[Joeaksa]

TP will be really valuable, especially here in Arizona. Its difficult to wipe with cactus...

[M.D. Holloway]

The same for silver as well. I guess you could make rubies or other valuable gemstones a demonination of value but the grade and purity comes into question. Gold can be smelted to be 24ct which is 99.999+% pure. Tough to do that with other precoius stuff. Some things are considered standard like oil - but the price for crude is based on a grade - light sweet is more valuable than heavy sour. Last I checked there were 400+ different grades of crude.

[dd74]

Gold = failsafe when our currency tanks (which it is doing). It's the most recognizable currency worldwide.

I knew a guy from Vietnam whose family came over on a refugee boat. His dad was a doctor, and paid for everything in gold, including their house in Rosemead, CA. In fact, the dad arrived and promptly retired. Gold allowed that.

[lendaddy]

I understand that it's aways been the accepted currency but why? And after the why, why should you expect it to be in future?

"Just because" doesn't even work on my four year old anymore

[lendaddy]

Maybe a better question is "Why anything with no inherent value, be it gold/platinum or gem stones?"

[the]

Originally Posted by lendaddy

Maybe a better question is "Why anything with no inherent value, be it gold/platinum or gem stones?"

I think there's several reasons:

1) Those are things that have limited supply. Therefore, they are not subject to artificial inflation or devaluation. Any government can just crank up its printing presses and make its currency worthless. But the government can't start printing gold.

2) It is something which the authenticity of can be easily tested.

[kstar]

I think it's simple supply and demand . . . and rarity.

Best,

Kurt

edit - also what Lube and the said - it's easy to quantify what pure gold is. FWIW, diamonds are fairly common on Earth and considered poor investment vehicles; their value is tenuous and controlled.

[dd74]

So you're asking why gold and not the cute rings you get in a box of Cracker Jacks?

[frogger]

A quick clip from the National Mining Association's website:

Gold's superior electrical conductivity, its malleability, and its resistance to corrosion have made it vital to the manufacture of components used in a wide range of electronic products and equipment, including computers, telephones, cellular phones, and home appliances.

Gold has extraordinarily high reflective powers that are relied upon in the shielding that protects spacecrafts and satellites from solar radiation and in industrial and medical lasers that use gold-coated reflectors to focus light energy. And because gold is biologically inactive, it has become a vital tool for medical research and is even used in the direct treatment of arthritis and other intractable diseases.

[masraum]

Gold is shiny and doesn't oxidize like most metals. People like stuff that's shiny. That's one of the main reasons why gold is valuable.

Originally Posted by LubeMaster77

I guess you could make rubies or other valuable gemstones a demonination of value but the grade and purity comes into question.

The problem with gems is that you can create them in a lab. So the folks with the best pressure cookers would be rich.

[Joeaksa]

Originally Posted by dd74

Gold = failsafe when our currency tanks (which it is doing). It's the most recognizable currency worldwide.

I knew a guy from Vietnam whose family came over on a refugee boat. His dad was a doctor, and paid for everything in gold, including their house in Rosemead, CA. In fact, the dad arrived and promptly retired. Gold allowed that.

Friend of mine is a dentist overseas. When he removes a crown or inlay he asks the patient if they want the old one or not. Most do not.

Every few months or so he takes the bucket he puts them in home and stash's it in the basement. Yes its dental gold, which is usually 10k or so but last time we talked he had over 50 kilos of the stuff sitting there.

Believe he is set in case something difficult happens...

[Mo_Gearhead]

Gold is mainly just another form of investment/speculation. Many own gold in their portfolios as a 'hedge'. Bad times it goes up ... good times it goes down.
Some take delivery of actual bullion (or coins) while some keep it in 'paper' form.

If a meteor hits the earth or Gore is correct and the seas rise and flood all but Kansas and MO. (and the Alps) or some other catastrophic event globally occurs ...you can take all the gold, artwork, spoons, etc. and dump them in the ocean.

Last I heard, they are non-digestible.

(but keep your powder dry!)

[tabs]

Some of U Boyz were hitting on it..Rarity, the stability of the metal, and its old time usefullness (malability). Gold is a rare and hard to come by element. A few years back Gold cost $250 an OZ to mine, that was when it was down to $259 an OZ on the world market.

Gold has always been the safe haven bet. Back when currency was anew fangled thing, nobody knew how to put a value on it. Ahh but Gold you knew that was good.

Gold has always been a hedge bet against inflation. That might be the current play on the metal. The $$$ is simply declining so the price of Gold is going up relative to the $. One thing to check is to see if Gold is climbing in value relative to other currencies?

Today there simply is not enough Gold or other precious metal in the world to back all the $$, Pounds, Ruble, Euros floating around.

Currency is basically an abstraction saying that I will give you one unit of production, labour etc for a $, and the government guarntees that it will collect that unit. That is what backs the $ or any other currency for that matter.

[tabs]

One can play the precious metals game in a number of ways

Buy Bullion or its proxy
Buy Current Coins, like Krugerrands
Buy Numismatic Coins...$20 Gold eagles
Buy Jewelry, thats what the Indians and Arabs do
Buy Flatware or Hollowware.
Buy Placer Gold..as in Gold nuggets

They are hedges against inflation and the standard when currencies fail.


The English nobility and European nobility in general was famous for their Silverware and Hollowware (Teas Sets, Trays, Candelabra etc) it was a way that they could put their wealth to use on a daily basis and if times got tough they could melt it down into coins.


If I were to invest in Gold or Silver it would be the numismatic or flatware approach, maybe jewelry approach (Solid Gold Chains).

[Sapporo Guy]

I thought that Gold has been very stable in price in the past hundred(s) years. ?!?

Also, I thought that JFK was related to the US going off of the gold standard. (another conspiracy theory to him getting it)

There's a city office in Japan that collects dental silver (teeth and what not) to give to charity. That little box collects about $300 worth every 2 days.

Now, imagine 50kg of dental gold ... hmmm, maybe it's time to be a dentist