<<Off Topic>> Gold
Hi Mr Cole, ---Nice Article by John Hathaway. Thanks for posting it.
Mr Hathaway says <<<"...Gold is a form of currency. ...>>>
True. Gold's fans are fond of pointing out the insubstantial nature of the US$ and other 'paper'.
I don't disagree with them on this point. But they seem to me to make an unjustifiable leap of logic at that point and assume that gold has, apriori, universally recognized inherent value. The question that I have is "What is backing gold?" Why should anyone believe that gold has inherent value? It has no great usefulness as a commodity, and is in abundant supply. The idea that gold will be the refuge of choice from various difficulties depends on people accepting gold ownership as a solid method of storing wealth. While this belief was widespread in the past, it is not so currently, and it is not likely to return, imho. The central banks don't believe it. People generally don't believe it. A few do, and that accounts for the value accorded gold now. But it is no more likely that the world is going to revert to a belief in gold's inherent value than to a belief in evil spirits as the source of disease.
Mr Hathaway stated, "Gold is a form of currency".
And imho it is as much an unbacked currency as any paper currency.
Sure, gold may rise somewhat under various circumstances. But I'd bet that the guys who control the sub-basement vaults stuffed with tons of the stuff are grinning at the prospect and planning to unload a pile on any rise in price.
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btw, I find it interesting that there seems to be a parallel of illogic in these two ideas:
1) The price of crude oil/NG will return to much lower levels because it has historically been much cheaper than it is now.
2) Gold will return to its historical place as a store of value, and perhaps as a medium of exchange/backing for national currencies because it has been recognized for many centuries as having inherent value.
It's often true that one can profitably bet on the return of long-established norms, but sometimes there are good reasons why a permanent alteration can be inferred to have occurred. The fact that there was a long history of a particular situation is not a Reason that it will return. As an assertion it has the common-sense appeal that comes from our daily experience with the regressions-to-the-mean that we often see.
But that visceral feeling of 'rightness' makes a poor foundation for investment, imho.
We've got to look deeper than that.
regards,
diana
(who believes we'll Not be seeing $15 crude or $500 gold again, ever.) |
