Gold and precious metals

[Tabasco Sauce]

I have been seeing commercials saying that Gold and Silver investments are the way to weatherr the potential collapse of the dollar. Is their any grain of truth to this?

 

[Merkinball]

Absolutely.

 

[Tabasco Sauce]

Well, I am in a virtual stock league, and every time the market goes down, my gold stocks go up.

 

[Bill3000]

Ron Paul says so.

 

[Godwynn]

Buying gold will also make you under perform the market.

Here is a better one:

 

[scherbchen]

I have another question that has been bugging me. it is ooooold, I know that... but I never got it.

why gold? why is gold the one alloy (is it an alloy? dunno, sounded cool. ok it's a metal. I hope) that all nations base their currency on?

 

[Whomp]

My guess is there's a more direct correlation between these commercials and the dollar closing in on a bottom.

 

[Tabasco Sauce]

Buying gold will also make you under perform the market.

Here is a better one:

Awesome graphs.

 

[DNK]

I was under the impression that gold was the safety investment when the market looked troubled. I think it tends to jump in times of economic uncertainty in the short term, although I'd expect it to be a poor long-term investment.

Not sure, though.

 

[Tabasco Sauce]

I was under the impression that gold was the safety investment when the market looked troubled. I think it tends to jump in times of economic uncertainty in the short term, although I'd expect it to be a poor long-term investment.

Not sure, though.

Well, it seems like something to save for a rainy day, in other words, buy it when the market is good, sell when the market is crap.

 

[Verge]

I own some gold that I bought when it was cheap, so I'm richer for it. But I honestly don't think much about it, since I think there are better ways to work your money.

 

[gallego]

I have another question that has been bugging me. it is ooooold, I know that... but I never got it.

why gold? why is gold the one alloy (is it an alloy? dunno, sounded cool. ok it's a metal. I hope) that all nations base their currency on?

It's scarce enough to be valuable but not so scarce that it can't be distributed into a flowing system of exchange, not so plentiful so that it has a (somewhat) stable value (it's not so valuable if you can just dig it up whenever you want like iron), and it keeps well. It's also pretty-looking.

 

[Elrohir]

I have another question that has been bugging me. it is ooooold, I know that... but I never got it.

why gold? why is gold the one alloy (is it an alloy? dunno, sounded cool. ok it's a metal. I hope) that all nations base their currency on?

Gold is a metal (And an element). An alloy is two elements mixed together (At least one a metal).

Anyway, people think gold is safe and secure because it has been popular as money for thousands of years. So it is seen as sort of "inherently" valuable and secure. In reality, gold is no more inherently valuable than paper currency or shells for that matter - its valuable because people agree that it is valuable, which is all money really is, something that can be exchanged for other stuff, because people value it. Gold is seen as a hard currency, literally, and as something that keeps its value even when the "official" currency collapses. It's easy to store and trade, and rare enough that it isn't common. (Which is why it became a type of money to begin with)

So, yeah. Basically people value gold as a type of money, especially in times of perceived crisis, because it has been historically used as a type of currency and is thought to be a safe investment.

 

[Bill3000]

Gold is inherently valuable because it's shiny.

 

[scherbchen]

so... we agree that it is completely arbitrary. I was beginning to think I missed something. diamonds at least have a use nowadays so I can see their value. but gold? shiny (firefly reference duly noted), rare, blank, blank.
I understand that for an economy to work people have to agree that something is more valuable than other things. otherwise you would still be living in a barter economy. But -and there is always a *but*- I can maybe grasp why humans chose gold in the beginning, as has been said, rare, pretty... isn't that outdated by now?depending on who you listen to oil or drinking water (hard to store, mark one down for gold) might be more valuable in the future.
when nazi terror wrecked my country people sold ancient heirlooms for a loaf of bread (while nazi goons "extracted" gold fillings from jews before they gassed them). I ramble... Isn't it a fact that the US gold reserve doesn't cover the amount of US $ in circulation (not just applicable to the US)? that is the cause of inflation, right? why not do away with the gold standard and invent *credits*.

believe me, I know why I dropped out of business MBA... I don't get that . .. .. .. ., excuse my arbirary gold standard

 

[aluka]

It also has some commercial and industrial applications. Also the value of natural diamonds is even more artificial. Any use of diamonds outside jewelry can easily be covered by man made diamonds. The high price of naturally found diamonds is really just marketing.

As for inflation; the relative size of the gold reserve has no bearing on it. Central banks have been selling most of their gold reserves in recent years anyway.

So its value derives from demand from those seeking what they see as traditionally a safe investment as well as its use in certain applications.

 

[ainwood]

This is a hang-over from when currency exchanges were based on the gold standard - when the value of a currency was actually linked to the amount of gold reserves that the government had. It was designed to prevent things like governments just issuing billions of dollars (hence avoiding hyper-inflation like that experience in the great depression, pre-war nazi germany, and more recently the likes of argentina)

 

[scherbchen]

but why not say 7 hours of work of a framer are worth 10 credits? wait, caught myself just in time. then somebody would claim a professor of ancient greek at oxford should gain 40 credits for the same time and that would be a whole new discussion. let's try again. one pound of wheat (exchange for meat/soy/whatever) is worth one credit. not rare, not shiny but it will feed you! I know I am asking a question that is very basic and might apear downright ignorant to most, but I just do not get it.

in terms of what was valued when it looks to me like
gems/gold/furs -> copper -> bronze -> iron -> gold -> gold (insert oil here somewhere) -> gold
not much of a progress, is it?

 

[Whomp]

Don't discount how important gold is culturally to 60% of the population (a rising middle class in India, China and Muslims). It's also extremely nasty to extract environmentally.

 

[Gogf]

My guess is there's a more direct correlation between these commercials and the dollar closing in on a bottom.

Yeah, I think the point of buying gold right now would be that you're worried about the value of the dollar declining faster than the value of gold.