# Is gold actually worth anything?



## Naked shorts (21 November 2008)

Gold has me confused

Things it can be used for
> Spaceships
> Looking nice
> Anti corrosion

Its heavy and bends easy so why the hell is this stuff so expensive?! It doesn't DO anything! (compared to say...steel, oil, sugar, and every other commodity)


----------



## chops_a_must (21 November 2008)

It's the only element/ material that is totally indestructible isn't it?

That's why I guess.


----------



## Flip (21 November 2008)

it looks nice.
its rare.
good for electronic circuits. 
people think it has value.


----------



## Naked shorts (21 November 2008)

chops_a_must said:


> It's the only element/ material that is totally indestructible isn't it?
> 
> That's why I guess.




It doesn't corrode, and it has decent electrical conductivity (silver has better).

I wouldn't go as far to say its the only indestructible element. Things like diamonds don't self destruct either, plus they would be easier to carry around


----------



## integrity (21 November 2008)

Are stocks actually worth anything?
Is ABS, BNB, AFG actually worth anything?
Are warrents linked to QLD government projects actually worth anything?
Is the Zimbabwe dollar actually worth anything?
Is that $50 note in your wallet actually worth anything?

Sometimes it just depends on the time frame.


----------



## Ageo (21 November 2008)

Naked shorts said:


> Gold has me confused
> 
> Things it can be used for
> > Spaceships
> ...




* Its been used as money for a very long time,
* More scarce than silver 
* Can be formed into many things and easier to work with
* Doesnt Corrode
* Sparkling look
* People have accepted it to be of some value
* Probably most importantly governments used it as a backing for paper money.


----------



## Absolutely (21 November 2008)

I been asking myself the same question actually. Like, where is it safe or worthwhile to put your money right now....shares, nup, banks, nup, property, nup.

So what about buying some gold and sticking it under the bed ?

Thing is, if the whole world economy collapses, surely the worth of gold collapses with it. I mean you can't eat gold. Gold doesn't keep you warm or is a good material to create shelter out of. So what good is it really......?????


----------



## Naked shorts (21 November 2008)

integrity said:


> Are stocks actually worth anything?
> Is ABS, BNB, AFG actually worth anything?




They are worth something because they have the potential to be worth something. ABS for example could be bailed out (or bought out), and in a year, go back to where they were. Unlikely, but possible



ageo said:


> * Its been used as money for a very long time,
> * More scarce than silver
> * Can be formed into many things and easier to work with
> * Doesnt Corrode
> ...



Just because it has been used to represent money, doesn't mean its worth anything. 

I have also since learned that it is used in some anti cancer medicines
http://en.wikipedia.org/wiki/Gold

I am still at odds as to why its ridiculously expensive, and why people view it as something to speculate on.


----------



## moXJO (21 November 2008)

Absolutely said:


> I mean you can't eat gold.




Don't be so sure

http://www.delafee.com/index.php?cPath=48&page=gold&gclid=COTY2tfnhJcCFSJIagodmH0HXg


----------



## prawn_86 (21 November 2008)

I have often wondered the same thing NS, and indeed in the current climate you would have thought gold would be going to new highs if the gold bugs were right and its such a great hedge against everything.

One reason it is worth a lot is there isnt much of it and its hard to dig up.

But if people dont want it, because its not actually good for anything, then it doesnt matter how hard it is to dig up...


----------



## Naked shorts (21 November 2008)

Absolutely said:


> Thing is, if the whole world economy collapses, surely the worth of gold collapses with it. I mean you can't eat gold. Gold doesn't keep you warm or is a good material to create shelter out of. So what good is it really......?????



Exactly my point, its as if its market value is far beyond its intrinsic value.

If the world crashes, are you really gonna give me your cows, chickens and wheat farms for a handful of pretty metal? NO


----------



## explod (21 November 2008)

moXJO said:


> Don't be so sure
> 
> http://www.delafee.com/index.php?cPath=48&page=gold&gclid=COTY2tfnhJcCFSJIagodmH0HXg





Wonder if you can stake a claim for the bottom of the turd sump.   Anyone want to be in it and help would be appreciated.


