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what makes gold so valuable?
08-29-2014, 03:47 PM
Reading the RoK article on bitcoin today, and some of the dissenting opinions in the comments section favored gold instead of bitcoin. I'm loosely familiar with the gold standard but I don't quite get why gold is so inherently valuabe. Can anyone explain in layman's terms?
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what makes gold so valuable?
08-29-2014, 03:48 PM
The hamster.
The hamster thinks gold is valuable because it's shiny.
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what makes gold so valuable?
08-29-2014, 03:56 PM
The use of gold in modern dentistry has elevated its status to the most valuable element due to its usage as a critical component in Grill Upgrades. Hip hop artists use gold as a way to enhance their smiles, and the market has followed, which has led to an explosion in gold mining across the globe.
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what makes gold so valuable?
08-29-2014, 04:08 PM
Gold is valuable because of its scarcity. However one might say that the reason gold is valued is because people have been using it for so many years as a form of currency or as backing for their currencies that it retains value in the minds of the people. Gold is valuable because people perceive it to be valuable. Why is it perceived to be valuable? Because people consider it to be valuable, it is a self perpetuating cycle.
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what makes gold so valuable?
08-29-2014, 04:14 PM
If the entire world financial system goes to shit, if governments and countries fall, the one thing you can bet on with 100% security is that, in the future, however things shake out, people will value shiny metal.
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what makes gold so valuable?
08-29-2014, 04:42 PM
The short answer is that gold has been treated as money for millennia by nearly every culture than came in contact with it.
The longer answer is that gold meets all the criteria for money better than anything else. It's rare, it's durable, it's divisible, it's portable, it's difficult to counterfeit, it has commodity value as jewelry and it can't be inflated with a computer or a printing press. So it's very easy to see why gold was the preferred form of money until relatively recently. And given the current state of the world economy and the health of the various fiat currencies of the world, there's still a strong case to be made for gold (although I wouldn't recommend having most of your assets there).
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what makes gold so valuable?
08-29-2014, 04:58 PM
Imagine if central banks around the world all used a gold standard for their currencies. One day, after all of us here are long gone I'm sure, and all the gold in the world has been mined from the earth, inflation would cease to exist.
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what makes gold so valuable?
08-29-2014, 05:22 PM
The above answers are excellent explanations to your question.
I agree with DChambers on this one but I must add that precious minerals like gold, silver, and copper have been forms of currency since the institution of culture in to the world. The time frame of introduction? When we moved from tribal communities in to structured civilizations.
Somewhere in history, someone had the idea," hey let's take all the food. Lock it up, and force people to work for it. We'll give them gold, silver, dollars, whatever for their work; they will then turn around and give it back to us for food."
Essentially, we can control the population to do as we want since we'll control the food supply.
With that being said, there is no inherent value to gold. Its only value is that you have to spend your time (inherent value) to work for gold ( perceived value) to pay for food (intrinsic value)
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what makes gold so valuable?
08-29-2014, 05:32 PM
Gold experiences what Carl Menger called 'anomalous demand,' because people will attempt to coalese around a medium for savings and gold has a head start on other commodities for historical and practical reasons. You can ask a hundred people the question at the top of this thread, but his answer, as refined by Mencius Moldbug is the best. For an updated exposition of it, do a web search for 'moldbug member' and get ready to follow some links.
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what makes gold so valuable?
08-30-2014, 04:56 AM
It's expensive because bascially, gold is the residue of a Supernova and cannot be reproduced, ever. Hence, it's scarce.
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what makes gold so valuable?
08-30-2014, 05:04 AM
Apparently monkeys like shiny objects and will even stash them in a safe place...a sort of primitive banking system when you think about it. At a certain level we're no different.
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what makes gold so valuable?
08-30-2014, 01:13 PM
Warren Buffet was being intentionally obtuse. Of course gold is a bad investment. Because gold is not supposed to be an investment. It's money. It's a store of value, not a means to acquire a return on existing capital.
Don't think of gold in relation to a stock or a bond, think of it in relation to currencies. Gold is a unique currency that has no nationality, and which cannot be printed into existence. In the age of fractional reserve banking and fiat currencies, gold stands totally apart in this regard.
