Most investors won’t get any income from their gold holdings though, and most would be loath to lend it out anyway, even if they could. After all, one of the main reasons for holding gold nowadays is as insurance against the current monetary system’s flaws and tail risks (it is definitely not the only reason, but it is a good bet it motivates a great many gold holders). Keeping possession is essential in this case.
In other words, for a gold investor the question “should I rather buy stocks, bonds or gold” is just one thing worth thinking about. Once that is decided, he needs to ask “which currencies should I choose to keep my cash holdings in” – and that is actually the question that seems more pertinent to gold. Gold should be seen as part of one’s cash savings – and as a matter of fact, the waxing and waning of the desire to save is one of gold’s fundamental drivers.
Of course, gold is not money nowadays, since it is not used as the general medium of exchange. However, it is highly likely that gold would be used as money in an unhampered free market economy, and we know for a fact that the market treats it as if it were money. If demand were solely driven by the metal’s industrial use value, its price would likely be far lower and almost all production would cease immediately, as ceteris paribus, existing gold inventories would suffice to satisfy jewelry and industrial demand for gold for about the next 70 years.
In other words, for a gold investor the question “should I rather buy stocks, bonds or gold” is just one thing worth thinking about. Once that is decided, he needs to ask “which currencies should I choose to keep my cash holdings in” – and that is actually the question that seems more pertinent to gold. Gold should be seen as part of one’s cash savings – and as a matter of fact, the waxing and waning of the desire to save is one of gold’s fundamental drivers.
Of course, gold is not money nowadays, since it is not used as the general medium of exchange. However, it is highly likely that gold would be used as money in an unhampered free market economy, and we know for a fact that the market treats it as if it were money. If demand were solely driven by the metal’s industrial use value, its price would likely be far lower and almost all production would cease immediately, as ceteris paribus, existing gold inventories would suffice to satisfy jewelry and industrial demand for gold for about the next 70 years.
The mainstream loves to hate gold, but then again, these are the same people who were bearish on gold all the way up from $250 to $1,900 (some turned bullish shortly before it topped, but that’s another story). What actually explains all this contempt for gold is the fact that it remains the main antagonist of the current statist centrally planned fiat money system. It’s as simple as that.
"Gold Is Money, Everything Else Is Credit" JP Morgan |