----------



## GreatPig (21 November 2008)

Gold has value as a form of money because of its properties. Most importantly, it can't easily be created, despite alchemists' best attempts over the centuries, and can't be found in relatively large quantities, so is not subject to inflation like paper money. Then there are other useful properties like its inertness (doesn't corrode over time), and its ability to be easily shaped into coins and divided into accurate smaller pieces (unlike diamonds for example).

However, this is all reliant on there being a perceived need for a form of money. The only alternative I can think of is barter, which is highly inconvenient in anything other than small communities. So on the assumption that there is a need for a form of money, gold has most of the desirable properties to fulfil that role. In small closed environments like prisons and POW camps, things like cigarettes have at times fulfilled that role.

If the world devolved into some sort of post-apocalyptic mess, initially other things like food and water for survival would be more valuable, but eventually there'd likely be a need for some form of money again. Who knows what it might be though. If all technology had gone, then old technological gadgets might be useable, again on the basic premise that they'd be in limited supply and not able to be manufactured. Not readily divisible though, so maybe the currency would be something like 1 Playstation = 10 Gameboys = 100 MP3 players, with 10 Playstations being one large plasma or LCD TV, and so on. You'd want big pockets to carry it all around though!

GP


----------



## numbercruncher (21 November 2008)

Naked shorts said:


> Gold has me confused
> 
> Things it can be used for
> > Spaceships
> ...





It money and has been for thousands of years ...

Central banks cant  print it , replicate it or bring it into being through alchemy or any other tricks ..... its timeless ....




Long after people lose faith in their Governments/Central banks created out of thin air money gold will still be their to do its job, a true global currency ..


----------



## chops_a_must (21 November 2008)

Naked shorts said:


> It doesn't corrode, and it has decent electrical conductivity (silver has better).
> 
> I wouldn't go as far to say its the only indestructible element. Things like diamonds don't self destruct either, plus they would be easier to carry around




Lol.

Copper, platinum, hell even the Hindenburg don't self destruct either.

You can however turn Diamonds into dust and make them therefore useless. Even in dust form, Gold still has the same value, and is in exactly the same quantity as before.


----------



## Ageo (21 November 2008)

Naked shorts said:


> Just because it has been used to represent money, doesn't mean its worth anything.




Then if thats the case nothing is worth anything besides the commodities we consume? and if thats the case agriculture commodities should be through the roof?


----------



## GreatPig (21 November 2008)

Ageo said:


> if thats the case agriculture commodities should be through the roof?



Agricultural commodities can easily be produced, at least at the moment. If you made wheat the currency, people could just go out and grow (or steal) acres of wheat and get rich.

GP


----------



## Ageo (21 November 2008)

GreatPig said:


> Agricultural commodities can easily be produced, at least at the moment. If you made wheat the currency, people could just go out and grow (or steal) acres of wheat and get rich.
> 
> GP




Exactly that is why gold have value because it is scarce, easily transferable and can be used as a means of exchange. To produce gold requires many man hours so unlimited cannot be created (unlike paper).

Something that has value (or real wealth) requires labour to produce it


----------



## awg (21 November 2008)

apart from the previously mentioned.

it is not so badly affected by inflation/deflation as paper currency.

it still is almost a defacto world currency, there is nothing else so universal.

The large populations of Asia, especially India and China, still use it as a store of wealth, as they have done for thousands of years, in the form of jewellery


----------



## sinner (21 November 2008)

An excellent question imo!

I think perceived value has a lot to do with it, why does LGL rally if everyone wants their physical?


----------



## explod (21 November 2008)

sinner said:


> An excellent question imo!
> 
> I think perceived value has a lot to do with it, why does LGL rally if everyone wants their physical?




Now you are getting down to it, encapsulated in the word "SENTIMENT"

Many good value stocks are going down with the bad, why? "SENTIMENT"

What does the media try to get through to us?  you are getting good at this, it plays on our weakness which is "SENTIMENT" 

If there is gold in "them thair hills" people will come out of thier burrows and foxholes from everywhere because we have been conditioned by good ole sentiment.


----------



## sinner (21 November 2008)

Nonetheless explod, for me the writing is on the wall for gold.

