Why gold?

Romeosierra616 said:
So from what I understand, the only "true" value gold has is circumstantial and dependent on what somebody claims it is? It's only valuable if people accept it as such?
Click to expand...

This quote hits it on the head; ANYTHING will have only as much value as the person you are doing business with is willing to place on it. If I (hypothetically being a business owner in the post-apocalyptic landscape) have a huge bank vault full of ammo and food and an underground reservoir full of millions of gallons of pure water that will never go bad, your bullets and food and water will not be worth a heck of a lot to me, but I might be willing to trade a box of 100 rounds of .308 for that pillow you managed to scrounge up(all other needs being met, luxury items start becoming desirable). Supply and demand come into play a lot heavier than the current market economy of mass production. If you need it bad enough, I could trade you a $0.89 bottle of water for 5 gallons of gas; if i needed it badly enough, I would be willing to trade someone a $2000 dirt bike for a new radiator hose for my truck(hypothetically speaking). I can imagine a massive demand for common OTC drugs developing, as well as first aid supplies, bullets, and probably water filtration items. Gasoline demand would peak, then decline as people started to run out of options and switched over to bicycles or animal transportation, but first aid, bullets(for hunting until the gunpowder runs out and people switch to arrows), and water will always be required.


On a side note, I wonder how long it will take the vegans to stop whining about slaughtering the animals for food and start hunting like the rest of the world? When it comes down to my stomach and your feelings about that cow, my stomach wins every time...
 
Sorry - I just realized that I'm in the survival subforum here. If you're focused on a complete apocalyptic SHTF situation then yeah, gold may not be much use to you. If you're talking about wealth preservation, whether through periods of hyperinflation, the demise of fiat currency, or even for after and through the reset and beyond to the rebuilding, then gold might not be a bad idea.
 
Romeosierra616 said:
So from what I understand, the only "true" value gold has is circumstantial and dependent on what somebody claims it is? It's only valuable if people accept it as such? Very interesting...

I mean, it makes total sense, if the majority accepts that Gold valuable, then it is, but if they don't accept it, it's nothing more than shiny metal.

I mean, hypothetically speaking, if you could convince enough people that Bottle caps(again taking reference from Fallout, obviously it's farfetched) are valuable, then they become so. Based on the fact that people accept them as such.
Click to expand...

Money, of any form, only has value because people believe it does. The only reason the grocery store is willing to give you food for US dollars is because both parties believe it has value.
 
Hiltonizer said:
The flaw with currency is that it's just that... currency. And mankind hasn't always gone to gold... The Aztecs (or was it Inca's? whatever) for example found it useless because it was in abundance... that's how I think it will be post SHTF. A bunch of jackasses running around with gold and silver coins when they don't even have a box of matches or a bar of soap.

Fact: Soap doesn't have an expiration date
Fact: Soap prices increase with inflation
Fact: Soap is a high input product
Fact: Soap is something everyone needs all the time

Soap will be the new currency.. stock up on your Irish Spring now. Soap is money.
Click to expand...

I always saw Coffee as becoming pretty sought after too once SHTF.
 
I am planning on cornering the market on V-8 interceptors. Someone will need them to crush the Ayatollah Humongous and his band of vermin on machines as well as to protect the dwindling desert fuel supplies. The fuel, the precious fuel. I will know the time is at hand when Mel Gibson is appointed Apocalypse Czar. OK, sorry for this stupid joke!
 
john_h said:
Actually, thinking about it, stockpile everything the BATFE and the DEA care about and you're all set.
Click to expand...

Building Supplies, Tabbaco, Coffee, Cocco, Alcohol, Firearms, Ammunition, Soap, Detergent, tampons/feminin napkins, toilet paper, tools and fuels will all be high value items in an extended SHTF enviornment.

Keep in mind, economic calamity in the US will devistate the world markets. The US is 26% of the world's GDP equal to the GDP of all of the EU-15 and 10x that of Italy, the largest of the "PIGS". Current fears are Portugal, Italy, Greece and Spain could drag down all of Europe and thus the rest of the world with them. Combined those 4 countries represent about 1/3 of the US economy.
 
Gold is money. Always has been.

For the same reason iron is good for building structures and copper is a good for thermal applications.

Gold, silver and copper. All are good money media.
 
Mike,

Actually, the concept of Gold = Money only dates back to the fall of Rome. Before that, gold was just another medium to represent money like a paper dollar today. Gold coins of the roman empire (and more recently of the Chinese and Japanese Empires) were merely representatives of comodities - wheat, rice, water and salt. Gold just made "money" hard to counterfit, easy to carry and durable - and it wasn't perticularly useful for much else, unlike copper, bronze and iron.
 
