So what's up with gold?

[derspiess]

The primary strength of gold was always that it was useless for anything other than money.

Gold is a very strong metal and conducts heat and electricity better than almost anything else.

The ability for it to conduct electricity and heat was not really a factor back when the Spanish were shipping it over to pay for their wars in the Netherlands.  You notice I used the past tense there.  But hey enlighten me, maybe I am wrong on that one.

http://geology.com/minerals/gold/uses-of-gold.shtml

[Jacob]

Re: the OP and the title.

Right now, I'd say nothing is up with gold. It seems pretty down, tbh.

[Malthus]

The primary strength of gold was always that it was useless for anything other than money.

Gold is a very strong metal and conducts heat and electricity better than almost anything else.

The ability for it to conduct electricity and heat was not really a factor back when the Spanish were shipping it over to pay for their wars in the Netherlands.  You notice I used the past tense there.  But hey enlighten me, maybe I am wrong on that one.

http://geology.com/minerals/gold/uses-of-gold.shtml

The main reason gold is valuable is that it is both beautiful and rare, and very easily worked - so perfect for making valuable jewelry out of. That established its value, and its use in coins etc. comes from that.

While its ease of working and electricy-conducting capabilities have some modern, practical application, if it looked like shit it would never have been particularly valuable in the first place, and its modern industrial uses would never have made it worth anything close to what it is worth now.

[Valmy]

I guess that goes to what I was saying.  That the reason it was good as money is because we didn't need it for anything else.  Needing it for industrial uses when it is being used as money serves to make those industries pay an outrageous price so it is counterproductive.  Before we did not have a problem like this.  Iron would have been a poor metal for money for that reason (well that and it rusts and is ugly and so forth).

[mongers]

I guess that goes to what I was saying.  That the reason it was good as money is because we didn't need it for anything else.  Needing it for industrial uses when it is being used as money serves to make those industries pay an outrageous price so it is counterproductive.  Before we did not have a problem like this.  Iron would have been a poor metal for money for that reason (well that and it rusts and is ugly and so forth).

But iron bars have been used as a form of currency/store of value.

[Malthus]

I guess that goes to what I was saying.  That the reason it was good as money is because we didn't need it for anything else.  Needing it for industrial uses when it is being used as money serves to make those industries pay an outrageous price so it is counterproductive.  Before we did not have a problem like this.  Iron would have been a poor metal for money for that reason (well that and it rusts and is ugly and so forth).

Then there is my favorite currency:

http://en.wikipedia.org/wiki/Rai_stones

Don't spend it all in one place. 

[Valmy]

But iron bars have been used as a form of currency/store of value.

I guess I missed where I said they didn't.  Cows were also used for this purpose.  But they would be a poor form of money, you do not want people hoarding cows and iron we sorta need that stuff for commodities.

[Malthus]

I guess that goes to what I was saying.  That the reason it was good as money is because we didn't need it for anything else.  Needing it for industrial uses when it is being used as money serves to make those industries pay an outrageous price so it is counterproductive.  Before we did not have a problem like this.  Iron would have been a poor metal for money for that reason (well that and it rusts and is ugly and so forth).

Well, it had no practical value until modern times it is true, but had (and has) a very high decorative value, in the form of rings, crowns, etc.

As a fiat money, you cannot beat the Rai Stones. They really are completely useless. 

[Valmy]

Well, it had no practical value until modern times it is true, but had (and has) a very high decorative value, in the form of rings, crowns, etc.

Yeah but having those things be valuable only increased their prestige value

As a fiat money, you cannot beat the Rai Stones. They really are completely useless. 

The 4 ton stone industry would suffer!

[MadImmortalMan]

The main reason gold is valuable is that it is both beautiful and rare, and very easily worked - so perfect for making valuable jewelry out of. That established its value, and its use in coins etc. comes from that.

And doesn't rust/deteriorate.

[Malthus]

The main reason gold is valuable is that it is both beautiful and rare, and very easily worked - so perfect for making valuable jewelry out of. That established its value, and its use in coins etc. comes from that.

And doesn't rust/deteriorate.

Good point.

Also, non-allergenic, making it even better suited for jewelry (though I doubt many Bronze Age chieftains cared about that aspect.  ). 

[MadImmortalMan]

FWIW, I read that factoring in the production and support costs in the gold market, a price per ounce below 1300 or so will start to put profitability pressures on mining operations. Not that they will necessarily quit mining below that, but they might limit selling product at the same levels. So just from a commodity perspective, there is some marginal floor built in.

[The Minsky Moment]

Industrial uses for gold exist but they are a small portion of overall demand.  That does make gold different from other commodities that are produced primarily for industrial use.  And not different in a good way - different in the sense that it is far more dependent on fashion (jewelry) and speculation.

Except that the jewelry market is kind of predictable.  Indians will always buy for wedding and special occasions, and Chinese buy for New Year.  But when the price goes up, they compensate by buying less.  So jewelry demand sort of looks like your standard downsloping demand curve.

Which means the only thing that can sustain a a gold bull market is speculative interest.  The sound in the market is the just the popping of speculative bubble.

[Admiral Yi]

I feel sorry for the poor schlubs who have invested heavily in gold as a "hedge against inflation."

[MadImmortalMan]

I feel sorry for the poor schlubs who have invested heavily in gold as a "hedge against inflation."

Those rules don't apply anymore.