Quote:
Originally Posted by Irenicus
kuroishinigami: gold plays a different role in the market to equities and bonds.
The other assets are dynamic -- they represent not just the capital, human and material, but also the expectation of profit, the flow of money, the dynamic growth in value. Companies change directions and outlook all the time, and the stock prices, eventually, move with them. Gold isn't like that; it's a static investment. It is just capital.
Gold is even different from the typical commodities trade, because while gold has industrial uses, by and large the gold market doesn't exist because it's used in computers, but because of the artificial value assigned to it by people. It's bad to generalize, but I'm going to do it anyway -- people invest (not trade) in gold for one and one reason: they think the economy is going to tank and they're hedging against it.
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I completely understand this point, but the point I was trying to get across to SH wasn't this. My point is, IMO, gold is very different from bitcoin(which actually in concept is close to real paper money, only not regulated) in that if all else fail(people somehow magically stop investing in gold as hedging tools), gold will still have bottom line value/exchange rate because it has intrinsic value(still has real use) unlike bitcoin, which is just 1 and 0 data intrinsically(can't be used for anything else). It doesn't matter how low gold price will be if it happen, which will certainly be much lower than gold's current price(again IMO, it won't go lower than zinc, but market price can be fickle), but at least it will still have value instead of becoming a complete trash like unused bitcoin.
Is it worth buying gold at its current price for only its intrinsic value? Definitely not. But will it still have value if someday it's left as investment tool? IMO, yes. I likened this in stock to stock and futures contract. Gold is like stock, if it fails and company goes bankrupt, you still have the company asset that will be liquidated as your bottom line return(with company asset being the intrinsic value in this analogy). Bitcoin is like futures contract. If the seller of future contract is unable to fulfill the agreement, you get nothing because the contract itself is just a piece of paper priced by the agreement of both side. It's a crass(and probably inaccurate) analogy, but I hope I get my point across.