Mankind will always need a medium of exchange, today we use “money” which is a conglomerate of electronic credits and paper instruments, neither of which is particularly durable or easily differentiated from counterfeits.

In times of civil unrest, of economic uncertainty and doubt, gold will hold where paper fails. The mantra that you can’t eat gold can be refuted by the fact that you can’t eat paper or electronic credits either. In total anarchy only food,water,guns and ammo will have value, hopefully in our lives such times will not visit us, but wars are a recurring plague of mankind and as we saw in the world wars, gold was a valuable means of exchange when currency failed or was difficult to exchange.

Gold still fascinates humanity, as evidenced by its widespread appearance on the wrists, necks and fingers of so many men and women in our current society. Until there is no desire to own it, it will have value. Gold is no longer being widely discovered, production is declining. Without a clear alternative investment, gold will continue to be held dear, and will increase in value. As with all things sold in a market the price will fluctuate with the personal fortunes and investment strategies of those who hold it and those who short it.

I don’t personally own gold, I prefer silver for several reasons. I own silver coins which provides 2 levels of value, the melt value of the silver and the collectors value, as well as the nominal denomination value (face value). When silver prices soar, more coins will be melted, making those left even more dear. Though silver requires more space to store, it is easier to exchange on a day to day basis, and is more easily recognized by the general public. There is considerably less silver in the world than gold, and it has more industrial applications which continue to consume more silver, leaving smaller and smaller reserves. Paper money can be counterfeited by private entities and foreign governments, electronic accounts can be hacked, even perfect flawless diamonds can be manufactured, but tangible metals like gold, silver and even copper will continue to hold value until the alchemist dream comes true and transmutation of base metals to gold is a reality.

We got gold going higher, the stock market on fire, and rates so low. That’s a thing of beauty and why you’re going to see a job market BONANZA in 1Q10 and healthy spending.

Best,

Sam-urai
Financial Samurai´s last blog ..Book Review & Giveaway: The New Rules For Mortgages

Gold is tangible and can be stored in a small amount of space, making it an ideal substance to be used to preserve wealth. Paper currency depends on public opinion for its value, hence the decline of the dollar as the U.S. government fumbles its way into the footsteps of Japan. The inverse curve will hold and gold will rise on a falling dollar, but thanks to the new American depression it will continue to rise in value. Gold is at half its historical high in inflation adjusted dollars, it could make 2400 dollars an ounce in the next year or two and if the depression goes worldwide it could easily reach 5,000 dollars an ounce.

The underlying fragility of the banking system has been revealed and people feel real fear when they begin to lose money on money market products. Wallstreet is addicted to risk as surely as crackheads to crack and with just as destructive consequences. In such an environment, those with means will purchase gold and silver and wait for things to destruct/correct themselves. All the central banks bandages cannot cure a hemophiliac. At some point the economic beast must die to be reborn, yet the Fed and its minions keep high voltage shock paddles applied until the feeble pulse awakens. How long until the shocks destroy the heart?

In such a world, how can gold do anything but appreciate in value?

I prefer to buy commodities that are being used in business because their prospects of growth are so much better. If something is being bought just to have it is a collectible and nothing more than a Beanie Baby.