Gold Has No Value

Christian DeHaemer

Updated April 25, 2011

There is no reason for gold.

It holds no intrinsic value, despite what the pundits would tell you. The whole industry is one of futility.

People spend untold fortunes and countless lives searching for it.

Cortés, for example, destroyed an empire in the Americas for the yellow metal. Spain was created and destroyed in turn because of gold.

They say many of his men drowned, weighed down by gold as they tried to escape through the canals of the Aztec capital…

When opportunists do happen to find this shiny yellow metal, they expend vast amounts of energy to pull it out of the ground, refine it, and then bury it in neat stacks in a vault, returning it underground. Only now they have the added expense of guarding it.

If they were smart, they would sell it where it is. Just issue some paper for the unrefined gold deep underground. Imagine the cost savings…

The great explorer Captain Cook — after he discovered the Sandwich Islands and before he was eaten by the Maori — discovered a unique economy among the Polynesians.

He found a people who traded rocks deep under the ocean that no one had ever seen.

Certain unseen rocks were big, special, and had value by common consent. A man would trade an undersea boulder for a wife or a pig.

Imagine the rich islander who spent his life gathering all of these rocks only to find that the Haole preferred gold coins…

In New Amsterdam, the burgers traded wampum, belts of beads made by the Indians.

In Africa, they are still digging up trade beads whose only value today is in their age.

And so it shall be with gold.

But not yet, dear reader. Not yet…

When I was a child in the late 1970s, my grandparents would give out silver dollars as gifts when they saw us.

My Aunt Janet gave me a pre-1963 set of coins for Christmas. They came on blue velvet and swaddled in a plastic case. 

My parents invested my college money in a gold fund. When it came time to use it, most of the value had dissipated.

But there is a new generation of buyers out there — and they are buying.

No top yet…

gold april 22

The greatest thing about gold is that its value is unknowable. It reminds me of the dot-com boom of the late 1990s.

Thousands of words are written about gold, but most of them say nothing. 

This is a good thing.

The same gold writers who made a fortune selling shares to the public in the 1970s — and wallowed through the down times in the 80s and 90s — are back. And they’re making even more today.

You see, because gold (much like AOL and back in the day) has no logical means of value, you can’t compare it to earnings.  You can’t even really compare it to the dollar or any other currency.

To talk of gold in inflation terms is like a snake eating its own tail.

Thus, Wall Street can sell it any way they want — price to eyeballs, price to clicks, wedding season in India, or the ultimate storehouse of value. 

They say an ounce of gold throughout history will buy you a nice suit. This was true in the market place of Rome, as it is at Brooks Brothers. I would argue $1,512 would buy a mighty nice piece of kit, and Men’s Warehouse sells two suits for a hundred bucks.

I know when to sell

Though I don’t imagine myself to be old, I’ve seen this movie before…

There will come a time within the next two years when your neighbor will brag to you about a gold mine he owns in the Yukon, your barber will talk of owning silver coins, and your wife will sell your grandma’s necklace at the strip mall for ready cash.

While all this is going on, the price of gold will spike to highs that will seem absurd. Volume will be up tenfold, and the price of gold will lead the news.

But what will really kill the gold bull will be when Congress gets serious about the debt and the Fed hikes interest rates to bring down inflation…

And that’s not even close to happening.

There is still a fortune to be made on the buy side.


Christian DeHaemer
Editor, Wealth Daily

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