If you buy bullion or coins, it’s in your hand or in the bank. If you buy gold stocks or something similar, you’re investing in the gold market.
Gold has always had value and always will because it does not rust away or disintigrate. It is as inert as lead. Bury gold in the ground or throw it in the sea for a thousand years and it can be retrieved good as new. It is also the best of conductors.
And gold holds it’s value. A one ounce gold coin in ancient Greece would buy a nice toga, a good belt, and a good pair of sandals. Today, a one ounce gold coin will buy a nice suit, a good belt and a good pair of shoes. It’s value has fallen only slightly as more gold has been found.
Gold has been used as a medium of exchange since time began, while paper money fluctuates when compared to something of real, tactile value. For example, in the Confederacy, the paper money became worthless only because nobody would accept as an exchange for something. People will always accept gold because it can be retraded for something else.
Thank you all.
And the question is, WHY?
Yes, it seems to be true historically. People have always accepted gold, because gold can "always" be retraded, because someone else "always" wants it, because they know they can retrade it.
But why? Note that operative word in gold is "retrade" -- i.e. we want gold because it can always be TRADED for something that is actually useful.
In ancient times, Gold was valuable because it was shiny and easy to work, and rare. You could prove how important you were by showing how much wealth you were willing to throw away on a shiny rare metal you could melt and mold around things. Like fancy clothes, or a palace with 10 times the rooms you need.
Nowadays, we can make shiny things with any metal, and the number of people who wear gold bling to show how rich they are by how much they can waste is ebbing some, but not much.
When we are all starving to death, who is going to trade you a loaf of bread for an ounce of gold?
Gold has always been tradeable, and has held constant value. But it appears to be all psychological. The actual use of gold is far outstripped by supply. If one day the world comes to it's senses and realizes that gold has no value on it's own, gold will be essentially worthless.
That day may never come -- but it COULD come. There is nothing that would require people to buy gold, the average person has absolutely no direct use for it, and no law requires anybody to accept gold as payment for anything.
Remember, everything you can collect has great value until the day it doesn't. Like Beanie Babies.
Last lesson. If you bought a DaVinci painting with gold while DaVinci was alive, which would be worth more today -- the same amount of gold, or the painting?