And that's the whole miscommunication between gold bears and gold bulls, the bears always chart gold against the USD because they treat it only as a commodity as it isn't legal tender, the bulls look at the same chart the other way around and see the USD against gold because when it takes too many dollars to buy the basic necessities people will use gold as an medium of exchange even if it isn't legal tender. Only difference now is before people would carry barrels of cash to buy a loaf of bread but with technology a barrel of cash can be replaced with plastic cards.
Can't eat gold
- Thread starter John_Doe
- Start date
And that's the whole miscommunication between gold bears and gold bulls, the bears always chart gold against the USD because they treat it only as a commodity as it isn't legal tender, the bulls look at the same chart the other way around and see the USD against gold because when it takes too many dollars to buy the basic necessities people will use gold as an medium of exchange even if it isn't legal tender. Only difference now is before people would carry barrels of cash to buy a loaf of bread but with technology a barrel of cash can be replaced with plastic cards.
50 years ago, my parents bought their house in a very well-known and decidedly upscale Boston suburb for $26,000. Today, the house would bring about $1 million.
50 years ago, that $26,000 worked out to about 743 ounces of gold.
Today's $1,000,000 works out to about 550 ounces of gold.
So, by the "gold standard," the value of my parents' house has declined by a bit more than 25% over the past half century.
Quote from sle:
Do you think if you would have buried an ounce of gold 50 years ago, it would buy you more or less real estate in Manhattan today?
Again (and I am sure someone wrote this before me) gold is a commodity. As commodities go, it might be perceived as a way to store wealth but overall it has very little intrinsic value. Also, don't forget that gold is not being consumed, but rather overall gold in "circulation" increases 2% a year due to mining.
I am not saying gold is a bad investment, I am just saying that one should have other investments in their portfolio.
Why did you choose manhattan, the most expensive place in the country? Only 1/2 of 1% of the country lives there. 99.5% of the country live in cheaper locations.
50 years ago (1961) the median home price for the whole country was $12,500 or 357 oz of gold. Today 357 oz of gold will get you $653,000.
I dont know what median home prices were in manhattan in 1961, but im sure they were higher than normal prices. That said, the average home price in manhattan as of January 2011 is $840k. Its a good bet that whatever paid for real estate in manhattan in 1961, if you bought an equal amount of gold, the gold would've outperformed.
Oh and also....You cant eat real estate. Just wanted to add that for the OP.
In that case, why not choose S&P 500 instead? Similar returns, similar sharpe rate.
I will ask again - why gold? what makes gold a "currency" of choice, why not palladium, diamonds or some rare sea shells?
PS. and you are wrong about the manhattan real estate, it appreciated way more then gold, even accounting for the recent decline.
Those can all be used as a medium of exchange as it depends if the seller is willing to accept them. Like how some retailers take visa but not mastercard. The sentiment now is that if the dollar implodes people are storing their wealth in gold and silver so what makes it a good currency is the amount of people willing to accept it.
gold = sun worship
silver = moon worship
if you want to ask why gold has been money for millenia you have to go back to our real roots.
right now people are just starting to recognize gold as a currency again, silver doesn't get nearly the respect. what do you think silver will be worth when we start describing it as money again? my guess is a sub 5:1 silver:gold ratio will hit in the next 20 years at some point, so if you are truly a long term gold bull, do yourself a favor and get some silver instead until the ratio drops like a rock.
silver = moon worship
if you want to ask why gold has been money for millenia you have to go back to our real roots.
right now people are just starting to recognize gold as a currency again, silver doesn't get nearly the respect. what do you think silver will be worth when we start describing it as money again? my guess is a sub 5:1 silver:gold ratio will hit in the next 20 years at some point, so if you are truly a long term gold bull, do yourself a favor and get some silver instead until the ratio drops like a rock.
The same amount of gold will buy you the same amount of bread today as it would have for Jesus.