A friend whom I respect very much for her intelligence, asked me a question I could not answer. I know some of you will be able to help me out.

She said, “Why would an inert metal like gold be worth anything? You say it’s a safe haven, a means of trade, but at one time, so were coffee beans. Why don’t you just stock up on coffee beans?”

I said, “Gold has to be worth at least $300/oz, or in that range, because that is the cost of extracting it from the ground. But why is it worth more than that, why is there a premium above that, I don’t know.”

I see that historically, as well as today, investors buy gold as a safe haven in times of inflation. But why? It’s not like you can use bullion to pay your rent or buy your food.

Please, do not get impatient with me, because I know I have asked this before.