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Xil

Convince Me That Gold Is Worth Anything

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Okay so jewellery can be made with gold, and certain chemical industries use gold but in the end, why is it so highly prized?

Its relative scarcity has set a market value which is understandable and I can also see why the price will fluctuate depending on sentiment.

I hear talk of it being a safe haven during periods of financial meltdown, but why? Is there a reason why most of the world could not survive without gold?

I need water and food every day but I'm sure I could get by without gold. Surely it could be worthless one day?

Xil.

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Okay so jewellery can be made with gold, and certain chemical industries use gold but in the end, why is it so highly prized?

Its relative scarcity has set a market value which is understandable and I can also see why the price will fluctuate depending on sentiment.

I hear talk of it being a safe haven during periods of financial meltdown, but why? Is there a reason why most of the world could not survive without gold?

I need water and food every day but I'm sure I could get by without gold. Surely it could be worthless one day?

Xil.

Sorry to be rude but you are being very lazy. You are on the internet so you have access to a vast resource of arguments and rationales for and against gold. Go use it and make up your own mind.

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Guest wrongmove

Sorry to be rude but you are being very lazy. You are on the internet so you have access to a vast resource of arguments and rationales for and against gold. Go use it and make up your own mind.

You could say the same about house prices. Should HPC.co.uk be shut down :o

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Okay so jewellery can be made with gold, and certain chemical industries use gold but in the end, why is it so highly prized?

Its relative scarcity has set a market value which is understandable and I can also see why the price will fluctuate depending on sentiment.

I hear talk of it being a safe haven during periods of financial meltdown, but why? Is there a reason why most of the world could not survive without gold?

I need water and food every day but I'm sure I could get by without gold. Surely it could be worthless one day?

Xil.

If that's what you believe, just short it.

Cheers :P

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Okay so jewellery can be made with gold, and certain chemical industries use gold but in the end, why is it so highly prized?

Its relative scarcity has set a market value which is understandable and I can also see why the price will fluctuate depending on sentiment.

I hear talk of it being a safe haven during periods of financial meltdown, but why? Is there a reason why most of the world could not survive without gold?

I need water and food every day but I'm sure I could get by without gold. Surely it could be worthless one day?

Xil.

Some people ask me this in the 'real world'. I usually reply with: why hold cash?, what is cash? Where does it come from? Why is 50p equivalent to a mars bar?

Explain to me why you have faith in cash/paper money first...

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Some people ask me this in the 'real world'. I usually reply with: why hold cash?, what is cash? Where does it come from? Why is 50p equivalent to a mars bar?

Explain to me why you have faith in cash/paper money first...

I don't have any more faith in cash/paper. Looking at recent experiences of people in Argentina and Zimbabwe, I'm sure they lost all faith in their currencies in the wake of hyper-inflation.

Cash is a useful token for bartering. It buys me food today when I need it but I can see how the 'value' of can be eroded by economic forces beyond my control. Ultimately it could be worthless.

What puzzles me is why gold has intrinsic value that surpasses my perception of its value to society. Surely with the impending energy crisis, enriched Uranium would be a better bet for something with a genuine worth to global communities. And I don't want to get into a debate about the pros/cons of nuclear energy. And I know that you can't stash coins made of Uranium. But I think you get my point.

I'm not playing devil's advocate or trolling.

Xil.

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Sorry to be rude but you are being very lazy. You are on the internet so you have access to a vast resource of arguments and rationales for and against gold. Go use it and make up your own mind.

Okay:

The main reason gold is valuable is because it is appreciated around the world. Its glowing appearance, durability, and malleability, or ability to be shaped into many different forms, are universally recognized, and it has been accepted worldwide as payment for goods and services for centuries.

Gold can be made into thread and used in embroidery.

Gold is among only a handful of financial assets that is not matched by a liability. It can provide 'insurance' against extreme movements on the value of traditional asset classes that can happen in unsettled times.

