Oh, and by the way, my friend had a personal conversation with Warren Buffett. Buffett asked him how his investments were doing, and my friend answered: “I have a lot of investments outside the dollar, mostly precious metals”. And Buffett said “That’s very good, I also like them, and especially …”. That was about two years ago.
Sure, it’s true that using gold as a backing for liquid short-term money, or for preserving of long-term purchasing power, seems like a waste. But hey, using paper backed by nothing, and that is losing value faster than inflation is even more ridiculous.
Also, we wouldn’t have to talk about this if the politicians of the world were honest (umpf!).
Having some stable medium of exchange or storage is certainly useful for greasing the wheels. Nobody said it has to be the wheels, and that all your savings have to be in gold.
But it is a nice speculation if you look how ridiculous the money-supply gets handled, and how everyone is fooled to take the inflation for “prosperity” (and even pay capital gains tax on that). It’s a simple calculation if you believe in history. Crises come and go, and in the last one gold went to $850 ($6000 in today’s dollars if the dollar loses half its value every decade). Sure, we don’t have a crisis (except liquidity, credit, housing, derivatives) yet, but maybe we get one again. At a tenth of that theoretical peak value I take the risk/reward. (The risk that gold goes down to its mining cost or even below?) I don’t see any other investment where you could make 10x your money if a crisis comes.
I just decided to search for a few junior/intermediate gold producers (also as speculation if you want). I hope I will find some that have really good reserves, and are well leveraged to the price of gold. I will double check them with Doody, Moriarty, Puplava if they have honest guys at the helm…
Will report back if I find some.
