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Nobody wants gold because they want gold. They want gold because it has value, and that value is purely based on what someone else will give you for the gold.

• orblivion 13y ago
  Yes, gold is selling for quite a lot right now, and it's probably not because people spontaneously developed a taste for jewelry. Having established gold's price due to valuation from those who do like jewelry, gold is a convenient way to store and transfer buying power. As such, people snatch it up, availability goes down, exchange rates go up. Given those considerations, it still must rely on people bidding those higher prices for jewelry, but now it's only available for the higher bidders among them. However, especially in the economic climate, there is another source of valuation, which is speculation that in the future, prices will go up. Based on this phenomenon, the price of gold could conceivably rise up, yes, past the point where any consumer would want to buy it for jewelry. But this is only because speculators believe that in the forseeable future, USD will be devalued so much that some will be willing to buy for jewelry at that higher rate. Finally, there is another form of speculation, which I will call "Hot Potato Speculation". This is the one you're talking about. This is speculation based purely on other people's speculation, which in turn is based on other people's speculation, ad infinitum. This is the "greater fool" scenario. It adds a lot of volatility to the market. Hot Potato speculation does surely exist in the gold market, just as it does in any market. But the valuation based on jewelry consumption serves as a negative feedback loop to keep it in check. Further, valuation based on gold's storability and transferability as a currency piggybacks on it and bolsters it further. Long-term, informed speculators, who will not be spooked by a small price fluctuation, bolster it further. So, the first three sources of value serve as protection against fluctuations from Hot Potato Speculation. However for Bitcoin, Hot Potato Speculation is all that exists.
  • stevedekorte 13y ago
    Jewelery's value is as a price tag you can wear. It's not about it being "shiny" as cheaper materials can be made to be just as shiny. And gold is only a price tag because it was the best technology for implementing a secure distributed account system. Until bitcoin.
    • orblivion 13y ago
      > Jewelery's value is as a price tag you can wear. That may have been the case at some point, but it's taken on a life of its own, such that people value it for its own sake. Maybe that will leave the culture if gold's price drops, but I think it won't happen all at once. People care about gold specifically, and diamonds specifically, for weddings. For some reason, but it's there. And I use "shiny" as a half-joking way to describe desire for something unto itself.
      • dllthomas 13y ago
        "People care about gold specifically, and diamonds specifically, for weddings." A brilliant piece of marketing by De Beers, that.