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History is often clearer than the present, so let's look at the price of silver around 1980. In 1979 silver was $6 an ounce, by 1980 it was worth $48.70 an oun

by Ologn 11y ago

History is often clearer than the present, so let's look at the price of silver around 1980. In 1979 silver was $6 an ounce, by 1980 it was worth $48.70 an ounce by 1982 it was back below $5. Was silver really have $48 of value in 1982 dollars? Clearly not. Over the short term the price of gold, silver, subprime real estate, dutch tulip bulbs, pets.com stock etc. can soar over its real value. Over the longer term, price and value always come back together though. > the $1323 is maybe $13 practical utility and $1310 collective faith in its use as a currency But non-speculators pay $1323 to fill teeth and conduct electricity. For them, the $1323 is 100% for practical utility. Of course, as the value of gold soars, they look for alternative products to fill these needs (ceramic, copper). Over the long term, I think gold derives 0% of its price from anything other than its value, over the short term, different factors come into play (like silver in 1980).

mikeash 11y ago
The vast majority of gold ever mined sits around doing nothing. If it was seriously useful for practical purposes then people would pay a lot more than $1323/ounce for things like plating electrical conductors, in order to get that gold out of vaults and people's dresser drawers and into useful applications. Compare with oil, which stores pretty well, but where the vast majority of oil that is extracted is used rather than stored.
ori_b 11y ago
> But non-speculators pay $1323 to fill teeth and conduct electricity. Well, It tends not to be used for fillings any more, and for coating conductors, only a tiny amount is used. Even then, half the time the gold plating is social value ("Audio connector with GOLD PLATED TIPS!", rather than practical value. Mostly, it just sits in stockpiles, though; it's practical value is less than the value of stockpiling it. > I think gold derives 0% of its price from anything other than its value This is a tautology. However, a large portion of that value comes from the perception of value. It's valuable because people think it's valuable.

by Ologn 11y ago

mikeash 11y ago

The vast majority of gold ever mined sits around doing nothing. If it was seriously useful for practical purposes then people would pay a lot more than $1323/ounce for things like plating electrical conductors, in order to get that gold out of vaults and people's dresser drawers and into useful applications. Compare with oil, which stores pretty well, but where the vast majority of oil that is extracted is used rather than stored.

ori_b 11y ago

> But non-speculators pay $1323 to fill teeth and conduct electricity. Well, It tends not to be used for fillings any more, and for coating conductors, only a tiny amount is used. Even then, half the time the gold plating is social value ("Audio connector with GOLD PLATED TIPS!", rather than practical value. Mostly, it just sits in stockpiles, though; it's practical value is less than the value of stockpiling it. > I think gold derives 0% of its price from anything other than its value This is a tautology. However, a large portion of that value comes from the perception of value. It's valuable because people think it's valuable.