I know of at least one small cap gold miner who is in the enviable position that the high AUD price of gold coupled with high physical demand has allowed them to process the very lowest grade of dirt that is usually dumped as useless/unfeasible/unprofitable to pay the bills!

They are stockpiling their good stuff with no worries! I'm sure if these guys are doing it there must be other companies in a similar position.

I also saw 2 long plays on some "smallish" cap players BEFORE the market rally today!


----------



## explod (21 November 2008)

sinner said:


> Nonetheless explod, for me the writing is on the wall for gold.
> 
> I know of at least one small cap gold miner who is in the enviable position that the high AUD price of gold coupled with high physical demand has allowed them to process the very lowest grade of dirt that is usually dumped as useless/unfeasible/unprofitable to pay the bills!
> 
> ...




Absolutely agree with you but we are here trying to establish the intrinsic value to gold.   As has been pointed out by others, it has been used as a form of exchange going back thousands of years, regarded by many as money and this is imprited virtually into our sub-conscious.   The markets are bad and have been looking shaky for a few years now by some of us, so the sentimental buffer against paper money losing value is gold.   This sentiment will soon drive the price up, others will then notice that it is about the only thing on the block and then the rush north will be well and truly on.

'SENTIMENT'


----------



## Dowdy (21 November 2008)

You guys have this around the wrong way. It's almost laughable.

It's fiat money that has no value. Just look up what the term _Fiat Money_ means.



> The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment.




ie. It only has value because we (the government) says so.

Gold has intrinsic value, industrial uses etc


----------



## Naked shorts (21 November 2008)

Dowdy said:


> It's fiat money that has no value.
> ............................
> Gold has intrinsic value, industrial uses etc




You seem to be contradicting yourself here.


----------



## So_Cynical (22 November 2008)

Dowdy said:


> You guys have this around the wrong way. It's almost laughable.
> 
> It's fiat money that has no value. Just look up what the term _Fiat Money_ means.
> 
> ...






Naked shorts said:


> You seem to be contradicting yourself here.




In what way?

Pretty clear to me.


----------



## Naked shorts (22 November 2008)

So_Cynical said:


> In what way?
> 
> Pretty clear to me.




.......fiat money has no intrinsic value


----------



## So_Cynical (22 November 2008)

Naked shorts said:


> .......fiat money has no intrinsic value




http://en.wikipedia.org/wiki/Innate

_The term intrinsic denotes a characteristic or property of some thing or 
action which is essential and specific to that thing or action, and which 
is wholly independent of any other object, action or consequence. A 
characteristic which is not essential or inherent is extrinsic._

Prob a poor choice of words.

Fiat currency is backed by nothing....well a promise of sorts...money in infinite and plentiful.

Gold is Gold...it is what it is and will remain that way....Gold is finite and rare.


----------



## sinner (22 November 2008)

A useful statistic to consider is that 95+% of the earths gold has been mined, all the stuff that was around 2000-4000 years ago founding and ruining empires is still above ground being used for the same function and we are still looking for more!


----------



## champ2003 (22 November 2008)

sinner said:


> An excellent question imo!
> 
> I think perceived value has a lot to do with it, why does LGL rally if everyone wants their physical?




Because if everyone wanted their physical Gold then that in effect would skyrocket the price of GOLD to unprecedented highs and that would benefit the Gold mining companies.


----------



## Temjin (22 November 2008)

Lol go back a 100 years ago and beyond back and ask the same question. Then you tell them you don't think gold is worth anything and only your piece of paper is. I can't imagine their responses. 

The fact remains that gold/silver has been human's choice of money for the last few thousand of years. Fiat money has only an extremely short history by comparison and in theory, has a 100% failure rate. (i.e. it fails as a form of money) 

Beside a Fallout's style doomsday event, anyone on this planet would surely trade stuff with you for gold.


----------



## mayk (23 November 2008)

sinner said:


> A useful statistic to consider is that 95+% of the earths gold has been mined, all the stuff that was around 2000-4000 years ago founding and ruining empires is still above ground being used for the same function and we are still looking for more!




Is that one of the on-the-spot statistic? Or you have some reference?


