Published on September 27, 2023 | By Dan Barrett

Why Gold is still one of the best investments around

Why Gold is still one of the best investments around

Did you ever wonder why gold is still considered one of the best and safest investments around? Some of it has to do with the specific characteristics that gold offers as a commodity and a store of value. It's odd, because, after all, gold is just a metal that we dig out of the ground. So why has humanity used it for thousands of years to act as "money" and a store of value?

The biggest reason, is that governments or institutions can't really control it, like they can control fiat currencies like the USD. They can't issue more of it. They can't print it. It can't be magically created at the press of a button on some Central Bank computer. I provide a list of reasons that gold is an ideal solution to what can be considered money below, but I will re-iterate that, despite those reasons, it is primarily that no one can control its supply. Of course, the price of gold can be altered somewhat by nefarious actors like the Wall Street traders, who may act on behalf of central banks (although there is no concrete proof of this, we all suspect it is the case), but the long term price of gold will reflect the global demand for some form of sound money. Gold is definitely sound money.

So here is a list of other reasons that gold is an ideal form of sound money:

  1. It is easily identifiable. Gold is only one of two metals that isn't some sort of grey color.  Its yellowish color is unique. Copper is the other one.
  2. It is NOT easy to fake. Including the color as mentioned above, gold is incredibly dense. i.e. it weighs much more for the same size as almost any other metal. In fact, it is about 70% denser than lead and 140% denser than steel. So when you have something that is pure gold in your hand, it feels much heavier than any other type of metal. So you know you are likely to have the "real" thing.
  3. It is rare. One other characteristic of something that makes good money, is that it is not easy to find or produce. This can easily be seen in the fact that gold is hard to find for mining operations. In fact, the composition of the earth's crust has estimates of gold content in the in the range of 0.001 to 0.006 parts per million. Compare this to iron, the most plentiful metal in the earth's crust of 63,000 parts per million. Rarity goes back to the same argument of not being able to control the supply.
  4. It is divisible. Since gold is simply a metal that can be produced in any size or weight, we have the ability to divide it into small or big sizes the accommodate any requirement.
  5. It is accepted as something valuable everywhere on the planet. Gold is valued by all cultures and people everywhere. This goes back 1000s of years before different societies even had the ability to communicate or even know of each other's existence. Since gold is so ubiquitous in its ability to be valued between countries, societies, or cultures, it is a perfect example of something that can be considered money.

For all of the above reasons, it is unlikely that gold will not be the common denominator of what is considered money. Of course, using it in everyday transactions is not completely feasible but something that is legally convertible into gold further facilitates gold being used as the ultimate form of money.

Dan Barrett is the Chairman of Pacific Precious Metals and the Founder of the Aureus Point-of-Sale system, a software platform made for bullion and coin dealers. He has been investing in physical gold and silver for over 15 years. His prior experience includes being an Analyst for a variety of Banks and Hedge Funds.

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