Wednesday, October 17, 2012

The Lure of Gold

A recent article here in New Zealand discusses the upsurge in gold investing by locals.

It states the usual points commonly fed to a seeming unknowing public. Points like, "[Gold] is a hedge against economic uncertainty" and "you should have at least 10 per cent of your wealth in gold".

The predictions also come out; gold to hit prices of US$2000 to US$3000 within 12 months.

However, to be fair, the article does recommend gold in ones portfolio and does lay out some methods for the newby on how to go about buying it and in what form.

What I find fascinating about articles like this is that they frequently appear at times of uncertainty. There is a distinct fear factor involved with gold investing.

Then again, gold isn't really a hedge against economic uncertainty. I think you have to go back a step or two from there and see gold as a a hedge against bad government. Typically, it is bad governmental decisions that cause a bad economic environment. Economics is not something that goes bad without outside influence.

Buying gold is definitely still a contrary purchase decision. The sort that if discussed would make people go quiet at respectable parties. One is looked down upon as a hippie once was in the 1960s. Of course the bright side to that is that hippies are now the be-suited greenies holding sway in parliaments around the world. Oh, well.

Gold has always had an allure. Legendary pirate tales abound and are built around the plot of stealing Spanish pieces of eight. Scrooge McDuck is pictured swimming in gold coins. Gold is still the hot number one when it comes to jewellery. Somehow we just know gold is valuable. Does it have intrinsic value? Well, that's moot. I don't think so.  So why don't more of us own it?

For one, the stigma as mentioned above. Secondly, what do you do with it? You can't exchange it readily. You need fiat money to buy regular goods and services after all.

But gold is simply the best form of money. The amazing historical stability with which gold has kept its fascination and its consistency over time, and in many cultures, is testament to its ability to assuage the fears that men have of losing their hard earned wealth. Gold tends to be the best type of wealth preserver that has ever been known to man.

These days and those coming upon us show no signs that this allure is waning at all.

Gold in New Zealand dollars: $2140.88 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $40.37 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
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