On Gold

[David Randolph]

Here is a quote from Warren Buffett on gold investing:

 

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

[Fortune Green]

http://www.marketoracle.co.uk/Article14996.html

[John Masterson]

Here is a quote from Warren Buffett on gold investing:

   

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around   guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

I gotta admit, it makes you think...

[The Gorn]

Warren Buffet is observing the painfully obvious - gold is a wasting, non productive asset. Its only value is to be a store of value.

But, I kinda wonder, when I read a statement like that, just how much gold does Mr. Buffet own squirreled away somewhere just in case?

[John Masterson]

What would happen to the economy if the they discovered that gold was hugely plentiful down in the deepest oceans, extremely common,  and they found a way to get down there and mine it easily?

[Origisaurus]

Warren Buffet is observing the painfully obvious - gold is a wasting, non productive asset. Its only value is to be a   store of value.  
 
  But, I kinda wonder, when I read a statement like that, just how much gold does Mr. Buffet own squirreled away somewhere just in case?

Many fail to distinguish between wealth and exchange mediums, i. e., money.  I saw an airy-fairy question on LinkedIn to the effect that if we just did away with money everything would be groovy.  "Imagine".

Precious metals, or similar durable, portable commodities, are mediums of exchange.  That's money, or currency.

Wealth is accumulated production surplus to immediate needs.  Think the Masai cattle owers, or that great scene in "The Ten Commandments" where Moses opens Pharaoh's granaries to feed the Hebrews.  The priests are aghast, because that stored grain constitutes not only wealth, but power.

And Oh, Yeah - shares in enterprises - that's investment of wealth.  It's also speculative and we know that because every so often the bubble bursts.  Buffet has become one of the very rich because he made many winning bets.  Many others are less successful, right down to the poor slobs that loaded up their IRAs and 401Ks with their employers' stock, and lost the whole shebang when the employer went bust.

The above is why it's prudent to store some of your wealth in precious commodities, which will actually increase in value when the other stuff crashes.  If you can spare it.

[Richardk]

Aluminium was once a precious metal that is now common. How about a case of Coke where the drink is valued more than the gold cans?

[Aussie]

....is capped by an Aluminium (that's al-yu-MIN-ium) pyramid, because when it was built, Aluminium was still a semi-precious metal that represented technological advancement.

Silver has WAY less moxie than it used to have, because stainless steel looks a LOT like it, tarnish aside.

Gold is a throwback to the days of "oooooh, shiny thing!".  But a lot of people still have greater faith in shiny things than in government economic policy.

That said, there is some Islamic proverb or something about an emperor separated from his retinue and lost in the desert.  He comes across the tent of an old Bedouin woman, who refuses to tell him where her water skins are hidden, until he has promised her half his empire.  Then she gives him water, saying "If I had've held out, you would have offered me ALL your empire for that drink of water.  But I don't want your empire, or any part of it, I just want you to understand how things are.  An empire is worth no more than a glass of water.  One day you will stand before the judgement of God, and then you will realise the wisdom of my words."

[John Masterson]

....is capped by an Aluminium (that's al-yu-MIN-ium) pyramid, because when it was   built, Aluminium was still a semi-precious metal that represented technological advancement.  
 
  Silver has WAY less moxie than it used to have, because stainless steel looks a LOT like it, tarnish aside.  
 
  Gold is a throwback to the days of "oooooh, shiny thing!". But a lot of people still have greater faith in shiny things than in government economic   policy.  
 
  That said, there is some Islamic proverb or something about an emperor separated from his retinue and lost in the desert. He comes across the tent of an old   Bedouin woman, who refuses to tell him where her water skins are hidden, until he has promised her half his empire. Then she gives him water, saying "If   I had've held out, you would have offered me ALL your empire for that drink of water. But I don't want your empire, or any part of it, I just want   you to understand how things are. An empire is worth no more than a glass of water. One day you will stand before the judgement of God, and then you will   realise the wisdom of my words."