I'm still not getting it. Scarcity, desirability, medical uses, electro-plating, dentristry......etc.

I would still suggest that most of the 6 billion people on the planet could get by without it. The abolition of the gold standard and the reduction in reserves held by central banks would lead me to believe that the main global policy makers have other priorities as well.

I'm not trying to disuade anyone from investing in gold. I'm struggling to understand why it is perceived by the wider world as a potential port in a storm.

Xil.

Edited by Xil

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I don't have any more faith in cash/paper. Looking at recent experiences of people in Argentina and Zimbabwe, I'm sure they lost all faith in their currencies in the wake of hyper-inflation.

Cash is a useful token for bartering. It buys me food today when I need it but I can see how the 'value' of can be eroded by economic forces beyond my control. Ultimately it could be worthless.

What puzzles me is why gold has intrinsic value that surpasses my perception of its value to society. Surely with the impending energy crisis, enriched Uranium would be a better bet for something with a genuine worth to global communities. And I don't want to get into a debate about the pros/cons of nuclear energy. And I know that you can't stash coins made of Uranium. But I think you get my point.

I'm not playing devil's advocate or trolling.

Xil.

Quite agree with your sentiments Xil, you wont get much more than vague statements such as "real money" intrinsic value and all those other soundbites pulled off of other internet forums and 2nd hand regurgitation of anonymous posters from most on here, as Ive been asking simiilar questions with little satisfaction in well argued/balanced points.

Money is just a means of exchanging goods ultimately and theres most likely as many disadvantages of a a fixed gold monetry system vs fiat as in most debates

Theres not much in the way of rational reason why people SHOULD value gold, but if they do value it and people have faith in it and are willing to trade/exchange it, then theres no reason not to as mentioned see it as a safe haven if yuo know that theres 99% chance of being able to exchange it. One simple piece of advice for investing is that you cant beat the market. So though I dont agree with most peoples reasons for going into gold what Ive seen, if the whole world is thinking on those same lines, from a market point of view im wrong and thus should buy some gold. I therefore might buy/put 10-20% of my savings into gold for that reason. I certainly wouldnt think Id shift everything into gold and start laughing manically at the fools in the real world with their paper money from a concrete bunker Id dug in my back garden however, which is the kind of impression I get of gold bugs idea of heaven

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Despite many people saying Gold has "supernatural powers"..... the main reason it is a reliable store of value is simply because ...... it always has been reliable store of value .....

Of course, past performance is no indication of future performance but with gold, the past performance spans thousands of years and its reliability has been near perfect .....

So much so that it became the foundation of transactable currency almost worldwide ..... which made it overly powerful/influential and gaining its progressive quarantine through the Fiat system .....

Gold is used by all major central banks, is globally accepted, is inert and almost indestructable, is compact and convenient, has limited supply and diminishabilty, and has a history which makes it as safe a bet as anything on this earth could possibly be ...... for the next generation or two anyway .....

Further into the future however, there could be a slight problem with the old supply/demand curve .....

"Even at the conservative estimates of 10 ppb of gold in seawater, there is a great deal of gold in solution in the oceans. Humankind has unearthed perhaps a total of 3.3 billion ounces of gold over the course of history, an amount equivalent To a cube of gold 55 feet on a side (Dworetzky 1988), but the sea water of the Earth's oceans contain about 25 billion ounces of gold (Burk 1989). If the ability of some of these bacteria to concentrate gold around their cell membranes to the degree that they form massively dense agglomerations of hollow gold microtubuals, as the evidence suggests, then perhaps a similar bacterium may find a practical application in sea water. It is believed that these bacteria concentrated gold from solution concentrations similar to that of sea water, though perhaps not similar with regard to other constituents. If such a bacterium could be identified and grown in sufficient amounts, it might then be fixed to substrates that could then either be moved through large volumes of sea water, or placed in stationary positions in areas of relatively swift currents. Once enough time had elapsed for these bacteria to gather sufficient amounts of gold, these substrates could then be gathered and processed to recover the gold. The problems in these approaches are not trivial, and the work and research needed for an evaluation of its practicality are not simple. I believe that such research might pursue exploring the precise biochemical and bioelectrical pathways for the deposition of gold in these naturally occurring bacteria. Perhaps with a sufficient understanding of these pathways, these gold scavenging abilities might be artificially promoted or enhanced sufficiently to achieve an economic recovery of gold from sea water"

