Most people love gold. It is simple a emotional commodity where there is a deep seated allure and lust. Gold used to be money and it was great money for its times. It was one of the few resistant, standardisable, rare things that was any good for storing value. In a primitive world Gold is great as currency its only draw back being its high value. That was where silver, and copper stepped in and filled the gap. However, it wasn’t long before paper and credit took over from metals and a promise even when it hasn’t been as good as Gold has ruled money as the main source of wealth and transaction far back into history.
That doesn’t stop Golds modern fanbase believing that gold should once again be the basis of our monetary system. It makes sense for them as they own some and remonetisation would shoot Gold to the moon faster than any crazy cryptocurrency. Yet back in the 19th and early 20th century industry and society was crucified on a cross of gold, as the anti-gold standard people would have it and it took the first world war to kill Gold as money for much of the world and the great depression in the US to see in out of peoples pocket and into government reserves for good.
Gold is terrible money in these times, its insecure, volatile and cant be easily digitised. Making more gold puts mining Bitcoin to shame when it comes to environmental damage. Not only does it used 5 times as much energy to mine 1 single years more supply it rips up huge swathes of the environment to do so.
Yet tearing up the globe for Gold is nothing new, with the disastrous destruction of North California by gold rushers and the consequent silting up of the Sacramento river one of the initial impulses for the environmental movement as we know it.
However there is no shaking gold’s investment audience, it’s the same old types since when I was a small child, grisly old guys awaiting armaggendon and a global comeuppance. Like stock market crashes it has to happen, history is littered with such moments but I believe if one was to come about these days, gold would not zoom to the skies.
Gold is caught in a very narrow range and has been going nowhere for years now. Having a basement of gold bars has not been a great investment even with interest rates near zero, a good environment for Gold, at least in theory. The stock market has trounced Gold, pretty much most assets have in this era of QE. Will Gold have its day when this merry-go-round shudders to a half?
I believe that one of Gold’s most powerful use cases has gone and as such Gold is now only any use outside of its industrial and commercial uses as the currency of war. Governments keep gold in reserve because in war gold is what you pay with. Its no good having soldiers if you cant trade with Gold, because pretty if the stakes get high, soon your paper won’t be accepted and only bullion will buy you what you need in trade.
That use case is still in place but what has gone away is the use of Gold as flight capital.
When little rocket man was wrestling big rocket man, Gold didn’t react, but Bitcoin went off the dial every night. You cant head for the airport with Gold bars these days and opening a foreign bank account is a thankless task that can take months or never get down. A normal person sweeting a war isn’t a billionaire with a private office, but in the old days they might have stashed a few thousand or even hundreds thousand in Gold if they thought the balloon was going up.
Today you’d stash it in Bitcoin and be safe in the knowledge you could fly away on holiday somewhere safe for a few months and your stash would be as safe as the place you hid you private keys.
This is a blow to Gold so that for now when a war breaks out or a conglict starts to brew, don’t expect Gold to spike like the old days. Now Etherium, Bitcoin, Ripple, Litecoin and a myriad of crypto will get the attention that Gold once enjoyed.
Its bad news for grumpy old men but good news for Crypto-believers and a new trading opportunity for us.