----------



## sinner (23 November 2008)

Sorry, no references. I am extrapolating from slightly older data (2004ish) because below-ground reserves are not evaluated too frequently (happy for someone to provide newer data).

But if we assume total above ground gold (pretty much all the stuff ever mined is still with us) to be at 140,000ish tonnes at 2004, with below-ground reserves ESTIMATED at 50,000 tonnes we are talking below ground rates of 22% total gold remaining below ground in 2004.

Roughly 2500 tonnes a year is dug up we can see below ground reserves quickly approaching <10% if you take into account destruction and diminishing returns on what is left. Just think, less than a decade ago cost of production per ounce for some producers was in the order of $6-10/oz and today I see more and more explorers-cum-producers running profit at costs of $680-750/oz (IGR estimate and TRY actual respectively).

As I mentioned earlier (or maybe in the other gold thread), some miners are RIGHT NOW using the very lowest grade of dirt because physical demand and price are so high that they can afford to pay the bills with what they would usually throw away as useless and keeping their good stuff for a rainy day!


----------



## mayk (23 November 2008)

sinner said:


> Sorry, no references. I am extrapolating from slightly older data (2004ish) because below-ground reserves are not evaluated too frequently (happy for someone to provide newer data).
> 
> But if we assume total above ground gold (pretty much all the stuff ever mined is still with us) to be at 140,000ish tonnes at 2004, with below-ground reserves ESTIMATED at 50,000 tonnes we are talking below ground rates of 22% total gold remaining below ground in 2004.
> 
> ...




You think that only 50,000 tonnes reserves are left in the earth? You must be joking, right?  50,000 might be the proven reserves, not the actual reserves remaining.  Many unexplored land still remains, apart from the virtually unexplored 75% of the earth under sea.


----------



## So_Cynical (23 November 2008)

^^^ New discovery's above 1 million ounces are rare, and gone are the days 
of big multi million ounce, high grade discovery's.

How much gold is there ? 

http://www.galmarley.com/framesets/fs_commodity_essentials_faqs.htm

_In the world there are currently somewhere between 120,000 and 140,000 tonnes 
of gold ‘above ground’. To visualise this imagine a single solid gold cube with edges 
of about 19 metres (about three metres short of the length of a tennis court). 
That's all that has ever been produced_.

 That's how rare it is.

Gold still underground

_Where it is known about with reasonable confidence, and can be extracted economically, 
un-mined gold appears on the books of mining companies as ‘reserves’. There remains as 
reserves about 40% of the total of gold above ground - i.e about 50,000 tonnes. South 
Africa has 50% of the world's known stock of un-mined gold._


----------



## prawn_86 (23 November 2008)

From a pure theory point of view, gold is only worth what people are willing to pay for it.

If everyone suddenly decided that gold was worthless, then it would be just that.

A more specific question, which has already been answered somewhat, is; Why do people think gold is worth anything?

With this question its the supply side of the equation that comes into play.


----------



## explod (23 November 2008)

prawn_86 said:


> From a pure theory point of view, gold is only worth what people are willing to pay for it.
> 
> If everyone suddenly decided that gold was worthless, then it would be just that.
> 
> ...




Yep, it is scarce

and we have "SENTIMENT"

Treasuries are down to 1% yield, but out of fear the money is pouring into them.  When it is realised how they are being devalued by deflation and the printing presses then gold will be the last refuge for the immediate to medium term.


----------



## projack (3 December 2008)

Treasuries are down to 1% yield said:
			
		

> That is about half what the gold lease rates are now. Can’t remember ever seeing this in the FIAT era, when gold actually pays higher dividend than the dollar.


----------



## Naked shorts (3 December 2008)

projack said:


> That is about half what the gold lease rates are now. Can’t remember ever seeing this in the FIAT era, when gold actually pays higher dividend than the dollar.




You can lease the stuff out too!?


----------



## projack (3 December 2008)

http://www.kitconet.com/charts/metals/leaserates/au_go_0030_lsb.gif


----------



## Ageo (3 December 2008)

Naked shorts said:


> You can lease the stuff out too!?




Of course, its used as a security (similar to your house etc..).

Watch out for those December contracts!!