OPM said:
The prepper fantasy of no government or economy is just that – FANTASY. As soon as a man was able to produce in a day more food than he could consume, other men wanted to lead and control him, whether voluntary or through force. And as long as there are limited resources, there is an economy. The nature of SHTF is immaterial, be it nuclear war, worldwide pandemic, major volcano eruption, economic collapse, etc., there will be government. It might not be the same size, type or have the same reach, but there will be a government.

Now that we hopefully on the same page and are talking about real rather than imaginary world, we can address topic of money. Through history man experimented with numerous items as money. Grain, beer, land, cattle – just to name a few. Unfortunately, all but gold failed. To serve as money an item must have certain attributes. Among them: 1) Stability of supply growth. Preferably close to population growth. Meaning scarcity and predictable mining/creation rates. The subsections of 1 are: 1a) No arbitrage, which means it cannot be created without equivalent effort/cost. The ratio does not need be 1:1, but it has to be close. E.g. US nickel would pass this criterion, but $100 would fail big time. 1b) Not consumable. Although thanks to petrodollar we are living high on the hog, oil is consumable and thus should not be money. In the modern world consumption is one of the main obstacles for silver to be money. Of course silver cannot be consumed via destruction like oil, but it is put into too many products in too small of a quantity making its pragmatic value too great to function as money. 2) It has to be available across the world. Palladium cannot be money because it’s mainly located in Russia. Thus they control world’s supply and that cannot work. 3) Fungibility. Diamonds are unique and thus they cannot be money. 4) Portability. Try to carry some land across the country. 5) Divisibility. Lack thereof is one of the main failures of pure barter system. 6) Durability. Gold has been known to be periodically relocated to the bottom of the ocean by misfortunate owners, but even so, it’s really indestructible. 7) Easily identifiable, hard to counterfeit, easy to store and anonymity are plus. There is a reason gold has been used as money for thousands of years. There is simply nothing better currently known to man to serve as money. Although fiat can be forced onto the subjects, it cannot be forced on to the sovereigns. That is why central banks settle debt in gold the only real money.

Hence, your real question is “why money?”. If you are starting out in life and other things are more valuable to you – buy them. But at some point you should start saving. It is generally accepted that a balance portfolio should contain 5-10% in cash and 0-5% in foreign currency and 0-10% in commodities. Remember gold is both money (cash) and commodity, and FRN can be and should be viewed as foreign currency. So depending on world and market condition you could arguably keep up to 25% of your portfolio in gold – although usually only up to 15% is recommended.
Click to expand...

To my understanding, South Africa, the US and Canada all have significant palladium deposits.

Also, gold would have very significant industrial uses (in electronics for example) if it weren't for it's use as a currency driving the price up.

I think otherwise you hit the nail on the head. Gold is used as money because it physically suits the purpose and people believe it's worth something. In a way it's little different than fiat currency.
 
RE : Hiltonizer
Sure, if you expect the world to end tomorrow – bread & guns. But if you think there is chance the worl won’t end, having a few coins to pay a nurse to wipe your ass when you are old and crippled might be prudent. [grin] [wink]


RE: OP
If US is involved in all out nuclear war, gold will be your last concern. Most likely necrophiliacs will be your first - because you’ll be dead. You’ll either die in the immediate blast or slowly and painfully thanks to our little friend the radiation poisoning. Of course nuclear winter, toxic rains and other pleasantries of the nuclear age could be enjoyed by the few survivors. They are likely to be in very small groups and not welcoming to outsiders, including traders. However, when societies grow beyond the few closely related families and trade renews – they’ll need money. As previously pointed out – gold seems the best choice. Keep in mind that humanity has tons of this stuff above ground. So for young society with too few individuals it might not be scares enough to serve as money. But at some point human numbers will be large enough to once again use it as money. It might take thousands of years, but sooner or later…


RE: PaulD
No. Only Russia and South Africa. We do have some, but very small amounts. Not nearly enough to change supply dynamics if Russians wanted to screw with us. Gold on the other hand is nearly everywhere.
 
PaulD said:
This is what I based the statement on.

http://palladium-bar.blogspot.com/2007/09/palladium-reserves-and-palladium.html
Click to expand...

North American reserves are about 6% of world reserves by that chart, with more than half of "North American" reserves in Canada, so the US has less than 3% of the world reserves.

Another thing this chart highlights is Africa's mineral wealth. Zimbabwa and Etheopia are suspected to have huge Platinum/Palladium reserves, Etheopia and Somalia have huge proven diamond reserves. None of those have significant production capacity because of a lack of security and political stability in the regions. If central Africa could stop killing each other over the crumbs on the floor, they could quickly build themselves a big seat at the table.
 
