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As I understand it, gold will always be useful as an inflationary hedge. Even absent the role as a currency standard, it's scarcity will guarantee it a place as a commodity as long as there are people willing to trade one thing for another.
Gold's utility basically hasn't changed since the mid 1970's when most countries were already off of the gold standard for their currencies and the dollar followed suit. That the Swiss rejected a backing requirement for their currency just calls they youngsters' attention to what is in effect, quite old news.
Unfortunately, it also seems to be quite useful in fleecing paranoid investors.
As I understand it, gold will always be useful as an inflationary hedge. Even absent the role as a currency standard, it's scarcity will guarantee it a place as a commodity.......
Actually gold is not all that scarce. Annual production from mining is over 100 thousand ounces/year. Total world stock of gold is estimated to be in the range of about 175-200 thousand tons. Gold really is not a commodity since the uses are minimal. Gold is primarily used for jewelry or just horded.
Agreed gold like any precious metal is a commodity and it's value is partially set by demand.
But, Gold is also a fear trade. If you believe that the world's major government are going to collapse, you tend to own gold. Not necessarily a rational position, rather an emotional position. One would be better off with a solar powered bunker stocked with food, and bullets and medicine to be sure.
Is gold a hedge against inflation? Charting it against the CPI would seem to debunk that theory. Plus, it skyrocketed in 2010/2011 despite benign inflation. I think those pushing gold as an investment, or hedge, are those who are looking to recoup their money after buying at $1900/oz. Good luck with that!
Gold generally tracks inflation if held over the long term - compare an average gold price to the average price of anything else historically, and you come up with roughly the same factor. I do not find it useful as a hedge because I am not wealthy - so there is no point in my trying to hedge anything
The $1900/oz period was clearly a bubble, just like housing prices before that
People who claim that gold is useless and has no value simply want the world around us to work as they think it should work rather than recognizing how it clearly does work.
Our obsession with gold is actually a pretty fascinating one. Most people don't even know where our obsession came from. Well many MANY years ago our ancestors were discovered by ancient alien miners who needed gold for their technology due to its conductive properties. So they genetically modified our ancestors into the semi intelligent upright walkers that we are today and trained us to mine gold. Therefore our ancestors recognized gold as something important and valuable. The gold began to run out and the aliens moved on but our obsession with the material continued on to this day.
Our obsession with gold is actually a pretty fascinating one. Most people don't even know where our obsession came from. Well many MANY years ago our ancestors were discovered by ancient alien miners who needed gold for their technology due to its conductive properties. So they genetically modified our ancestors into the semi intelligent upright walkers that we are today and trained us to mine gold. Therefore our ancestors recognized gold as something important and valuable. The gold began to run out and the aliens moved on but our obsession with the material continued on to this day.
A good theory as any.
I lean towards the theory that the vast majority of people are drawn to shiny objects.
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