P.S here banks dont use gold as a form of security (not sure why) but in Italy its normal to use gold as a form of security to receive a loan (gold is much more liquid than houses so im not sure why its not used here).

Actually come to think of it gold is 1 of the most liquid physical assets there has to be on the market today (selling can usually take place on the day).


----------



## Temjin (4 December 2008)

prawn_86 said:


> From a pure theory point of view, gold is only worth what people are willing to pay for it.
> 
> If everyone suddenly decided that gold was worthless, then it would be just that.
> 
> ...




That's true though. We humans have developed the technology to turn subatomic particles and arrange them to make gold atoms, at a relatively cheap input cost, then gold will become worthless.

By then all matters would become worthless because they are all easily produced and replicable. 

And then perhaps stuff like anti-matters and pure energy density would be a form of currency. 

Ahhhhh, too far into the future. And if we get to that stage of technological sophisication, humans would have destroyed themselve. 

So I guess gold will be our choice of hard currencies for the foreseeable future.


----------



## GreatPig (4 December 2008)

It seems to me that the next level of global currency control could be technological - some sort of high-security computer that controlled the amount of money in circulation (mostly in the form of "credits").

Such a computer would need to be secure, with multiple redundant units running in parallel in separate locations around the world, and require concurrent authorisation from a number of selected people to adjust its operation (which should be rare, and could therefore be based on some relatively arduous political/financial process requiring agreement from a quorum of members around the world).

I think the technology for this is already available, but trying to get political agreement from all the world's countries as to how it would operate, without one or more countries trying to sneak back-door entries into the system for their own use, would probably be very difficult.

GP


----------



## Ageo (4 December 2008)

GreatPig said:


> It seems to me that the next level of global currency control could be technological - some sort of high-security computer that controlled the amount of money in circulation (mostly in the form of "credits").
> 
> Such a computer would need to be secure, with multiple redundant units running in parallel in separate locations around the world, and require concurrent authorisation from a number of selected people to adjust its operation (which should be rare, and could therefore be based on some relatively arduous political/financial process requiring agreement from a quorum of members around the world).
> 
> ...





There is 1 problem with that, those that are in power of such a device can easy manipulate it uses (just look at the printing press). Hard commodities used as an exchange for money like gold is good because to produce more you need to physically work for it (making it hard to control it all).

And no i dont believe the government would be able to confiscate all gold again as they did previously since people today would revolt. (i know i would)


----------



## GreatPig (5 December 2008)

Ageo said:


> There is 1 problem with that, those that are in power of such a device can easy manipulate it uses



That's why it would need to be secure with highly regulated control.



> And no i dont believe the government would be able to confiscate all gold again as they did previously since people today would revolt. (i know i would)



That's what they have riot police, tear gas, and prisons for. 

GP


----------



## cuttlefish (5 December 2008)

I guess we get trained our whole lives to march to the beat of pieces of worthless paper ... its not much of an extension for that to become credits in 'The Great Machine of Wealth".


We're not far off it anyway ...  its not like the banks hold much real paper ... the US fed doesn't have a big pile of dollar bills stacked away anywhere.  Rudd isn't sitting on a big pile of aussie notes ready to toss 'em over to the banks when bailout time comes.

The printing press is already like punching the credit button on a faulty computer game ... bang bang 99 credits please and I can play all night for free.


----------



## Ageo (6 December 2008)

GreatPig said:


> That's why it would need to be secure with highly regulated control.
> 
> 
> That's what they have riot police, tear gas, and prisons for.
> ...





Anything that is regulated by man can be manipulated, history has proven this (even if its highly sophisticated).

Also riot police, tear gas and prisons would not be able to control a full blown revolt  (but that can be left for another discussion)


----------



## explod (6 December 2008)

GreatPig said:


> That's why it would need to be secure with highly regulated control.
> 
> 
> That's what they have riot police, tear gas, and prisons for.
> ...





In the scheme of things overall gold is a very small part of world assets.  Maybe control in some places, but I don't think they would bother in Australia.

But interesting to think on.  The US economists certainly speak of it.


----------



## GreatPig (7 December 2008)

Ageo said:


> Anything that is regulated by man can be manipulated



That would include the gold price then.