Ultimately, like you say, gold has an intrinsic value (the cost of its production, which is expensive enough) but its real/market value as a store of wealth and means of transfer of ownership ...... is purely what humanity puts upon it ..... (kinda like property) ..... the fact that human nature hasn't change all that much over millenia and the fact that humanity seems to have had an affinity for gold from almost the beginning ..... is why its so highly prized ..... plus the fact that there hasn't been nor is there likely to be, any other genuinely viable alternative ......

Sorry to be rude but you are being very lazy. You are on the internet so you have access to a vast resource of arguments and rationales for and against gold. Go use it and make up your own mind.

Dude don't apologise for your rudeness ..... if your not gonna be of any help, just don't bother to reply instead of making yourself look like an @rse .....

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Thanks Mr_Sminty and Perfectionist. You've managed to persuade me that I haven't missed something more fundamental about the value of gold to the world.

The fact that gold becomes more highly prized during periods of global instability is particularly fascinating. During a military conflict, people need food, medicine, shelter, security. The one thing they don't need is a precious metal and yet these are the times people turn to it. Its value is in essence a reflection of human insecurity.

I might start buying up sea water just in case......

Xil.

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Excerpts from http://www.gold-eagle.com/editorials_04/evans061304.html

Gold was the main currency in most of Europe, Asia and the Americas for most of the last few thousand years, up until 1971. Silver was also widely used, though to a lesser extent.

Gold evolved independently as money in the world’s main civilizations, because it is:

1. Rare

About 5 parts per billion of the earth’s crust. Difficult and expensive to mine.

2. Indestructible

It does not tarnish or decay.

3. Compact

If all the gold ever mined were made into a solid block whose base was the size of a football field, then it would be about 1.5 meters (5 feet) high.

4. Malleable and divisible

You can easily reshape it, flatten it, and divide it into tiny pieces.

5. Hard to find

The amount of mined gold has increased only slowly, rarely more than 2% per year.

Until 1971, government currencies were backed by gold. You could, at any time, exchange a unit of any of the world’s main government currencies (such as a dollar, a yen, a pound, or a rupee) for a prescribed amount of gold. Currency notes were just certificates for various weights of gold. For example, from 1934 to 1971 you could exchange 35 US dollars for one ounce of gold.

In 1971 President Nixon of the United States broke that nation’s promise to always exchange 35 US dollars for an ounce of gold. Since then the world’s government currencies have been ‘fiat’ currencies — they are not defined as a weight of gold, they have no connection to any commodity or anything tangible, and they are only worth what someone else is prepared to trade for them. The fiat currencies now ‘float’ against one another, with their relative values going up and down with economic trends or fashions.

All today’s government currencies are ‘fiat’ currencies. A fiat currency is defined and created by a government. It is given meaning only by legal tender laws—national laws that say that the fiat currency has to be accepted as payment in that country, and thus force people to use the fiat currency.

The term ‘fiat currency’ came about because the legal tender laws that give it value are a ‘fiat’ (or authoritative pronouncement) of government. A fiat currency is a currency brought into existence by government decree (that is, by fiat).

The value of gold, on the other hand, is independent of any government laws. Unlike fiat currencies, gold is accepted as valuable without needing protection by laws.

Fiat currency is created at the whim of politicians and bureaucrats. History’s lesson on this point is clear: those in charge of a fiat currency always, eventually, due to some urgent government priority, create too much of the currency and it becomes worth less, and ultimately worthless.