People don't understand gold because they have been intentionally misled to view it as an investment rather than as currency. Gold is real money (which stores value over time) that can act in the function of currency (which allows for transactions and payments).
To understand the purpose of gold, consider the following. Imagine you opened a time capsule that had been sealed one-hundred years ago in 1914. Inside the time capsule were three things: $1,000 worth of paper U.S. dollars from 1914, a $1000 stock certificate from a major corporation in 1914, and $1000 worth of gold in 1914.
What would each be worth in 2014?
Well, your $1000 in 1914 cash wouldn't be accepted as currency. You might be able to sell them to a collector for a few hundred bucks. Your $1000 stock certificate would most likely be to a company which no longer existed, and if the company did still exist after countless mergers and ownership changes, they would simply laugh at your ownership claim and tell you to sue them if you had a problem.
The gold would be worth about $75,000 though. Did it appreciate it value? Was it some amazing investment? No. It just didn't lose value. It did exactly what it was supposed to - it stored value over time. Your $1000 worth of gold in 1914 is worth $75,000 today, or put another way, your 2014 dollar is worth 1/75th of a 1914 dollar.
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what makes gold so valuable?
08-30-2014, 01:59 PM
Think of gold as currency insurance. You buy it knowing full well the price of it could plummet. It's better to have it and not need it, than to need it and not have it.
It's also a good thermometer to tell when the national currency is sick. If people start losing confidence the temperature rises. Ie the price. If it drops, the currency is regaining value and people are feeling better.
Dreams are like horses; they run wild on the earth. Catch one and ride it. Throw a leg over and ride it for all its worth.
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what makes gold so valuable?
08-30-2014, 03:11 PM
One very important property of gold today is liquidity. If I hold a pound of gold in my hand today, I truly posses it and can use it to purchase stuff given some sort of secure environment.
If I have, say, $20,000 in my bank account, first the bank may really only have $1,000 thanks to fractional reserve lending (lending out more than exists.) Second, at any time the bank can freeze withdrawals and I have access to $0.
There are other items you can use as currency, but for gold, anyone anywhere will generally accept it as a form of payment. Want to buy something from me with Venezuelan bolivars? No thanks.
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what makes gold so valuable?
08-31-2014, 03:59 AM
Fact I read:
If you put all of the gold in the world in a cube, it would be 60 ft x 60 x 60.
It would fit on a baseball diamond.
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what makes gold so valuable?
08-31-2014, 06:10 AM
@weambulance
Interesting. Thanks
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what makes gold so valuable?
08-31-2014, 05:35 PM
Gold and the other precious metals are not without intrinsic value, in fact I don't think we've heard the last of using these metals for technology and other purposes. Silver was used as a pre-antibiotic cure because it has strong anti-bacterial properties. In fact, most precious metals have medicinal uses, they're just not used as much anymore. With the progress of nano-medicine and multi-resistant bacteria, it seems likely they could have a resurgence.
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what makes gold so valuable?
08-31-2014, 05:41 PM
Quote: (08-30-2014 01:13 PM)scorpion Wrote:
The gold would be worth about $75,000 though. Did it appreciate it value? Was it some amazing investment? No. It just didn't lose value. It did exactly what it was supposed to - it stored value over time. Your $1000 worth of gold in 1914 is worth $75,000 today, or put another way, your 2014 dollar is worth 1/75th of a 1914 dollar.
Gold is a very reliable inflation indicator. Not the doctored modern inflation number, but inflation as in expanding fiat money supply.
As you wrote, gold is real money. For a monetary system obsessed with fiat money, I find it quite interesting how the FED now hasn't delivered on the gold that Germany wanted to get back.
http://www.bloomberg.com/news/2014-06-23...bters.html
Quote:Quote:
Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all.
Why would that be a problem if gold was just a meaningless metal? Or maybe the Federal Reserve doesn't have the gold anymore? Maybe it was shipped off to 'private investors' a long time ago, but that is venturing into conspiracy theory.
All I can say is that I wouldn't want to be dependent on a pension in Euro or USD 20-30 years down the line.