If gold is used as a backing for currency, that only works if the price is fixed, otherwise to print more money all they'd have to do is say that the price of gold is now higher. If they made the price so high that there was far more gold available than the amount of currency it was backing (say $100 trillion per ounce), then it would have supply-side issues as well.

GP


----------



## Ageo (8 December 2008)

GreatPig said:


> That would include the gold price then.
> 
> 
> 
> GP




Of course and i agree the COMEX gold price is way out IMO and being manipulated, it should track the physical supply since that is much harder to manipulate as such. 

The difference between electronic and hard commodity is that it takes man hours to actually produce the hard commodity (not the same for the electronic thow).


----------



## Spanning Tree (8 December 2008)

Gold I think is a good store of value if you are cynical about government. Gold is for those people who always think the government is corrupt. As an investment gold is not good because gold does not produce any income from e.g. dividends or rents.



> Thing is, if the whole world economy collapses, surely the worth of gold collapses with it. I mean you can't eat gold. Gold doesn't keep you warm or is a good material to create shelter out of. So what good is it really......?????




Through tradition and because of the properties of the metal, it will become the de facto currency. E.g. rice cannot be used as a currency because eventually it decays. 



> Just because it has been used to represent money, doesn't mean its worth anything.



The $50 in your wallet is worth $50 because most people accept it is worth that much and they have faith in the monetary authorities. A currency needn't be necessary for some industrial purpose for it to have value. Paper money cannot be used for anything but it functions as money. What gold has over paper money is difficulty of government manipulation.




> Something that has value (or real wealth) requires labour to produce it



This is the Labor Theory of Value and it is the achilles heel of communist theory.


----------



## punter1955 (10 December 2008)

So it's best to hold physical precious metal than having a trade certificate?


----------



## prawn_86 (10 December 2008)

punter1955 said:


> So it's best to hold physical precious metal than having a trade certificate?




Definitely. 

In the end trade certs are just paper, and if there is no supply (worst case scenario) thn how can you claim your physical?


----------



## GumbyLearner (10 December 2008)

Spanning Tree said:


> Through tradition and because of the properties of the metal, it will become the de facto currency. E.g. rice cannot be used as a currency because eventually it decays.
> 
> What gold has over paper money is difficulty of government manipulation




The best thing about physical bullion is that you dont have to worry about other people attaching their liabilities to it including governments 

I like your point about rice not being a currency but ST have you considered the possibility of a new barter trade

http://article.wn.com/view/2008/10/...sults&template=cheetah-photo-search/index.txt


----------



## explod (10 December 2008)

GreatPig said:


> That would include the gold price then.
> 
> If gold is used as a backing for currency, that only works if the price is fixed, otherwise to print more money all they'd have to do is say that the price of gold is now higher. If they made the price so high that there was far more gold available than the amount of currency it was backing (say $100 trillion per ounce), then it would have supply-side issues as well.
> 
> GP




Well it is well said that there is no manipulation.   It is not used to back currencies anymore, paper money is just a proimise.  It is static and at the moment its value is deflating.   Follwoing quote from the "Privateers" webpage worth a look.



> In economics, there is no such thing as "intrinsic" value. This is true for the simple reason that value does not reside in the atoms, molecules, chemical composition, or structure of an economic good. It resides, always, in the MIND of the individual perceiving the good. When looking to acquire an economic good, an individual must decide how much time, or effort, or other economic goods he or she is willing to offer in exchange. That decision determines the value of that economic good, at that particular time, to that unique individual.
> 
> This is a crucial distinction. Value is not in what is beheld, it is in the eye (and mind) of the beholder. The reason why some goods evolve into money while most others do not has nothing to do with the "intrinsic value" of the goods so favoured. It is because a large number of individuals have realised that goods used as money have a unique usefulness. Unlike all other goods, they can be exchanged easily, and at any time, for anything.





And as I indicated last week, its all really about sentiment.   You can put money away and get interest/yield and capital growth, but when all is looking pear shaped one may need time out.   Gold does not pay interest but it is solid in the hand and no promise of government is required to back it.

Great thread all

cheers explod


----------

