There’s a few very big things in favor of gold as an investment, including the hugely relevant points that gold is finite, rare and has a loooong history of being highly valued. But let’s forget about the positives for a minute, instead, let’s focus solely on all the negatives. Let’s go straight for everything I can think of that contributes to the case AGAINST gold as an investment.
In no particular order:
•Gold can’t be spent on the internet: at least not in the way that digital currencies (be them fiat or crypto) can be. It’s therefore increasingly unlikely to ever regain the potential to be used a form of money in the modern world (which is forever trending to taking over our entire economy — if it hasn’t already done so). No significant utility = no significant value?
•Almost nowhere in the modern world accepts gold as a means of payment. It can only be sold in very very specific places (places that have ways to verify it is real, safely secure it, and also sell it on in exchange for the local currency — to pay bills, pay taxes, etc). It is therefore incredibly inconvenient to exchange for actual, spendable currency.
•Gold is incredibly heavy (and therefore a nightmare to carry very much of).
•Gold can’t be easily divided (have you ever tried dividing a bar of gold?).
•Gold can’t be easily moved or taken abroad in significant quantities (or particularly safely) without all the difficulties of declaring it, etc, etc.
•Selling more than a few thousand dollars of gold usually requires various forms of identification, which when traveling abroad you may or may not have access to (or even have at all if the requirement is a residency card or a bank account in the country you’re attempting to sell it in).
•Owning gold bullion has historically been made illegal by various governments (including the United States – from 1933 to 1974) — and this could in theory happen again in the future.
•Nobody really knows how much of it there is. Although estimates put the amount above the ground somewhere in the region about 200,000 tonnes (about 10 trillion US dollars worth in today’s [August 2023] prices), nobody really knows.
•Gold is practically untraceable (note this can also be viewed as a good thing in some ways) and can therefore be easily sold if stolen — making it very appealing to thieves.
•Apart from the very small amount used in jewellery and electronics and a few other niche applications like in spacecraft, gold is not actually used for anything much (has no significant utility) other than as a store of value — meaning its value largely relies on the whims of individuals and governments who may or may not continue to desire it.
•Over the last fifty or so years gold hasn’t performed as well as many have hoped it would as an asset — and has been hugely out-performed by the likes of US tech stocks and cryptocurrencies (Bitcoin etc).
•Gold is highly unlikely (in most people’s opinion) to be used as legal tender ever again — and therefore arguably more just a relic of history than a future real-world asset.
•Plus no doubt a few more I can’t currently think of (if you can come up with any more please comment below).
In short: gold’s usefulness/utility (and potential for further future utility) is diminishing in just about every capacity apart from as a store of value. But will its worth as a store of value last? Are there now potentially better alternatives (i.e. Bitcoin)?
Despite all of the above however, some say there’s a potential for a digital currency backed by gold, which, in theory, sounds like a good idea, right up until you realize that there’s so far no way to sufficiently verify that the folk who say they’ve backed this hypothetical currency by the gold they say they have can prove that they’ve really done so.
Others say that gold is doing just fine as a store of value as it is and will continue to do so in much the same way it always has.
Will it?
Maybe. Maybe not.