Most people love gold. It is simply an emotional commodity where there is a deep-seated allure and lust. Gold used to be money and it was great money for its times. It was one of the few resistant, standardizable, rare things that was any good for storing value. In a primitive world gold is great as currency; its only drawback being its high value. That was where silver and copper stepped in and filled the gap. However, it wasn’t long before paper and credit took over from metals and a promise even when it hasn’t been as good as gold has ruled money as the main source of wealth and transaction far back into history.
That doesn’t stop gold’s modern fan base believing that gold should once again be the basis of our monetary system. It makes sense for them as they own some and remonetization would shoot gold to the moon faster than any crazy cryptocurrency. Yet back in the 19th and early 20th century, industry and society was crucified on a cross of gold, as the anti-gold standard people would have it and it took the First World War to kill gold as money for much of the world, and the great depression in the U.S. to see it out of people’s pockets and into government reserves for good.
Gold is terrible money in these times; it’s insecure, volatile and can’t be easily digitized. Making more gold puts mining Bitcoin to shame when it comes to environmental damage. Not only does it use five times as much energy to mine one single year’s more supply, it rips up huge swathes of the environment to do so.
Yet tearing up the globe for gold is nothing new, with the disastrous destruction of North California by gold rushers and the consequent silting up of the Sacramento river, one of the initial impulses for the environmental movement as we know it.
However, there is no shaking gold’s investment audience. It’s the same old types since when I was a small child, grisly old guys awaiting Armageddon and a global comeuppance. Like stock market crashes it has to happen, history is littered with such moments, but I believe if one was to come about these days, gold would not zoom to the skies.
Gold is caught in a very narrow range and has been going nowhere for years now. Having a basement of gold bars has not been a great investment even with interest rates near zero, a good environment for gold, at least in theory. The stock market has trounced gold, pretty much most assets have in this era of QE. Will gold have its day when this merry-go-round shudders to a halt?
I believe that one of gold’s most powerful use cases is gone and as such gold is now only any use outside of its industrial and commercial uses as the currency of war. Governments keep gold in reserve because in war gold is what you pay with. It’s no good having soldiers if you can’t trade with gold, because pretty soon if the stakes get high, your paper won’t be accepted and only bullion will buy you what you need in trade.
