Gold is not money (but it might be a good investment)

Generali

http://www.bedlamplc.com/c2/uploads/cpd%20gold%20march%20sir.pdf

Between 1 January 2000 and 3 December 2009, the
price of gold rose 326 per cent to reach an all-time high of
$1,226 per oz. This dramatic rise is often explained through

confident platitudes: “Gold is a hedge against inflation”,
“gold is a safe haven” and “gold is real money”. However,
such confidence is not always well informed. So let’s
examine gold as a commodity, a medium of exchange and

an investment, to separate the facts from the myths.

Might be of interest to some, a piece about gold as an investment.

vivatifosi

There was a really good article in the Economist about gold a week or so back. I looked to post it at the time but couldn't get a link, have managed to now. It is a very long article, but looks at the pros and cons of gold ownership, who is buying gold and what the future trends may be. I've not quoted from it as I would undoubtedly highlight the wrong paras as it isn't a subject that interests me particularly. Here's the link:

http://www.economist.com/node/16536800

And some more gold graph !!!!!! for the interested:
http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story_id=16531196

michaels

Ooops - whilst I normally read the Economist cover to cover I have to admit that gold interests me so little that I didn't read that article.

However now we are discussing it here 2 questions:
1) What is 'All the Gold in the world' worth - is there enough of it to have any appreciable impact on the real economy?
2) Unless there is loads of it surely there is a huge danger that it is just another commodity bubble based on investors looking for 'uncorrelated/inverse correlated' assets?

Generali

michaels wrote: »

Ooops - whilst I normally read the Economist cover to cover I have to admit that gold interests me so little that I didn't read that article.

However now we are discussing it here 2 questions:
1) What is 'All the Gold in the world' worth - is there enough of it to have any appreciable impact on the real economy?
2) Unless there is loads of it surely there is a huge danger that it is just another commodity bubble based on investor lookig for 'uncorrelated/inverse correlated' assets?

According to the article I posted, there are 5,000,000,000oz of gold 'available for exchange' (presumably that is the stock of gold that has been mined that is not held by Central Banks). According to the LBMA (link) the last gold fix was USD1211.75/oz so the value of the gold is USD6,058,750,000,000 or about 8.5% of annual GWP (Gross World Product) which would be pretty much exactly 1 month's worth of GWP.

If the price of gold was to rise 10 fold or drop by 90% then my guess is that the only big impact would be on a few individual investors and brokers. It's used industrially in electronics and things but I don't think in such quantities as to have a large impact on the eventual price paid by the consumer. It isn't a huge part of most bank or Central Bank reserves as far as I am aware.

RDB

You must not forget that that gold and silver have been used as money for all known human history.

All paper currencies through all human history have always gone to their true value which is nothing. Gold and silver cant go to nothing they always have value. The £,$ etc are on their way to zero, on their way there gold and silver will be going up to account for all that extra paper the printing presses are churning out.

Just stating facts thats all. I know some hate these facts.

Generali

RDB wrote: »

You must not forget that that gold and silver have been used as money for all known human history.

All paper currencies through all human history have always gone to their true value which is nothing. Gold and silver cant go to nothing they always have value. The £,$ etc are on their way to zero, on their way there gold and silver will be going up to account for all that extra paper the printing presses are churning out.

Just stating facts thats all. I know some hate these facts.

If you read the article they make a very good argument as to why gold can't be money these days. Basically money = stuff bought + savings. Stuff bought = $70,000,000,000,000 (GWP). Gold would have to be divided into chunks too small to be of practical use if it was to be money.

I agree fiat money has no intrinsic value. Nor does gold, it just can't be printed.

RDB

Generali wrote: »

If you read the article they make a very good argument as to why gold can't be money these days. Basically money = stuff bought + savings. Stuff bought = $70,000,000,000,000 (GWP). Gold would have to be divided into chunks too small to be of practical use if it was to be money.

I agree fiat money has no intrinsic value. Nor does gold, it just can't be printed.

Baloney!

If you gave a serial number to every atom then 1 oz of gold would be enough for the world.

But thats not really possible.

There is plenty of gold I think a nano gram could be about a penny and a milligram could be about a £10er.

Or one whole gram could be about £100,000 in todays currency. Or whatever it takes.

You just need every nano gram having a serial number and a good system of digitally transferring it with a card or something from buyer to seller.

This would be a return to honest money. That someone couldn't increase the supply of and spend it themselves depreciating everyone elses 'money' like is happening today with our fiat currencies.

Generali you would like this video.

http://www.youtube.com/user/whygoldandsilver#p/u/2/VHNZ2Dd7NfU

HAMISH_MCTAVISH

RDB wrote: »

That someone couldn't increase the supply of and spend it themselves depreciating everyone elses 'money' like is happening today with our fiat currencies.

Rubbish.

Gold is nothing but a speculative commodity with few real uses, and a commodity in a huge bubble at that.

One day in the not too distant future, you goldbugs are going to get wiped out by the gold price crash...... For all the very same reasons you think you won't.

RDB

HAMISH_MCTAVISH wrote: »

Rubbish.

Gold is nothing but a speculative commodity with few real uses, and a commodity in a huge bubble at that.

One day in the not too distant future, you goldbugs are going to get wiped out by the gold price crash...... For all the very same reasons you think you won't.

Interesting so your saying for the reasons people think gold is going up a long way, for these reasons you are saying its going to crash?

Reasons like debasing currencies around the world Hamish? So printy printy and abusing the worlds currency supplies is going to make gold crash according to Hamish? All these trillions of units of fiat currencies being added to the world supply all over the world is going to make it less of these units to buy an oz of gold? Hmmmmm I cant see where you are going with this Hamish.

If you are not saying this Hamish what are you saying?

What reasons are you talking about?

HAMISH_MCTAVISH

RDB wrote: »

Reasons like debasing currencies around the world Hamish? So printy printy and abusing the worlds currency supplies is going to make gold crash according to Hamish? All these trillions of units of fiat currencies being added to the world supply all over the world is going to make it less of these units to buy an oz of gold? Hmmmmm I cant see where you are going with this Hamish.

Exactly this.

The fact that you believe any of this nonsense, rather than the reality that gold is nothing more or less than a speculative commodity, is why you'll get wiped out when the gold bubble pops.

A quick reminder of what happened last time a gold bubble developed.

Gold peaked, and then fell by 65% in a 20 year crash.



Gold is in a monster bubble, and anyone holding it as a primary investment will be wiped out when it inevitably pops.

DiggerUK

HAMISH_MCTAVISH wrote: »

.......Gold is in a monster bubble, and anyone holding it as a primary investment will be wiped out when it inevitably pops.

Hamish, I've put this question to many people, many times, including yourself.

Why was it, that whilst all other assets were bubbling in the boom, gold didn't?

Why is it, that now we are in the bust, gold is bubbling, but all other assets aren't?