Why do we value gold?

CanOz said:

Same question could be asked about diamonds...I read somewhere that they are actually quite plentiful but the suply is careful controlled by the 'Cartel' De beers, or was...

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Diamonds can't be subdivided into equivalently valuable pieces - the worth of a diamond has to do with it's size. Did you really not know that?


Also, because gold is shiny.

Starcraftmazter said:

Did you really not know that?

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No I'm pretty stupid...:bloated: I need little yellow crapping video game players to tell me the ways of the world. I've only been living. learning and working in this world for 40+ years, on 3 continents.:disgust:

I Have so much to learn, perhaps i should have stayed at home in my mums arms and played video games....:

Then i could be an expert on EVERYTHING....like my idol Starcraftmazter.

CanOz

CanOz said:

No I'm pretty stupid...:bloated: I need little yellow crapping video game players to tell me the ways of the world. I've only been living. learning and working in this world for 40+ years, on 3 continents.:disgust:

I Have so much to learn, perhaps i should have stayed at home in my mums arms and played video games....:

Then i could be an expert on EVERYTHING....like my idol Starcraftmazter.

CanOz

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There's no need for jealously; though I too would be unhappy if I did not know the properties of diamonds by the time I reached 40

Starcraftmazter said:

Diamonds can't be subdivided into equivalently valuable pieces - the worth of a diamond has to do with it's size.

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No, you are incorrect on both counts.
:fan

This thread is a dirty rotten steamer.

im sparticus said:

now that is Kool

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Glad you like it spartacus, this is why I have some gold so when the time arises, i can set myself up with a mean set of grills.

If some objective observer was watching us, the humans on this planet, they'd be totally puzzled by the gold issue.

Imagine, say, aliens turned up and were checking us out. They'd see our activities. Okay, we cover large areas of land with crops so we can eat. Yep, that makes sense, it's a huge industry and we need it to live, sure. We mine things like iron and copper and aluminium so we can build stuff, have buildings, vehicles, etc. Yep, that makes sense. We dig up oil and refine it so we have a source of energy to fuel our activities, sure, that makes sense. All these things carry value because we need them, we use them, we would not live well (or at all) without them.

Then they would look at something like gold. This big industry, this 'precious' substance which so much resources are devoted towards producing. Okay... that seems interesting... so once this shiny yellow metal is produced, what is done with it? It is made into bars and then stored in warehouses where it sits idle and ignored, yet people pay massive amounts of wealth to choose who owns the stuff? What the? Okay, so it's useless now (well, it has some trivial uses but obviously if the majority is just shoved away in warehouses they are irrelevant), but does it have some future use or value to explain things? If, say, there was some cataclysm, some war, some food shortage, could it be used to help feed or clothe or house or rebuild? No? It would become even less valuable then than it is now, and the owners wouldn't even be able to reach it if they wanted it (how many gold owners own their gold as physical gold at their own house or burried somewhere they can access?), so ownership would not only be meaningless as it is now, but not even the case.

...those observers really would think the gold bugs were morons.

Gold is not the most rare or the most useful substance on the planet. Its value is almost entirely foolish sentiment and tradition. If it was functionally valuable we would be using it, not storing it. We can't produce more. So what? We can't produce more of any element.

I expect the gold bubble to completely and permanently burst in about 10-30 years. Over the next 10 years I'm really not sure what will happen, but it's one of the least enticing investments I can think of. Extremely risky, it's an obvious bubble, a guarantee of investing in something useless with value based purely on sentiment with nothing to back it.

The bursting of the gold bubble is inevitable. If nothing else, in the more distant future when our mining is extraterrestrial, gold will become cheaper (easier to obtain) than things like iron. I have no doubt the bubble will burst before then. If gold is cheap and abundant in the future, we'll actually probably start using it, but only because it is cheap and freely available, which means prior gold investment will have been a waster effort.

You need to understand the concept of "store of value".

waimate01 said:

Sure, it's harder than flipping the 'on' switch on the printing press, but that doesn't mean it creates wealth in any form, it just places a limit on rampant inflation. Blue seashells take effort to find, and are as valid a currency as gold.

The proof to this lies in the following thought experiment: all heavy elements are baked in the heart of stars. Consider a one billion tonne solid gold asteroid that makes its way towards earth, impacts another nickel asteroid head-on, and rains down a shower of gold that fortuitously is evenly distributed across the face of the earth, with 100kg landing in each backyard. Is every person now rich? Will every person have three rollers and a 150ft superyacht? Of course not. No wealth has been created any more than every Zimbabwean billionaire had a superyacht.

The fact that a (for want of a better term) 'golden [meteor] shower' is vanishingly unlikely does nothing to invalidate the demonstration that gold raining from the sky creates no more wealth than running the printing presses.

