I just finished reading an atricle on lessons from the crisies thus far.... Many varying ideas and thoughts but one I thought very provoking was this comment:
".... is a criticism of gold. The yellow metal failed to perform its perceived function of protecting against risk through the crisis. It behaved the same as other commodities, collapsing as the world collapsed.
Gold has not maintained its value through the years. In 1940 an ounce of gold bought 30 barrels of oil, now it buys around 12. It took 40 ounces to buy the average house, now it costs 187 ounces. A possible disruption to gold's "commodity" performance is central bank buying."
This I guess ties in with I think Kwagga mentioning that the gold rush has not hit the streets and when it does the **** will start.
gold requires substantial energy to find it, drill, refine....hence coupled with limited geographic location and supply as well as being portable gives it lots of intrinsic value. No energy required to add a dollar digit on a reserve bank balance sheet is there?...hence it was coupled to gold to anchor it to some degree of value. Once the anchor was cut, theres no limit to the amt of dollars created....hence inflation....hence tis merely a belief system now with no intrinsic value!! Funny how the couple worked well during the prosperous manufacturing 50's and 60's but when the 70's crises hit, the only way was to print their way out, hence they had to cut the gold anchor....which is what lead to the massive 70's inflationary spiral that only Paul Volker could stop with a massive increase in rates (to quell the supply)...
Something doesn't necessarily have intrinsic value because it is hard to find or harvest. It has intrinsic value because there is a demand for it. The practical uses that gold can be put to - electronics, jewelery, dentistry, etc - do not warrant the small mountains of gold that are carefully stashed away underground.
IMO: The bull for $-gold is firmly established, the bull for R-gold needs disconnect of the $-R see-saw. The bears need to have their way with general equities, thats all it will take. Indications appear to be pointing that way. Now the word is that further $ weakness will be inflationary for $ dependants. Take that as a double whammy effect. The entire gold equity market cap is same as Walmart, less than Microsoft. Not a lot to share. The FED need to increase interest rates to stop this truck, but they are committed not to do this.
At present I suppose. Who knows. It pays to be sceptical about black swan predictions. If something worthwhile happens, we will see. Anything that looks to have some price momentum potential is a candidate for a punt.