Gold Attributes

What are some of the attributes that makes gold so special? After all, it’s just number 79 on the periodic table of elements – only one of over a hundred known elements. Why gold?

I used to think that an element, mineral, or commodity had to be useful or beneficial in some other way to be prized as an asset to hold. After all, if it has no use then why hoard it? For example, water is needed (for all life), hoarded (think dams and reservoirs), and coveted (ask any farmer who irrigates or beachfront property owner).

There’s a concept in urban planning called ‘best use’ of a property. For instance, a steeply sloping property with swampland and a river flowing through it may be best suited to be parkland. Sure, you could build houses on it with great effort and expense but there’s cheaper and better suited land nearby for that purpose. It could be turned into a garbage dump but undesirable chemicals would leach into the wetlands and river and perhaps into the drinking water. You get the idea. Each parcel of real estate has a best or better user for it. Not that the best use always happens but most would agree that one use would be better than another.

It’s the same with metals, only sort of backwards. Most elements and metals are used in many and various applications. However, each need for material has a particular element, metal, or commodity that works best. Why are aircraft bodies made primarily of aluminum? It’s because aluminum is the best suited for that use. It’s the strongest, cheapest, and safest material to use. Can substitutes be used? Sure. Fighter jets are made of titanium instead of aluminum because it’s more rugged and can survive the G-forces better and enemy fire too. Could 747’s be made from titanium? Sure they could, but at much greater and prohibitively expensive cost. Palladium is used in automobile catalytic converters. Silver is used for most mirrors. There are substitutes for both but these have been found to best suited for that purpose over time.

Now I ask you, what’s the best material or substance to be used as money? Why it just so happens to be gold. Yes, gold is used for jewelry, dentistry, gold leaf, electronics, and other purposes but its best use is as money. Each of the above uses has one or more substitutes anyhow.

Why is gold’s best use as money? Well, partly because it’s Durable, Divisible, Easily Recognizable, Highly Liquid (financially), Hard to Counterfeit, Easily Portable, Relatively Rare, Non-Toxic, Beautiful, Compact, Unchanging, An Honest Measure, Won’t Rust, Decay, or Burn, Convenient, Fungible, Holds its Value over Time, and Is Anonymous. Oh, and it’s hard to come by, is extracted from the earth at great expense and hardship, and historically increases in supply at about the same rate as population expands.

But you know what? None of that really matters in the end. What does matter is that it is Desired and Coveted by others. Other people want it and are willing to trade goods and services for it. It doesn’t really matter why they want it – just that they do and always have. As long as human nature does not change (and it never has), gold will always have value to people and thus will always be money.

Here are some other attributes that make gold special.

Gold is the only major asset class that is negatively correlated to all others (i.e. Bonds, Equities, Real Estate, Cash). (Ibbotson Associates, 2005). When the stock markets are on a bull run and housing is booming you may not want to be all in gold. But when most of the other markets are down or sideways (since the turn of the last century), gold is normally increasing in price.

Gold does well in both Inflationary and Deflationary environments. (The Golden Constant; Jastram, 1977) The 1930’s was a time of deflation and the 1970’s was a time of inflation. Gold did well throughout both those decades.

Gold is the most Conservative investment one can make – more conservative than cash or bonds. This fact isn’t widely known. Author and investor Stewart Thompson calls it the “World’s Lowest Risk Investment.” When I say conservative I’m not saying that it always makes you the maximum dollar gain. Not so. What I’m saying is that its value can never fall to zero. There’s always a demand for it in bad times and in good. Your dollars can lose value over time and even become worthless. They can burn in a fire resulting in their value going to zero. Your bank can go bankrupt and perhaps you’ll get something eventually but your dollar denominated account could go to zero. As I keep pounding the table about, gold is always in demand. There is always someone willing to take it off your hands, either honestly or dishonestly. That has always been the case through recorded history. Why would it change now? While your gold can decrease in dollar price over time, its value remains constant. It is a lump of metal. Its value and utility do not change over time. Just like the value of water or air doesn’t change. Spanish gold coins taken from the bottom of the ocean after hundreds of years remain unchanged. They do not rust and still weight the same. If you have a house fire your gold may melt but it will weigh the same and retain its value (and dollar price). Someone will pay you just as much for that melted lump as for that shiny coin. It’s the metal that has value, not what’s stamped on it. And finally, as long as you don’t have it stored at your bank, the bank’s closure will not affect you if you hold gold. That is, if you hold it in your hands outside of the banking system.

In summation, gold is the one universal monetary means of settlement. It’s always accepted where other forms of payment are not. Got Gold?

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About the author:

Jerry Western is author of the newly available work,

Got Gold? Get Gold.

A Book on How to Protect your Wealth with the 21^st Century Gold Rush and

a Layman’s Guide to Riding the Golden Bull and the Silver Stallion.

Ordering instructions are available by e-mailing westernoutlook@gmail.com

Jerry also teaches 5 classes about the silver and gold markets.

Silver and Gold: Constitutional Money

Riding the Golden Bull

Silver and Gold Fundamentals