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0 pointsnostrademons7y ago0 comments

So your logic is that "people buy gold because other people believe it's a safe investment"? That same logic applies to crypto - if people stop believing that gold is a good investment and start believing that crypto is a good investment, gold will cease to be a good investment and crypto will become a good investment.

I think gfodor is asking something more along the lines with "What can you do with gold that you cannot do with anything else you can buy?" There are valid answers to that - gold is a catalyst in several chemical reactions that won't work with any other metal, it's corrosion resistant, it's shiny, it's a very good conductor that's quite malleable. But I'm with him in surmising that if people only used gold for its metallurgical properties, absent any historical sentimental attachment, the price would drop 99.9%. Gold is actually quite abundant; 190kt have been mined so far [1], most of which is either locked up in jewelry or being hoarded as an investment, so if people ceased to believe it was valuable there'd be a very large oversupply for the few real industrial uses.

[1] https://www.gold.org/about-gold/gold-supply/gold-mining/how-...

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6 comments · 2 top-level

mattnewton7y ago· 2 in thread

That’s still far more uses than if people think a particular coin has lost its value. When thinking about a store of value for loss-averse people, the intrinsically useful, always-been-valuable mineral I can hold in my hand seems like a psychological winner over numbers in a blockchain that require an industrial society with the blockchain to keep churning. My take was that people were speculating in bitcoin to get rich, not to weather government collapse.

wbl7y ago

Iron is much more useful. It also requires more energy to extract.

kazen447y ago

iron is far more abundant though.

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brandall107y ago· 2 in thread

Ignore the utility of gold, I feel that just muddies the waters.

The volatility of crypto makes it a terrible store of value. While people may use it as such, it is primarily a speculative asset.

OTOH, gold has historical precedent assuring its stability. So while that could suddenly change, its going to take a fairly sizable event to shift the perception. Like a nuclear holocaust or something.

If there's any generational shift in this thinking it's purely naivety.

nostrademonsOP7y ago

So my perspective is basically that crypto is a terrible store of value, but gold is also a terrible store of value. Take a look at the price of gold since the Nixon Shock:

https://goldprice.org/gold-price-history.html

At the time of my birth, gold was worth $800/oz. By the time I was old enough to ask "What's gold?", it had fallen to $300/oz. It was up to $500 by 1991, then began a long slide down to almost $200 in 2000. Then it rapidly zoomed to $1900 during the Financial Crisis, and has since fallen back to $1200. If you invested in gold in 2009, you would've lost 40% of your money in constant dollar terms, and almost 6x relative to the S&P 500.

It's even worse if you zoom out to the 100 year history. Private ownership of any significant amount of gold was outlawed from 1933-1974, and owners were required to turn in their gold for $20.67 or face 10 years in prison.

It's not Millenials who are being naive here (well, maybe they are too). It's the generations before them who believe there's any such thing as a reliable store of value. Everything is speculative - things are worth only what other people will pay for them, and there's a long history (still continuing in places other than the developed world) of people not even doing that and just taking them at the barrel of a gun.

coralreef7y ago

When the shit hits the fan, everything is terrible.

Which asset is "safest" / will reduce the least in value in times of turmoil?

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