There have been hundreds of fiat currencies in the past, in various countries at various times. In every single case, the currency eventually became worth much less and was abandoned because the people in charge of making it eventually succumbed to the temptation of making far too much of it.

Examples of fiat currencies include:

1. Chinese bark currency (notes printed on tree bark, as recorded by Marco Polo), 1260 – 1360. One of the earliest fiat currencies, ended in hyperinflation.

2. Banque Royale Notes in France, the ‘Mississippi system’ (designed by John Law). Issued in 1716. Collapsed worth nothing by 1720.

3. Continental bills, printed by the US Congress during the American Revolution. Began issue in 1775, shrank to 1/40 of their original value by 1780. Hence the saying ‘not worth a Continental’.

4. Assignats in France during the French Revolution. Issued 1790–1796, collapsed to 1/600 of their original value by 1797.

5. Marks in Weimar Germany, after WWI. Issued from 1919 to 1924, collapsed to three trillionths of their original value. This was the currency that was carried in wheelbarrows towards the end.

The only fiat currencies that have not collapsed are today’s fiat currencies (that is, none of the hundreds of previous fiat currencies ceased to be legal tender without first undergoing a massive loss of value). All of those currencies effectively became fiat currencies in 1971, when the United States abandoned its commitment to pay 35 US dollars for an ounce of gold.

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I might start buying up sea water just in case......

Xil.

Xil, I see sea water trading sideways for a while yet. Fresh water on the other hand, there's a lot of upside there.

Go for the water ETF - that's my tip! :rolleyes:

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Xil,

Everyone seems to have hit the nail on the head. The one thing I might add is that although people need food, energy etc much more than gold it is not feasible to put all your wealth into these needs.

Gold is a storage of wealth, if you put all your wealth into food it would go off before I could eat it. I suppose you could buy a farm, but I aint got time to be a farmer :)

Gold does not give any return or loss, gold is gold. It does not increase in supply, whereas the cash (sterling) supply increased by 12.1% in 2005. This therefore gold becomes a very good investment when all other investments are negative.

Edited by Jason

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Gold cannot be debased or produced ad infinitum on a printing press therefore it is a good inflationary hedge.

I do think uranium is a better bet at the moment and would encourage you to look at some uranium companies.

Cameco shares have gone from $10 to over $70 in three years.

http://www.cameco.com

There are several other great commodity plays out there. Silver is a more useful metal industrialy than gold and still has some intrinsic monetary value. Many people believe it will rise even faster than gold in the near future.

Edited by gone west

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Okay so jewellery can be made with gold, and certain chemical industries use gold but in the end, why is it so highly prized?

Its relative scarcity has set a market value which is understandable and I can also see why the price will fluctuate depending on sentiment.

I hear talk of it being a safe haven during periods of financial meltdown, but why? Is there a reason why most of the world could not survive without gold?

I need water and food every day but I'm sure I could get by without gold. Surely it could be worthless one day?

Xil.

Personally, I hold some gold because I have my doubts about the security of the banking system. There is a debt bubble now and an energy crisis probably just around the corner. Peak Oil may well be a severe energy crisis, leading to banking collapses. There will certainly be financial disruptions. This being so, it makes sense to get an asset with a history of holding its value over long periods of time. Don't be too impressed by the decline of gold over the last 25 years, that was an era of generally cheap energy and falling interest rates. Interest rates aren't falling any more and energy is no longer cheap.

Gold has all the required properties that a true currency must have; rarity, obvious physical uniqueness (colour and density), durability, beauty. If national currencies were managed competently I wouldn't be interested in gold & silver, but there is progressive incompetence going on out there. So take care.

I share your views on the goldbug community; largely white supremicist, survivalist, paranoid, gun-totin' certifiable nut-country bumpkins.

Edited by malco

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That's a good article. Demand for gold looks completely international - without borders.