Good proverb.

[Peter Gibbons]

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Buffett is the biggest beneficiary of the current system. Would you expect him to say anything else?


"Warren Buffet is observing the painfully obvious - gold is a wasting, non productive asset. Its only value is to be a store of value."

Gold was also used as exchange medium for thousands of years. Gold has important industrial uses as well.

Even if you accept that gold is a "wasting, non productive asset" - ( which I don't ) - is there anybody here that believes that the current system is cheaper to run? After you dig out, refine the gold and produce the coins - the maintenance of exchange system based on gold must be an orders of magnitude cheaper than the current system and MUCH more difficult to be gamed  by insiders. It's mind blowing that a gold coin from the Roman times still has the same purchasing power today.

Of course silver and copper can also be used as store of value and exchange medium. Gold just happens to be more rare and this is the reason it packs more value per certain weight.

In conclusion - Here is a quote from ( Great Irony! ) Alan Greenspan:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

[Aussie]

People don't use gold coins in everyday transactions for the same reason they don't walk around with a huge roll of banknotes in their kick like they were Al Capone.  Unless you got bodyguards, there's far too much likelihood that someone is going to 'redistribute' a large slice of your wealth under duress.  Silver might work, having a much lower value per ounce, but a gold coin of low enough value to be 'safe' to walk around with would either be alloyed to buggery with a baser metal, or so small as to constitute a slip-through-your-pocket's-seams risk.

[Peter Gibbons]

I guess you have not seen gold coins in a long time:

These are smaller than a penny and are only $99:


http://www.mint.ca/store/coin/125oz-gold-coin-%13-red-maple-2009-prod620004

I have walked with couple of hundred bucks in my pocket many times without any problems.


http://www.mint.ca/store/coin/sterling-silver-lucky-loonie-2010-prod330026

You could easily have non pure gold ( or silver ) coins that will be durable, light and in the $20 to $50 value.
And that value will not decrease rapidly year after year.

Of course this kind of thinking is considered crazy these days ... Everybody has been brainwashed.

[Origisaurus]

There are two main ways to own gold - deposits in a trusted bank (used to be Swiss, but who knows anymore?) or bullion coin in your own sweaty hands.

The first is fine for hedging or speculation.  The second is for insurance against apocalypse to buy your way to somewhere you think will be safer.

As any advisor would ask, "What is your investment goal?".

[The Gorn]

I guess you have not seen gold coins in a long time:

These are smaller than a penny and are only $99:
...

You could easily have have non pure gold ( or silver ) coins that will be durable, light and in the $20 to $50 value.
And that value will not decrease rapidly year after year.

Of course this kind of thinking is considered crazy these days ... Everybody has been brainwashed.

I don't see gold currency (whether minted/official or commercially sold) as practical. It's simple. The value would fluctuate every day.

I don't think it's crazy at all. It's just that there is no modern economy that could accommodate a sliding scale currency.

Even considering the evils of a central banking system, at least the mechanism of official currency minting keeps the *value* of currency relatively stable and offers useful denominations for making change.

To keep in a jar at home buried in your crawlspace just in case of econopocalypse... sure, no problem...

[Peter Gibbons]

"I don't see gold currency (whether minted/official or commercially sold) as practical. It's simple. The value would fluctuate every day."

I don't know why would the value fluctuate? Care to elaborate?

I don't have personal experience with gold or silver in circulation but my grandfather did.

When he was paid with gold coins - he was able to save enough in just a few years to build a house.
By the time he was 26 years old he had pretty nice paid house - no mortgage or garbage. And he started virtually from zero.
He never mentioned any problems when people were dealing with gold and silver coins.

The problems started when the government confiscated the gold and started to print paper money to finance the wars.
They really screwed up the country then.


I responded to the thread because I think if "Somebody was looking from Mars" they will find Gold a lot more useful to the humanity than all the bankers on Wall Street combined.

http://en.wikipedia.org/wiki/Gold#Electronics