To the extent $s have failed to be a store of value, one could argue US fiat is not money either. Gold at this point satisfies 1 condition of 3 for money. USDs 2 conditions of 3. What will it take to make gold a medium of exchange? I don’t know, but theoretically there’s a higher probability of that occurring that, for e.g., than using Sumerian sea shells, as 50 years isn’t *that* long ago, and gold as currency has a many thousand year tradition (as well as being minted currently in a state resembling currency now).

The store of value in a currency-type equivalent is good enough for many without it being a medium of exchange, with a large enough population betting on doom (i.e., will become a medium of exchange) to put some wind beneath the price. Even now, clearly it’s not as liquid as the dollar, but it’s easily exchanged and much better than pure barter if some doom scenario does happen.

I am just trying to connect the dots here. There are a huge number of people who buy gold as a dollar hedge. But if gold isn’t used as money and we aren’t going to revert back to the gold standard (both of which are true) then why should gold be viewed as a dollar hedge?

Even the fear trade is flawed. After all, if you’re really worried about armageddon it’s lead you need, not gold.

This whole gold movement just doesn’t seem to make a lot of sense to me. I view gold in much the same way I view diamonds and that means the mechanics of supply and demand should be the only thing that influence prices – not some fantasy connection to the dollar that is a thing of the past….

i always appreciate your site and your opinion.

Personally, I don’t think I have ever used gold for anything besides gifting. It might have been money 50 years ago, but it’s not anymore.

2010 should bring us more of the same govrnment QE and thus higher stock prices -Unemployment will remain very high -the people receiving extented benefits continue to increase and the people who have exhausted all benefits are increasing
The rational for owing Gold are varied but the bottom line is the price for it is going up!
Happy New Year to all–I hope

gold and to a lesser extent other commodities are the only haven here, although some money can be made with the dollar short term in this printed money and “step back from the cliff and feel good about not going over” temporary environment.

but what ran us up to that cliff is still gaining on us.we turn to face it soon.gold goes up for years.

it is THE bubble play of the 20-teens.

my current rationale for gold going up is, that the most of goverment debt (any country with over 100 percent debt/gdp ratio) will not be ever repaid or currencies need to be devalued in order to repay the debt….so far we have only seen that market doesnt care about QE and there will be huge need to finance worldwide deficits in next years. so i expect more QE (aka dillution of money) all over the world next year.
wasnt it same in the GD1? crash, some sticksaves, then bond market crash and default of several countries on their debt….

Hence, I do not believe we are in a bubble.

Great debate. I wish I had even a few of the actual answers. Clearly I am in the minority with my beliefs because gold is an outstanding asset in terms of performance.