One particularly strong proponent of buying gold is economic commentator Peter Schiff. He lays out the typical argument in his market outlook from his firm's website:
In a world in which fiat money-substitutes are continually debased by governments around the world, we believe that gold remains the most honest and accountable form of money. When financial uncertainty abounds, it becomes increasingly important to hold assets with value that cannot be diluted by government monetary policy. Gold has been chosen as a store of value and unit of exchange since the dawn of civilization due to its inherent properties: rarity, durability, fungibility, divisibility, and portability.
Ultimately, as the current crisis runs its course, the value of a gold-based monetary system may once again gain favor with productive nations looking to safeguard the value of their savings. In such a scenario, gold would spike in value as central banks became net-acquirers of gold, rather than net-sellers.
On what planet does anyone really believe that a gold-based monetary system could return to productive nations? That seems like wacko doomsday talk to me. It's hard to even begin to imagine the amount of gold that would be necessary for that to work. Do you really see nations - especially like China, Brazil and India, who are becoming increasingly important in the world economy - suddenly embracing a gold standard?
Then there are the economic consequences. If all currencies were pegged to gold, then you would no longer have floating exchange rates, which virtually every legitimate economist will tell you are essential to efficient international exchange.
The strongest criticism I see against buying gold, however, is that it's just another commodity. As a result, it's subject to market whims just like other commodities. A giant gold mine is discovered in Siberia? The value of gold decreases. A deep recession leads to people buying less jewelry? The value of gold decreases. Platinum becomes a stronger preference for wedding bands? The value of gold decreases. Gold, like every other commodity, cannot hide from supply and demand shocks in the market.
If you are worried about cash and want to invest in a commodity, then go for it. But why gold? Sure, it's shiny and pretty. But so are diamonds. And so is platinum. What makes gold so special? As far as I can see, just the rhetoric behind it.
I like how you keep trying to bury your credit card post with even more bullshit.
"A deep recession leads people to buy less jewelry so the value of gold decreases?" Do you even research what you write on wikipedia before posting?
Look at the historical prices of Gold. Gold prices skyrocket during recessions because people think Gold is a safe investment. If you would have bought Gold 5 years ago and sold it today, you would have nearly doubled your investment.
Gold IS a bad investment today but the reason why is because when the economy heals, its value will undoubtedly go down. Then if/when things are going great again, load up on Gold and wait until the next disaster. QED.
Can someone PLEASE tell me why a college senior has an economics blog, and why a post from said blog was featured on Yahoo?? Please??
So . . . you're saying that because the price of gold skyrockets during recessions but falls after, that people shouldn't treat it like a sacred mineral, but instead like a . . . commodity? Well done dis-proving his point to, well, prove his point.
He was incorrect on the functional relationship between recessionary cycles and gold prices. From the larger context of the post, big deal. It doesn't change the fact that there is absolutely ZERO chance of the world sliding back on to the gold standard, and that it should be treated like any other commodity.
The whole point of my comment was that this college student should shut the hell up until he gets a little more experience under his belt.
I never said gold wasn't a commodity, or that it shouldn't be treated like one. Anyone who has glanced at the historical prices of gold (such as, oh, someone writing an article on gold) would know the value of gold skyrockets during recessions. He is using crackpot supply and demand analysis to say just the opposite.
What's even more infuriating is that Yahoo published one of this Pulitzer winners, 160+ people railed on it, he tried to brush it off as "a few people disagreed with him," and then tried burying it with even more bulloney.
grammar correction> Yahoo published one of THESE Pulitzer winners,
additional correction> I just noticed Mr. Indiviglio's prior post that led me to believe he is a senior in college actually said "when I was a senior in college." Apparently, in reality this guy has a degree and is an investment banker somewhere. There is no hope for us, folks.
kiddbilly3030,
Normally I refrain from making personal comments, for a variety of reasons. But you, sir, warrant an exception: you are a buffoon.
Dribble,
I take it you must be a friend of the author or the author himself. Please explain why you think I am a "buffoon," and why you chose to sink below your usual measure of self control to make a rare "personal comment," which you so refrain from doing on a normal basis, which I believe at face value since you yourself say so and you obviously can't lie.
Amused,
Billy.
kiddbilly3030,
You use profanity, personally insult the author, and present yourself as if you were some kind of commodities luminary, all while making it manifestly clear that you have no idea what you are talking about. So at the risk of damaging my rather measured online persona, I'm giving you a dose of the real me: you are indeed a buffoon.
And no, I am not the author, nor am I his friend. But I do write for the Atlantic. If you had even an iota of active brain matter between your ears, you would've figured that out, perhaps by using google to search for "derivative dribble."
Dribble,
1. The author's previous article on credit card companies was so infuriating it compelled me to act in ways that I, myself, wouldn't normally act, just like you with your "personal comments". There are over 100 others who felt the same way. I make no apologies at this time.
2. How in the hell did you get the idea that I'm trying to push myself as a commodities luminary? Because I know the price of gold goes up during recessions? I deny any financial genius here and now, that is just a piece of info I've picked up in my lifetime.
3. The fact that you think I would assume "Derivative Dribble" was anything more than a handle, and that I would furthermore google it to find out who you are, is not only buffoonery it itself, it is arrogance at its best. Who do you think you are, my friend? I don't read "The Atlantic," and I don't know anyone else who does either for that matter. Maybe you ought to stop before your "measured online persona" drops any lower.
This is my last comment to you or on this site, 100+ people can't be wrong. You can have the last word.
Billy.
Billy,
"100+ people can't be wrong." orly?
http://en.wikipedia.org/wiki/Herd_behavior
Dribble, N
Not going back on my word to give you the last word. However, could I request you comment on the serious points I made in addition to over analyzing that little figure of speech?
Thanks,
Billy.
kiddbilly3030 is clearly long on gold. When you're talking about any investment people who took on positions contrary to what you're advocating invariably come flame you.
Chang,
The reason why I'm "flaming" the guy is because of his insolent, naive, and infuriating post defending credit card companies. It was two posts back, please read it.
Billy.
This just might be the dumbest article I have ever read. The entire world was on a gold standard until 1971. Who is this guy and why does a reputable magazine like The Atlantic let him use their name?