Those seem like personal estimates of some blog guy. I am not sure how credible or reliable this source. Russia’s above and below ground reserves is notoriously closely guarded state secret. Ford learned that the hard way. However, if you look at mining rates and credible geological surveys – it is estimated that Russia has 50-65% of world known supply while US has 2-4%. If true, Europe, Japan, China, Brazil and US would never agree to use Palladium as money. Palladium also has other obstacles to be money; however, my main point was not about Palladium, but rather that one of the criteria of money is universal availability. Gold can be found nearly everywhere on earth.
 
new guy said:
Citing CNBC for gold forecasts = fail
Click to expand...

hehe well I am just trying to understand this before I jump in. It's almost like the whole market these days defies logic. I want to buy some but now I am afraid if it going to tank.
 
kman said:
hehe well I am just trying to understand this before I jump in. It's almost like the whole market these days defies logic. I want to buy some but now I am afraid if it going to tank.
Click to expand...

If you want to do some reading I'd suggest following www.tfmetalsreport.com. He's obviously a proponent of buying metals to prepare for "The end of the Great Keynesian Experiment," but the analysis is pretty good, and the other folks posting seem to know their stuff.

And yes, I did suggest that you follow the postings of a guy going by the name of Turd Ferguson. [smile]
 
kman said:
hehe well I am just trying to understand this before I jump in. It's almost like the whole market these days defies logic. I want to buy some but now I am afraid if it going to tank.
Click to expand...

never invest in anything if you can't afford for it to lose a significant portion of its value. There is no such thing as a "safe" investment. It's a falicy created by people who's primary job is to seperate you from your money.
 
ShadeWPI said:
never invest in anything if you can't afford for it to lose a significant portion of its value. There is no such thing as a "safe" investment. It's a falicy created by people who's primary job is to seperate you from your money.
Click to expand...

If gold is so obviously "safe" and "better than money", why are all the places that are explaining that fact to you so eager to convert their gold into your cash?
 
kman said:
I was wondering about this too, paper vs real: 80% Of the Gold the World Owns Doesn’t Exist
Click to expand...

I expect that most, if not all, commodities traders know that they don't own actual gold. They don't want the actual gold. They are simply speculating on the price of gold. Sure, some people who buy or sell futures are locking in their cost of profit to account for temporal mismatch of supply and demand, but mostly it's speculation.

With respect to ETF's and other investment products, all legitimate vehicles (I.e. SPDR Gold Trust) will tell you whether you own an interest in the physical gold or not. Even so, some small amount of the ETF may have to equitize the exposure via futures to account for subscriptions and redemptions.

In other words, if you want to know you own it, you have to buy physical. If knowing that your investment is backed by physical gold in a vault under the Thames, but the ETF. But if you just want to speculate on the price of good with no desire to take possession, then just buy any reputable vehicle.

ETA: i re-read that link. If you believe what he is saying, and that 75-80% of the gold market is naked short positions, then the right thing to do is figure out when that side of the trade is going to blow up and go massively long, as it would mean a doubling or tripling of gold prices in a very short time.
 
Last edited:
Rob Boudrie said:
If gold is so obviously "safe" and "better than money", why are all the places that are explaining that fact to you so eager to convert their gold into your cash?
Click to expand...

Because they can sell it to you with a 1-2% brokerage fee, then buy more gold with your cash.

I never said gold was safe. I said no investment (including gold) is safe and that if you can't afford to lose a significant portion of its value, you shouldn't buy it.
 
The whole idea of “safe” is misunderstood by general public. Investment/Finance is a science of matching risks and returns. Portfolio management is all about your risk tolerance, return objectives and investment constrains. Furthermore, aside from individual asset risk/return profile, asset correlation is key driver of the overall performance. IOW, you can combine incredibly risky assets with negative correlation together to produce risk-free portfolio. So talking about gold as a standalone investment and without knowing your personal profile – is pointless.

On a side note, silver has much greater paper vs. physical discrepancy. On busy days, more than annual mining supply changes hands. [wink]
 

Similar threads

Gold Question from Newbie
Replies
23
Views
937
Varmint
Varmint
Anyone sell gold lately ???
Replies
19
Views
901
enbloc
enbloc
Why you should use a priority bag system and ignore BOB vs. INCH
Replies
6
Views
2K
Knob Creek
Knob Creek
5 Things People Say They Can or Would do in a Survival Situation and Why They Won’t
2
Replies
33
Views
15K
Rider
R
Why I'll survive the collapse
Replies
18
Views
4K
Drs1321
D
Back
Top Bottom