It has a value because of a shared belief, not because of anything intrinsic.

As an exercise, one can use the same argument to explain to ones fiance why it is completely rational for one not to buy her a diamond engagement ring. But that works less well.

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or enter the age of nanobot mining which will happen at some point in the future

Sdajii said:

Its value is almost entirely foolish sentiment and tradition.

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hi there, welcome to humanity. can i interest you in a religion? or perhaps a social concept like marriage?

I expect the gold bubble to completely and permanently burst in about 10-30 years.

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absolutely. i am firmly of the belief the free market will have us mining asteroids in 25 years time making a whole bunch of commodities crash. doesn't mean i'm not holding gold to ride the foolish sentiment train while the financial system does its best lemming over the cliff impersonation.

Starcraftmazter said:

You need to understand the concept of "store of value".

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waimate01 said:

Gold is a fiat currency like any other. The only difference is that 'normal' fiat currencies are devalued by running a printing press or tapping zeroes on a keyboard, whereas gold is devalued by stumbling around in the bush digging holes.

In both cases they are a 'placeholder' for wealth, but not wealth itself.

(Gold does have industrial use, but it's incidental to its perceived value. Same as arguing that printed money can also be used as a useful household insulator ... true, but beside the point).

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+1, except for the comparison with using paper money as insulation. Gold has very high industrial value, the only reason we don't use more of it industrially is because of its scarcity and current value.

from wiki, https://en.wikipedia.org/wiki/Economic_history_of_Spain:

Gold and silver bullion from American mines were used by the Spanish Crown to pay for troops in the Netherlands and Italy, to maintain the emperor's forces in Germany and ships at sea, and to satisfy increasing consumer demand at home. However, the large volumes of precious metals from America led to inflation, which had a negative effect on the poorer part of the population, as goods became overpriced.

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When the Spanish started using too much of the gold they acquired from plundering the Americas at the same time to pay for things, it caused inflation of gold. Of course since we have pretty much explored the earth, it is unlikely for another huge source of gold to be found on earth so this is unlikely to happen now.

Note that I do say unlikely, but nothing is 100%. Who knows maybe technology will advance to the level where we can start mining other planets. Personally I think humanity will wipe itself out and this is unlikely to happen. Another possibility is that technology advances to the level that energy becomes extremely cheap.

With cheap energy, from wiki, https://en.wikipedia.org/wiki/Synthesis_of_precious_metals:

Gold synthesis in an accelerator

Gold synthesis in a particle accelerator is possible in many ways. The Spallation Neutron Source has a liquid mercury target that will be transmuted into gold, platinum, and iridium, which are lower in atomic number.

Gold synthesis in a nuclear reactor

Gold was first synthesized from mercury by neutron bombardment in 1941, but the isotopes of gold produced were all radioactive.

Gold can currently be manufactured in a nuclear reactor by irradiation either of platinum or mercury.

Only the mercury isotope [SUP]196[/SUP]Hg, which occurs with a frequency of 0.15% in natural mercury, can be converted to gold by neutron capture, and following electron capture-decay into [SUP]197[/SUP]Au with slow neutrons. Other mercury isotopes are converted when irradiated with slow neutrons into one another or formed mercury isotopes, which beta decay into thallium.

Using fast neutrons, the mercury isotope [SUP]198[/SUP]Hg, which composes 9.97% of natural mercury, can be converted by splitting off a neutron and becoming [SUP]197[/SUP]Hg, which then disintegrates to stable gold. This reaction, however, possesses a smaller activation cross-section and is feasible only with un-moderated reactors.

It is also possible to eject several neutrons with very high energy into the other mercury isotopes in order to form [SUP]197[/SUP]Hg. However such high-energy neutrons can be produced only by particle accelerators

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Gold has no value except for the fact that other people value it. This gives gold its value, and if other people stop valuing it, it loses value. However even when other people stop valuing it as a store of wealth, it still has value because it is useful in industry. Paper money is the same, once other people stop valuing paper money as a store of wealth, it loses its value. The difference is that paper money loses its value to worthlessness. Why use paper money in industry, when you can just use paper.

Why is everything so technical these days? Gold is simply beautiful! I wish my rod was made of pure gold. I didn't have enough spare cash for that so I had it bronzed.

I have to Popsicle sticks and a roll of insulation tape at least my tatt of a tinnie still turns in to an Aircraft carrier when aroused.

By the way - has anyone mentioned that Gold can't be printed yet?

Starcraftmazter said:

By the way - has anyone mentioned that Gold can't be printed yet?

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I presume you're saying it cannot be produced arbitrarily.

At least a printing press takes some sort of skill to build and operate. Gold can be, and has been, turned up by happenstance.

I'm not sure either qualifies as an unassailable storehouse for wealth.