Hi everyone. I got a question to ask. From an investment point of view. Why would you put your money into Gold. First of all, Gold itself does not generate any passive income. I mean if you put money into say a company, that company can actually generate passive income for you in the matter of dividents. There are more room for growth with regards to a well managed company as compared to gold. The only thing is to hope that the price of Gold goes up.Secondly, you need to pay rental costs to keep gold. Lastly, gold does not have many practical use. I mean the reason as to why people get gold is actually as a hedge against inflation. But the thing is that it does not serve any other purpose other then perhaps for ornaments etc. But if you think of it really carefully, why would people put money into gold.
Some random thoughts:
1. All you said about gold is right.
2. I doubt anyone says to put all your money in gold.
3. The problem with other things is that people are afraid of the following scenario:
They buy a well managed company at $50 a share. The company pays 10% dividends a year, and also goes up 10% in price. Total profit, $10. Net value, $60. BUT high inflation of, say, 25% or more, caused by ridiculous amounts of money printing like we have today and like we are promised more of, wipes out their profits and then some. Net worth: $47.50 in old purchasing power.
With gold the net worth stayed the same.
4. If one could find a govt on this planet that doesn't print money like mad, and in that country find a few well managed companies, then maybe that would be better than gold for the reasons you pointed out.
5. The advice to buy gold is usually presented to be as opposed to holding anything in dollars. Better to break even than to lose.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
So the gold standard is all about curbing the government right to print money right?
But then. You dun have to buy gold. You can still buy other hard assets like farms etc rite. Say there is a economic crisis. There wun be a demand for Gold since Gold would not serve as something useful as it is a luxury but farms would be in demand since food price will also inflate thus people would value farms rather then gold am i rite?
sylar: But then. You dun have to buy gold. You can still buy other hard assets like farms etc rite. Say there is a economic crisis. There wun be a demand for Gold since Gold would not serve as something useful as it is a luxury but farms would be in demand since food price will also inflate thus people would value farms rather then gold am i rite?
On what basis. Would gold be more important that necessities like food, property, oil, services ,etc.
The key is that gold would be a better "exchange" good. sure, people will want food, property, oil, services, but not all those things are easily divisble and exchanged for goods that you have. this is where an easily divisible, durable commodity exchange good comes into play. This is why gold (or silver) has generally become the preferred means of exchange (before state imposed fiat money)
sylar:On what basis. Would gold be more important that necessities like food, property, oil, services ,etc.
On the same basis that your cash is important to you today. Though, unlike gold, you can't even use it for jewelry, you can use it to buy whatever else you need/want. Most people find that feature (of money/gold) attractive.
if you are wondering why gold works so well as an exchange good, its because its divisible, portable, durable, recognizable, and has a high value density (related to portable). But what truly makes an exchange good a good (as in better) exchange good is its salability, which has a lot to do with the network effect of people want to use it because people want to use it.
Also be sure and check out
With this question specifically, it is important to note that farm land is possibly bubbling as we speak. Land is a hard asset, but it isn't quite like anything else, and is hard to predict.
It does not serve as a purpose beyond that. But unless gold is recognize as something that can really replace the currency then it would be valuable. But if gold become so expensive that people can no longer even afford them then how is it possible for someone to even recognize it as money. It is not possible or even feasible to carry gold around and that is the reason as to why notes were issued in the first place. I have no doubt that gold is currently recognizable because historically it is recognized as something that does not lose it value but isn't this perception? If the crisis really comes, do you really think that gold would be as valued then because other goods would have been valued as more important.
Gold is also a hard asset. And it also cannot be predicted. The value is also dependant on our valuation From my understanding gold also reached historic highs in the 1970s. The difference between farms and gold is that farm can generate income and the price of farms can increase due to demand but gold can only increased due to perceived valuation. Actually paper money is always better the gold because paper money you can carry around but the problem is that with paper money, government can cause inflation by printing a lot of it. There is no such thing as a 100% fool proof investment. If there is an over supply of food then the prices of farms will definitely go down but then with the current situation whereby money is being inflated, then food prices will also become inflated because even though there are more then enough of food supplies to go around, there is a perception that there is a shortages of food and thus creating an increase in food costs. Just the same as oil. It is a matter of perception rather then real cost.
If the crisis really comes, do you really think that gold would be as valued then because other goods would have been valued as more important.
It really depends on the depth of the crisis. If you mean back-to-stone-age crisis (Fallout fans here?), then I guess tools, weapons, ammo, and canned food is a better choice than gold.
Anything milder than that (meaning the division of labor and exchange remain quite extensive) will benefit from a medium of exchange that is not consumable per se. One can even argue that if the means for printing dollars are destroyed during the crisis, then the paper dollars might serve as good money (though some people believe that only goods with considerable use value may become money - which paper dollars haven't got).
Just like now. It is very cheap to print paper and thus create a lot of dollars. Maybe the way to solve it is to peg the dollars to something that is valuable. It can be gold, it can be silver, it can even be tin. It should be a certificate that actually allows me to get something that is tangible.