People have found all sorts of negative things to say about gold. There are a lot of properties that make gold useful in so many ways, detractors will always talk about how gold is not something you can consume, some go as far as saying that gold does not make sense as an investment because if just sits there, and accrues not interest or return on investment, unlike paper currency, gold is not something you can get great returns from. There are three subjective points we can explore: you really cannot eat gold, gold is in Backwardation in Switzerland the one country where gold is highly valued and speculation is nothing more than betting on the gold price.
Gold might not be food or money, but unlike food, gold does not get stale. Even if gold gets old it can still be reused. Gold can be sold to get cash in times of need. You can sell gold bullion Melbourne to get cash when you need to. What the anti-gold brigade is missing is that everything has its own particular purpose, and so does gold, but it cannot be all things to all people. If we stay on the food analogy, food has a marginal utility that diminishes very quickly.
Eating one hamburger might keep hunger away. Other than for eating or providing nutrition, a hamburger serves no purpose. You need to eat a certain amount to stave hunger off. You may have a second one because the first was really nice and you’re not satiated. You may eat a third because you were extremely hungry. Other than that, burgers cannot be stockpiled, they aren’t an investment you can earn cash from and more over, hamburgers don’t keep. Do, a hamburger has a marginal utility that diminishes quickly.
What does backwardation of gold in Switzerland mean?
It simply means that you can give 100oz of your gold for three months to the bank and get to use120,000 CHF over three months for free and at the end, get your 100oz bar and make 400 CHF in profit. Thousands of people have these gold bars that they cannot consume like one does food, but no one is taking that deal, even for three months. The reason might have to do with lack of trust. They don’t trust that their counterparty would give the gold back or the francs themselves could be seen as useless. The latter is more probable as the value of francs has been rendered useless by the Swiss National Bank flooding the bank system with this useless currency. Francs might be so useless that the bid to borrow them and the interest rate on them might be regarded as being negative.
Speculative assets are becoming too useless to own
People buy stock and speculative assets like Bitcoin hoping that their price will increase. Why would they think these prices will rise? Because they are relying on some other person coming along to bid higher. But why would the next guy do so, because he in turn believes another person will come along with an even higher bid. This could be a never-ending cycle, however the depletion of gold is inevitable.
So, why are people buying gold? The reason might have something to do with the fact that buyers sometimes buy things they have no real use for but to be ahead of the pack. They may be buying gold simply to sell it to the next person. This is where gold buyers come in handy when people want to sell gold bullion Melbourne. No one thinks about whether the gold they buy and sell has any use. Mainstream investors may think a little bit differently?
This is why mainstream investors do not buy gold. The gold community needs to change its messaging in order to reach detractors.
Gold happens to be money and more than any other commodity. Gold has the highest stocks to flows. Gold has become more popular through the years. Even after thousands of years accumulating this yellow metal, we are still mining for more. Gold is the most marketable commodity in the world. It is the final payment, it extinguishes debt for a lot of people.
Consider how China deals with other countries. It sells goods to the U.S for dollars, just in time to pay for the oil it gets from Venezuela. Payment is made in machine parts, welfare largesse and machine parts. For this to work, the dollar is a good currency for all parties, but money is valued for the sake of holding it. The dollar clearly works as a medium of exchange, but gold is good for saving.
Cryptocurrencies have entered the economic landscape and people have speculated how great their purchasing power will be in the near future. A thing that’s held simply to trade consumer goods cannot be regarded as a capital asset but rather more of deferred consumer goods.
So long as one man has a surplus of hamburgers and another has a surplus of gasoline, they will want to trade. So long as men want to trade, there will be some kind of medium of exchange. But that medium of exchange is not necessarily money. That medium can convey value, but not store nor measure it and that is why gold is far more than just money.