Saturday, August 14, 2021

The Value Of Gold And What It Is Worth In Today's Market

While reflecting on the distorted world in which we live and thinking about the woes of owning real estate which weather and time have a way of ravishing I started to think about value. Owning any tangible object seems to have its drawbacks, especially if it has no utility value. Still, they do have at least one thing going for them, they are real. Liquidity is also an issue and unless you can sell an item safely and without a lot of bother, it is difficult to argue it is liquid.

The recent pullback in the price of gold brings front and center the reality no investment is free of risk. When leveraging a position by using borrowed money this risk grows substantially. There is also the issue of where to store it, and even whether what you have purchased is real. Nobody wants to be made a fool of, and that is what a person becomes when they spend their money on what they think is gold only to find out later the item purchased is a fake.

People may claim there is huge demand, that a commodity is rare, and that the cost of producing it is soaring but that does not mean its value is destined to rise. Supply and demand remain king when it comes to valuing a commodity, and gold's role in our future has yet to be determined.

A recent post on AdvancingTime looked into how once magnificent Grandfather clocks have now become obsolete symbols of wealth and conspicuous consumption. The fact these large clocks are hard to move and maintain has led to their value dropping like a stone. In fact, many of them can now be found in storage rooms and the back corner of the garage in homes across America. Value is not a constant and whether something is in vogue matters.

It is easy to adopt the view that with the rapid and huge surge in both debt and the money supply gold and inflation have nowhere to go except up. Gold has for a long time been touted as the ultimate place a person can store wealth. Still, we should ask, do the trends taking place in modern society also undermine its value? While many gold bugs are astounded by such a suggestion, it is a question that should be asked. The rise of a slew of cryptocurrencies has called into question gold's staying power as a defense against inflation. 

We must never forget how gold quickly rose in value several times over the years only to slump in price for long periods of time. As charts showing the value of gold indicate, the precious metal has seen many ups and downs. Without a great deal of utility value, the value of gold tends to often move based on shifts in interest rates and the cost of money. Efforts to magically tie the value of gold to historic relationships with other commodities and currencies generally prove futile. 

The eroding ability of anything to stand up against governments growing ability to confiscate and steal our wealth brings into question the future of gold and its mantle of the best place to store wealth. This means that a person best have the gold they own in their possession and hidden away from prying eyes or it may not remain theirs for long. 

One of the sad realities we face is that gold has become so valuable that today many people that wore gold jewelry for years no longer wear it because it increases the risk they will be robbed. Crooks are everywhere, if someone will kill for a few hundred dollars, it does not take a rocket scientist to recognize that anyone wearing a $2,000 chain around their neck has a bullseye painted on them.

Central banks know that gold is a threat to fiat money and by occasionally causing it to retreat in value they can damage those that hold it dear. Many gold bugs and even silver investors claim this exploitation has gone on for decades and won't stop until economies collapse. They see gold and silver as two of the most manipulated commodities on the planet.

It was recently pointed out to me that many younger people are not as enthralled by gold, many of them are more focused on cryptocurrencies than this precious metal. Also, it must be noted that some cultures and areas of the world hold gold in higher esteem than others. This often has to do with their history and how their ancestors were to the idea gold and wealth flowed together as one.

The reason many young people may not be as captivated and dazzled by gold's charm could be their interests have turned to other things, they simply can't afford gold, or they are not familiar with how inflation can destroy the value of currencies. With all the above in mind, the biggest threat facing those that own gold is that it may at some point be confiscated by governments or that it may be made illegal to sell or owned. 

In no way should any of the things written above be considered a stand that holding gold is not the ticket to a prosperous future or a bad investment. The above is simply a reminder of how fragile and dangerous the investment world is, it is a place where nothing is carved in stone, and if it were, that stone would be sitting next to a giant stone crusher.


(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)


  1. One day the central banks won't be able to manipulate everything and price discovery will return. We will see some interesting values when that happens.

  2. You should do a Crypto hack job.

  3. Everything is worth only what we think it is, until it no longer has value. I've heard and read every argument pro and con about gold. All the prophets of the great reset and blockchain money have yet to convince me that gold has no purpose as a means of exchange.
    Look at any country whose economy is or has collapsed, and PM's are alive and well there. Recall Zimbabwe, when the population were mining gold in exchange for food. No, you couldn't eat the gold, but you could always exchange it for something to eat. Same in Venezuela. Same all over the third world.
    The world, or more accurately, humanity, is fragile right now. With transport and food supply in question, and interfering politicians and lying media sewing fear and discontent, it is very likely that gold will find a place, perhaps not as a legal means of exchange, but as an underground currency?
    I don't disagree with the author in principle about the fluctuating value of gold, as there is no tin foil in my hat, but gold is pretty, and shiny, and women the world over love it, so their men must groan and bear up and keep some on hand, until the light of civilization goes out completely.

  4. Gold and Silver is like Insurance of the worst kind. Only valuable when you NEED it!!! Like Guns and Parachutes, You only need it once, if not available, then you perish!

  5. Two comments came in objecting to a headband being worn in a picture in this article. Both said the picture contained something in Arabic that some Muslims would consider disrespectful. The picture has been removed due to these objections as no disrespect was intended.

  6. I'm not in tears but as expected, I took a great deal of heat for suggesting gold may not go through the roof. Some of the comments on other sites that picked up the article were downright abusive,
    I firmly believe that inflation or hyperinflation is in our future, however, that does not mean all things will increase equally in value. I like gold and simply wanted to point out that owning it has some drawbacks. It seems that even suggesting this to many gold bugs is blasphemy.

  7. When I consider this hyperinflation I am struck by something which seems to make it different to all its predecessors. In all previous occasions when a currency lost its value it was possible for an individual to convert their wealth into another currency, the value and eaxchangeability of which survived the event. Previous hyperinflations affected one currency at a time. In both Weimar and Zimbabwe all an individual had to do was act early and quickly to convert the local currency into US dollars. But I anticipate that in this hyperinflation it will be much harder to find a currency which is not affected and which is readily convertible into useful things after the crisis. It seems certain that holding US dollars will not preserve wealth. The Chinese seem to be trying to make their currency strong enough to be an attractive alternative to the dollar but nobody really trusts the Chinese so I don't think that will work. My own currency, the British pound, is hopelessly compromised by a cohort of central bankers who are willing to indulge insane spending by what increasingly seems to be an incompetent government. The Euro might survive well enough to preserve some wealth, as might the Ruble. Perhaps the cryptocurrencies will succeed. But in this hyperinflation, when trust in all governments and the banking system evaporates, I think it will do no harm to own a little gold.

    1. Thanks for your comment, I agree owning a little gold is not a bad idea. As for the euro and yen, I think they have a better chance of falling than the dollar.
      Only time will tell.