All stores of value are psychological, even gold. The last-ditch effort to return the world to the pre-WWI gold standard (between nations) led directly to the Great Depression. No serious people think there is any possibility of the world returning to this approach, unless there is first a disastrous collapse.
*********************************************************************************
Primarily because the gold has to be priced right. It wasn’t and led to problems. The actual cost of gold today would need to be $10,000 per oz. Doubtful that will happen.
International Monetary policy is not totally devoid of gold—it’s just not readily apparent and has to do with SDRs and basket of currency that they are currently discussing.
It would also be possible to design a system that is only partially backed by gold. However, that would lead us back to where we were when Nixon closed the gold window.
Other countries ask to be paid in gold instead of dollars, and given trade deficits that would mean our supply of gold would be depleted.
Still there are some very serious minded people — considered experts in finance that do propose a return to something other than fiat money.
In general, the Government/Fed is able to impose what is really huge taxes through the creation of inflation—so they can continue the debt/spending/printing of money.
The price of Gold went up 70% during the great depression. It went up 300% during the great inflation. Every diverse portfolio should have some Precious Metals, Real Estate, Cash/liquid assets, and stocks.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Good analysis.
Actually, I should be a gold bug as it has always been a good investment for me, both metal and mining stocks.
My push-back is against the idea that the economic imbalances could somehow be fixed by reverting to a metal-based currency, presumably without fractional banking. Ron Paul is simply wrong about this. To be blunt, the idea is as goofy (well, almost) as the global warmists who want to do away with carbon-based energy. It's just incompatible with the modern world.
But yeah, gold is fabulous. Silver too.
Speaking of metals, I also like lithium, as electric vehicles are coming fast (and not because of global warming ... they're just a better engineering solution and will ultimately price gasoline vehicles out of the market).
BTW, 50% of all investors are wrong on each and every market price. Because if there were an imbalance of "Bulls" and "Bears" on the security or metal or whatever, the price would change! (Every transaction has both a buyer and a seller, who obviously disagree on whether the price is going up or down.)
That's the utter genius of free markets!
What you said.