If I was an investor, I would be particularly encouraged with the paragraph:

.....the underlying figures, according to GFMS, show production around the world has been about 2,500 tonnes in every year from 2002 to 2005, while demand has increased from 3,355 tonnes in 2002 to almost 4,000 tonnes last year.

From my position, my original interest when I started this thread was that the price of gold (high or low) was dependant on sentiment and demand but little else.

Although I haven't changed my position, I originally felt there could be a time when gold would be worth around $0 per oz. To reach a worthless value, we would be looking at a global meltdown where everyone would be worrying about their next meal rather than their next piece of jewellery or dentistry. There's every possibility that this might happen in our lifetimes but no investment position will be invulnerable in such circumstances.

I'm happy now that there is sufficient multi-national interest to maintain a decent price for gold and other precious metals. At least for the short to medium term.

the cash (sterling) supply increased by 12.1% in 2005.

If national currencies were managed competently I wouldn't be interested in gold & silver, but there is progressive incompetence going on out there. So take care.

More good points. I'm not a huge fan of the way that money is being printed each year. My slender savings could be eaten away even without the much touted 'hyper-inflation'.

I do think uranium is a better bet at the moment and would encourage you to look at some uranium companies.

Cameco shares have gone from $10 to over $70 in three years.

http://www.cameco.com

I'll certainly have a look at Cameco and others. The current lack of investment and lack of imagination into sustainable energy sources convinces me that nuclear power has a significant place in the immediate future of energy production. I would rather invest in something with a few less disposal issues by hey its my money at the end of the day.

Appreciate all the good replies. This has been an eye opener for me.

Xil.

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Gold is worth whatever anyone is willing to pay for it.

inflation is regulated by debt to central banks which is regulated by the base rates which is rising.

gold is good a) in a free money society where rates are 0%

B) when real interest rates are negative.

remember

a) the bond market clearly shows that the long term inflationary presures are contained and may even be negative.

B) don't bet the house on gold it may fall in nominal terms if not real terms.

c) the yield curve shows that money supply is going to start contracting soon, don't hold gold or equities when that happens. nominal bonds and cash are the way to go.

I'm bearish on: Gold, Sugar #11, oil, copper, houses, FTSE, DOW S+P, R2K, N225, DAX CAC.

It is Just a metal, It has been bid up to a high price by an easy money policy that looks like it will not continue though.

Edited by jonpo

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Gold is worth whatever anyone is willing to pay for it.

inflation is regulated by debt to central banks which is regulated by the base rates which is rising.

gold is good a) in a free money society where rates are 0%

B) when real interest rates are negative.

remember

a) the bond market clearly shows that the long term inflationary presures are contained and may even be negative.

B) don't bet the house on gold it may fall in nominal terms if not real terms.

c) the yield curve shows that money supply is going to start contracting soon, don't hold gold or equities when that happens. nominal bonds and cash are the way to go.

I'm bearish on: Gold, Sugar #11, oil, copper, houses, FTSE, DOW S+P, R2K, N225, DAX CAC.

It is Just a metal, It has been bid up to a high price by an easy money policy that looks like it will not continue though.

Are you bullish on anything? Im guessing bonds! Have you any opinions on how long it will take before people start noticing a slide in all the above assets, will it be closely linked to money contraction?

Yep that was the article Plastic Elastic, actually detailed the real factors of supply and demand in the gold market etc. The hedging factor is one no gold experts/bugs on here have mentioned before, which would have an increased effect on supply and provide downward price risk to gold. Its this lack of counter arguments and the full picture with gold that makes me careful of making an investment decision into Gold.

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I'm fairly bullish on

government bonds of 5-10 year maturity.

cash.

Yen

Yuan HKD long term

turkish Euro debt.

IVA merchants, and insolvency practitioners.

the slide should start once the Bank of Japan starts to raise interest rates which is currently due to start in April apparently. tell you what if we get through 12 months and these assets have not slid Ill change my mind. Inverted yield curves are everywhere these days. the upper point of the global business cycle is upon us. time to save and make like a bear methinks.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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