Why Gold? It's useless!! 4

[Unotec]

Didn't know where to start this useless rant but here it goes (and probably explains why I'm an engineer and not a financial guy).

We, engineers, build stuff, value things that are useful and don't mind paying a little extra for something that will outperform cheaper things.

Now, with this financial crisis all I read is BUY GOLD, actual gold coins!! (yes, the buy, put in a chest and bury in your backyard type)

If gold is useless, well, has some very limited applications, why is it that is still considered so valuable?

If you think of it, stuff like diamonds or gems in general.... They are, in a practical useful way, WORTHLESS!! The most expensive things in life are typically the most useless!

What will happen if the economy tumbles further enough that people start now looking for things they actually need instead of treasuring something they can’t eat, drink or easily build with?

Gold is practically useless as far as my limited knowledge goes, but it will apparently hold its value.

Could the root of the financial troubles be that they are based on a thing as useless as gold?

Aztecs used to value corn as a currency, Romans salt, etc...


<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying ” Damn that was fun!” - Unknown>>

 

[jmw]

Fort Know, the New York bank, huh? I think my wife must have the next largest reserves.
She loves gold almost more than new shoes.
Its a bugger when we travel because the airport scanners are always going berserk (plus she has a steel pin in her arm which confuses them).

One attraction for gold is portability and saleability.
If you don't like your government then convert everything to something portable and leg it.

Also in this category are diamonds, rare postage stamps etc.

Gordon Brown; yes the signs were there early on that he had the financial acumen of a earthworm when he not only sold the UK's reserves at the bottom of the market, he sold so much as to depress the price still further. Then he devalued everyone's pensions (except government workers e.g. the local councils which is probably why we are expecting a huge hike in rates; not just to keep their pension funds topped up but because their staffing levels has expanded exponentially.)

Now he has done his bit to completely wreck the economy (while blaming the US) and he is now going round saying that he can save the world! Small wonder BHO barely gave him tea (and a couple of bits of tourist junk from the White House souvenir shop) when he came visiting.

JMW

http://www.ViscoAnalyser.com

 

[ewh]

jmw,
As far as scarcity, you would probably do better with other gemstones than diamonds. That is a very controlled market, and the price does not reflect rarity.

"Good to know you got shoes to wear when you find the floor." - [small]Robert Hunter[/small]

 

[cranky108]

A little crude, but, gold is just as worthless as breast implants. And valuable for the same reason.

Only gold lasts longer.

 

[Neubaten]

I strongly disagree that gold has no value.

There are some engineering and scientific
reasons for gold's value I'm surprised no one here came up with.

It was originally adopted as a valious metal because of corrosion resistance. It is also easily "coinable" because of its ductility. It was, rationally, the best choice in the old ages for an "exchange token".

It was the only way an artist could execute his/her craft and make it as long-lasting as it was possible with the technique known at the time (and nowadays it's still a good option to do so).

It is, also, beautiful to the eye.


The value of gold rests in its unique metallurgy.

Actually, chosing gold as a "token" is more rational and wise than notes or virtual cyphers into a bank account.

You can't do alchemy with gold, but you can always add fictional cyphers to the account.

 

[KENAT]

Fundamentally, back in the day, a small chunk of gold was easier to carry around and/or store than a sack of grain or salt or whatever.

So you get your sack of 'usefull commodity' exchange it at a point in time and space for some kind of token, or if you like IOU.

This token is usually made of a durable material. Gold is a good choice as it's inert, maleable, relatively scarce so unlikely to be excessively duplicated or de-valued & back in the day was actually found in its native form and didnt' need extensive refining etc. ... The shiny eye candy effect is almost secondary.

Now, at a different point in time & space, you exchange this token back into 'usefull commodity' form.

That, as I understand it is why gold became a measure of wealth. As to why it still is, I suppose it's a combination of a hange over to generations where it was the 'token' of choice rather than 0 and 1 in computer database/paper notes/base metal tokens/plastic cards with magnetic strips... and the shiny eye candy effect.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at posting policies:

http://eng-tips.com/market.cfm?

 

[SomptingGuy]

Related.

There was quite a well thought out and presented insight into the use of metals for money in the recent (and excellent) "The Ascent of Money" by Niall Ferguson, shown first on Channel 4 in the UK.

The relevant bit is the story of Francisco Pizarro finding huge amounts of silver in Peru and shipping it back to Spain to fund a war. It didn't make Spain any richer, just fuelled rampant inflation.

The silver itself had no intrinsic value. The fact that more of it was around lowered its value.


- Steve

 

[MechEng2005]

Gold is also a pretty good electrical conductor of course.

