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Debate: Gold has no real value to the man in the street.

Practical value of gold from a “man in the street” point of view.

For the vast majority of people on this planet gold is worthless.

A bold statement but consider the following.

To live you need money, doesn’t matter what sort as long as it’s the money that is in circulation in your country. With this money you buy, food, housing, energy, transport plus the other essentials needed for life.

If you are in work you will typically get paid your supply of money by your employer. If you are on benefits you get your money from the government and if you are on a pension you get your money from your pension provider. If you are begging on the streets you get your money from charitable sorts who feel kind enough to give you some of their money gained from the first three sources mentioned above. All these sources provide “money” not gold.

Next when you come to spend (or give away) your money the recipient will want, you guessed it, your money. He doesn’t want gold or any other stuff that has a “value” such as silver, lead, pretty crystalline minerals or anything else. He wants your money.

So what are you going to do with your gold. You have 3 options, wear it, store it or exchange it. If you wear it, it has no value to you. OK it has value to someone else, but to you it’s just jewellery. If you store it, it has even less value as you don’t actually derive any personal satisfaction other than telling everyone you are sitting on a pot of gold. If you sell it you typically sell it for money, which you can then use to but everything mentioned above. But you can only do this once.

So, unless you own a factory that makes electronic products or jewellery or are a professional gold trader, gold has no value to the man in the street.

Topics: economics
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    Oct 29 2012: Nothing has any real value unless we agree it has value. People agree gold is valuable therefore gold is valuable.
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    Oct 29 2012: Contrary to what most people here seem to think (with the notable exception of Mr Frum) when you look at the price variations for gold over the long term large increases usually line up with increased denand or reduced supply. At the moment the whole world is maddly buying iPhones and tablet computers and cars with engine management computers.so there is high demand in the electronics industry. Eventually the gold stockpiles in the central banks of the world will be melted down and used in industry as gold is a finite resource.
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    Oct 29 2012: Yes.

    Gold is a kind of money with less circulation ability.
    Money makes greed --- INVALID HAPPINESS!.
    INVALID HAPPINESS makes all kinds of evils, including immoral, crimes, wars and human self-extinction.
  • Oct 27 2012: Gold speculation is psychology, not a science. Basically it's valuable to you because you know someone else finds it valuable and you expect things to stay that way (which is reasonable because people who already have gold will always claim it's valuable). Of course that makes you wonder how this started, well, it's because once upon a time all money was backed by gold (since gold was rare and not used for anything practical, while newly discovered deposits were always small and difficult and slow to mine gold was the perfect material to fill such a role), so having gold automatically meant having purchasing power and that's the reason people stocked gold. So why do people buy gold now? As with all speculation you buy gold now because you expect to sell it for a higher price in the future, in fact the very act of buying gold already tends to increase the price (but because someone else may be selling more gold at the same moment the price does not necessarily go up). It is this game that pushes up the price: if gold was only bought for jewelry and electronics it would be much cheaper.
    • Oct 29 2012: "if gold was only bought for jewelry and electronics it would be much cheaper."
      Wrong. Gold is used in jewelry now BECAUSE it is expensive -- it is a way of showing off, just like Armani suits or Ferraris. Gold is expensive because it is rare, and because its relative chemical inertness keeps it from "aging". The same goes for platinum, silver, or even palladium. Do you think any of those jewelry wearers can tell the difference, just by looking, between platinum and stainless steel? It is fairly easy to make alloys that look like gold too. Or even gemstones, fake or real.
      • Oct 29 2012: "Gold is used in jewelry now BECAUSE it is expensive"

        Right, but without the speculation gold would definitely be cheaper and jewelry would be made of different materials.

        "Gold is expensive because it is rare, and because its relative chemical inertness keeps it from "aging"."

        It's also fairly useless, except for electronics, that should depress its price.
        • Oct 29 2012: there would be less speculation o gold if we had more stable currencies -- based on a bouquet of commodities, for example.

          Don't you think jewelry is useful? The most prized jewelry will always be made of the most expensive (rare and inert) material. If gold did not exist, people would have worn, and speculated with, the next material that has the two key attributes.

          Speculation is the way people experiment in any competitive economy. The more reckless the speculation, the greater the risk of losing. This is true whether we're buying Picassos, or designing a strategy for "the next greatest" software user interface. Gold, despite its ups and downs, has proven to be relatively un-reckless.
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    Oct 26 2012: Can't eat gold. :-)
  • Oct 25 2012: "If you wear it, it has no value to you. OK it has value to someone else, but to you it’s just jewellery."
    This is not how it works. Take the case of two girls (Jane and Mary) who are enemies. Let's say they both think that gold ornaments make them look prettier. Mary gives all her jewelry to Jane, according to you, it would have no value at all to Jane, because (???) Mary gets to look at a prettier girl, but Jane only gets to look at a dull-looking girl. Thus, (???) Jane suffers when she wears it.

    I wonder why all the girls I know put lipstick on themselves (though they can't see their own lips) rather than on me!
  • Oct 25 2012: We need money for the basic needs; but in most cases we reach for luxuries after the basic needs have been met.
    The 'man in the street' may not think gold is very important if he is starving; but the gold could meet his basic needs if it is sold because we live in the world where gold is valuable.
    For the rich (billionnaires in dollars) gold is a more reliable store of value because it can not be destroyed by fire, and it would not rust.
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    Oct 25 2012: ... in the defence of Gold... it has significant value within electronics as you mention Howard. The underlying issue is our whole money system - and why it does not work. Gold price is just a way of attempting to fix the unfixable. See:Economics - step out of the dream

    http://www.commonsensethinking.co.uk/economydream.html

    jp
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    Oct 25 2012: yeah, but why would that matter? most of the products don't have any direct value for me. a fishing rod means next to nothing to me. what do i do with a motorcycle exhaust tube? i would not give a dime for a television part either. so what did we learn here?
    • Oct 27 2012: Gold is predominantly bought for speculation, not consumption (except for jewelry and electronics), that is a big difference.
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    Oct 25 2012: Gold doesn't even have any value on its own, just what's given to it by definition and its scarcity ...

    Just imagine what would happen to our world economy if there was this random gold meteor shower, lasting for 24 hours and leaving this world rich in gold-nuggets which were equally distributed all over the place? :o)

    It makes one think how simple we just are... :o)
  • Oct 25 2012: Your thinking is backwards. Nobody wants money. People want what money will buy. Like gold jewelry.