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To: No Mo Mo who wrote (5476)	7/24/2000 9:14:46 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 436258

<<But what is the ultimate intrinsic value of gold?>> Well, that is a most perplexing question (especially in the last few weeks!) The answer is complicated, but I think the arguments rest on a few basic ideas: 1) Whatever the intrinsic value of gold is, it has not changed throughout human history. An ounce of gold is the same now as it was 10,000 years ago. 2) The main differentiating point between gold and fiat currencies is that the intrinsic value of gold cannot be altered by the hand of man, ie, by printing more of it as has frequently happened throughout history with paper currency. Moreover, there are more or less continuous pressures on government to overprint and debase their currencies, whether in response to a crisis of escalating debts (a la Latin America in the 1980's, the Weimar Republic in Germany in the 20's) or merely to create the short term illusion of prosperity for political purposes. Since you can't "print" more gold, its value remains at least relatively steady while currencies can (and do) fluctuate wildly during periods of economic stress. 3) The 3rd main reason for gold's role as a storehouse of value lies in the fact that although it does not change over time, people's attitudes toward currency do. Paper-backed assets tend to be popular when times are good, when credit is extended freely, and when there is little fear of external disruption. Unfortunately, the risk of creating bubbles is also greatest at these times, especially when coupled with the emergence of some object of speculation (i.e., tech stocks now, tulips in 17th century Holland, Railroad Trusts in England in the 1930's). When bubbles collapse, the subsequent pain is usually as bad or worse than the prosperity preceding the crash. People (for better or worse) tend to respond more forcefully to pain, and tend to avoid the perceived cause (i.e., paper assets) for LONG periods afterwards. What can fill the role? Where can one turn? Throughout history, it has been gold. Probably because of its historical role, central bankers have been more or less at war with gold as a currency because they perceive it to be a threat to their institution during times of stress. That's why we see large CB sales of gold, large banking institutions engaged in carry trade designed to restrain the price of gold, and recently taking large derivative positions amounting to net shorting of gold. Whether gold will provide the same degree of safety in the coming deluge remains to be seen, but in the interest of diversification it certainly is appealing (especially at recent prices). All my opinion only. Regards, Patron

To: No Mo Mo who wrote (5476)	7/24/2000 9:42:21 PM
From: Archie Meeties	Read Replies (2) \| Respond to of 436258

But what is the ultimate intrinsic value of gold? You ask easy questions. -g- Let's just pretend for a moment that gold has no value. Not so hard of a stretch - it isn't necessary for anything, it does nothing productive... Maybe it's beauty lasts longer than other forms of beauty, but it remains a metal, and one in serious oversupply (if you believe the bullion held by CB can come to the market at any time.) But if you held gold during the months when the Indonesian Rupiah was losing 70% of its value, then this seemingly worthless metal would have preserved your purchasing power like no other substance. During this time, the question you would ask yourself is not "What is the intrinsic value of gold", but "What is the intrinsic value of this piece of paper - my nations currency?" Gold, you see, answers to no one. Gold is either trusted or ignored. Yes, it has little intrinsic value by itself. But the theme of history is that it's value, however little, cuts through the illusion of fiat time and again.