Additionally, basing the financial system on something "useful" could bring it's own troubles, depending on what it is. For example, basing the financial system on silicon used in many electronics seems reasonable today. However, what happens if they start building atomic PCs and the best material is carbon. The usefulness of silicon declines, so the value goes down. I think the "luxury" value of gold (shiny, status symbol, etc) does a decent job of regulation. Not that there may not be better alternatives...

Even something like land, which is finite and certainly has usefulness, has it's drawbacks. I would argue that a productive farmer's field is more useful than a desert. However, what if we have a dust bowl and the farmer's fields in a certain area all become barren? Not much better than the desert then... Or if solar power becomes HUGE, maybe I'd rather have an acre in the Sahara than a farm field in Wisconsin.

No, the more I think about it, the better idea I think it is to have the finicial system based on something useless. At least then the only driving force is an artificial value. Seems easier to control in some ways. And if the demand for gold decreases, it's probably because the economy is going down and people aren't buying luxury items. Seems to follow nicely. Maybe it exaggerates effects somewhat, but it seems like it all balances out and settles nicely given time.


-- MechEng2005

 

[moltenmetal]

If you're preparing for the apocalypse, a shotgun and some shells would probably be a better investment than gold.

Commodity gold costs money to store, making it a poor "repository of wealth". If you buy it retail (so you can store it in a hole in your backyard), you lose a significant chunk of its value on re-sale.

Gold is a commodity, subject to the vaguaries of supply and demand just like all other commodities (including engineering services...). Unlike diamonds, gold actually does have some supply pressure on its price, since gold ore is measured in ppm gold...

It does have industrial uses which are not trivial either. It's so costly though that substitution are usually made, but there are plenty of applications where only gold will do.

Diamonds are worth what, $50/carat or so, without the market controls that create artificial value for them. Apparently there are people who can grow gem-quality blue diamonds now via vapor deposition, and the Russians alone could reportedly blow away the world market value in diamonds simply by dumping their stores on the market.

 

[jmw]

Got yours yet?

http://www.telegraph.co.uk/finance/...-Is-it-too-late-to-jump-on-the-bandwagon.html

JMW

http://www.ViscoAnalyser.com

 

[Unotec]

Nah, can't afford a an amount significant enough to make a difference.


<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying ” Damn that was fun!” - Unknown>>

 

[KENAT]

Well I read or heard somewhere that silver is the poor mans Gold.

Just don't ship it to Spain to start a war apparantly;-).

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at posting policies:

http://eng-tips.com/market.cfm?

 

[btrueblood]

Silver prices tanked quite long ago, when film photography was overtaken by digital. They are probably more or less stable now...maybe going up slowly over the future, as more products use silver plating for its antimicrobial properties.

 

[TheTick]

Silver hasn't exactly "tanked". There was a bubble that burst, but the overall trend is steady.

http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx

 

[Gymmeh]

i skimmed through this so i hope this point was not stated...

women like gold.

Men like women.

Enough said.

 

[jmw]

Gymmeh, I like it!

But why isn't the converse true?
e.g.

Men like football...

....

.....




JMW

http://www.ViscoAnalyser.com

 

[ivymike]

I tried to get that across in my 9 Mar 09 15:29 post... but it's good to have a concurring opinion.

 

[btrueblood]

"Silver hasn't exactly "tanked". There was a bubble that burst, but the overall trend is steady."


Interesting spin. Take a look at 1984 to 2000. Pre-'84, silver was around $10/oz. or more. Then it dropped below $6, and stayed around $4 for the next decade and a half. Only climbed back above 10 in the last few years...

 

[KENAT]

jmw, cause women fundamentally have what most men want if you catch my drift, and use it to their advantage.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at posting policies:

http://eng-tips.com/market.cfm?

 

[cabraham]

Gold is used in producing semiconductors. Diamonds are useful for cutting due to their extreme hardness. Gold, diamonds, and other precious metals, such as silver, and gems, such as sapphires, have practical use in industry.

In semiconductors, gold doping can reduce minority carrier lifetime, and increase speed. Gold contacts are not as low a resistance as copper initially, but over time, gold holds up better, i.e. no tarnishing takes place.

Cutting hard metals is best done with diamonds. In the pre-CD days, when we played vinyl records, we used a diamond stylus to track the groove.

Gold and diamonds have plenty of practical uses. Why would anyone even suggest otherwise?

Claude

 

[drawoh]

cabraham,

A guy I used to know on some electronics bulletin board systems used to rant that wealth comes from the sun, and that gold is nothing but poker chips. It is not as if you cannot find anything to do with food.

It is too bad they did not select cat poop as the poker chips. I have a source of it.

JHG