Gold: Relief When You Need It

Despite the millions of gold lovers around the world, including many among TFR family and friends, somehow I have never been attracted to gold’s charms.  I have often wondered about the fascination, bordering on obsession, of this yellow metal in modern society.  Granted, during the pre-industrial age, gold was treasured because it was a bona fide currency in many kingdoms and civilizations that passed through this world.

If you are a king of a soverign country, and you don’t have modern printing presses and secure anti-counterfeit technology, the next best thing is to fully control the metal that forms the basis of your currency. So, the kings and queens of those days loved gold not only for its durability and malleability but because they controlled its source, production and circulation among the people.

Even prior to the Bretton-Woods agreement, gold had a measurable economic relationship to a country’s wealth, value of its currency and the power it bestowed in the world.  The US dollar was pegged to gold for much of the 20th century until President Richard Nixon severed this relationship in August 1971.

Unlike other metals, which have many practical commercial uses, gold has little practical use.  Silver has several practical uses including your catalytic converter in your car and in oil refining; copper is excellent conductor of heat and electricity so it has both home and industrial applications.  Even lead is used for pencils, soldering, paints and until couple of decades ago, in gasoline and petrol.  Other precious metals like platinum and palladium also have industrial uses.

Gold, on the other hand, has been given the status of a king of all metals.  It is believed to be a storehouse of value in inflationary times, but we saw how it is an unreliable and unproductive asset for those wanting to live off it.  Moreover, the world’s central banks have diminished its role in recent times.  But it still reigns supreme among gold bugs.   Much like a king, it enjoys all the respect without doing any work!

Until Now

 

For a relief worth more than gold.

For a relief worth more than gold

Gold has now been put to colonial (as in colon 😊) use, for the first time in a museum open to the public.  A golden toilet!  What’s great about this usable exhibit is that it is both extravagant and utilitarian.   Never has ‘bling’ done more than…well, just ‘bling’ing.   The Guggenheim museum in New York and the creator of this usable artwork Maurizio Cattelan have replaced an actual normal toilet in a restroom with its golden substitute.  Of course, it has a guard outside so your objectionable smells or sounds will not truly be a private affair there.  I can understand there may be a certain sense of accomplishment of having done it on the most expensive throne, ok seat, on the planet.  This will get on some people’s bucket list, for sure.

New York now has one more tourist attraction to boast.  Like the ‘mile high’ club, you can now visit this New York establishment to become part of shall we say, the ‘golden reliever’ club? Finally, gold has been put to the most basic of all human uses.  Beauty and practicality in one package, accessible to both the Wall Street barons and New York’s homeless living in its underbelly.  Talk about boweling the playing field.  This fully functional toilet, ahem…exhibit, is now waiting for your royal evacuation.

The artist has chosen to name this golden receptacle of human waste as ‘AMERICA’.  While I initially felt offended, I chalked it upto another crazy artist’s creative liberty.  However, he justifies his creation’s name, much like this great country, as a symbol of both expensive luxury and intense practicality – go figure.

I concede the final point to the gold bugs.  Your precious metal indeed has practical use.  Too bad, you can’t track this on Personal Capital.  

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11 comments on “Gold: Relief When You Need It”

  1. By Your First Million

    This post did get a few chuckles out of me…

    …but I absolutely love gold (and silver for that matter). Gold is the ultimate insurance when we are having shaky financial/economic times. Nobody denies that we may be coming up on another recession of some sort sometime in the next few years (especially if the Fed ever gets around to finally raising interest rates by any significant amount). Some may argue that because a recession is deflationary the price of gold will actually go down. While this may be true, the comparative value of gold (gold’s purchasing power) will almost certainly go up. This is what most people don’t understand about gold & silver. It’s not all about the dollar price. In fact gold is actually at all time highs when measured in several other currencies. What can 1 ounce of gold buy you? This is the real question. In 1980… about 900 ounces of silver could buy you a median priced single family home. Today a median priced single family home in the US is about $242,000. Divide that by today’s $19 silver we are looking at 12,736 ounce of silver to buy a house. I would say silver has a pretty high upside potential. During the next crash, if housing bottoms out and silver & gold top out (in relative value, not dollar price).. I plan to make a huge transfer out of overvalued metals and into undervalued real estate. I could care less what the dollar price does (although I like when it dips so I can buy more with my dollars).

    1,000 ounces of silver is worth about $19,000 today. Imagine buying a median priced single family home with that same 1,000 ounces of silver that you bought for $19,000. This is what happened in 1980 and could certainly happen again.

    • By TFR

      Thank you for this detailed comment. I understand where you are coming from but you have used two variables here (price of silver/gold and price of a house) that are driven by entirely different dynamics. Taking a ratio of these two doesn’t give us actionable conclusions on either one.

  2. By Dividends Down Under

    Haha – the golden throne indeed. Very nice! I can think of better things to spruce up our house though.

    I don’t understand the gold obsession either – it doesn’t produce any income nor is it logically getting any more valuable. It’s a strange one. People just associate it with recessions.

    Tristan

    • By TFR

      Thanks for stopping by Tristan. Coming from Australia, thought you guys have a fascination for all things mined out of the ground. You may be an exception. 😄

  3. By earlyretirementnow

    Good post! That colonial use of gold definitely made me laugh!!!
    I looked at gold and silver prices since 1871 (as in 145 years ago) and both were able to just roughly compensate for inflation. Gold with a real return of just under 1%. Silver had a slightly negative real return. As folks have stated here: It’s an artefact of precious metals just sitting there and not multiplying. Gold doesn’t create any income. Hence the low return.
    Cheers!

  4. By The Money Commando

    I have NEVER understood the attraction to gold as an investment. As you said, it’s completely unproductive. There are no profits generated by gold. It doesn’t generate rent. It doesn’t pay dividends. It is, at best, a decent hedge against inflation. However, there are lots of other inflation hedges that are significantly more useful (like TIPS or real estate) and actually generate income and/or rise in real value even after adjusting for inflation.

    I do believe that inflation will be significantly higher in 5-10 years than it is now, and that’s why I’ve purchased a number of rental properties. These, along with various stock investments, should assure that I stay well ahead of inflation.

    • By TFR

      Absolutely TMC. But centuries of fascination with gold won’t go away easily. Stocks provide the best hedge against inflation because even TIPS are pegged to CPI index figures, which can understate true inflation. With supply and demand, the marketplace dynamically adjusts towards the right inflation level which will show up in earnings of corporations.

    • By Fulltimefinance

      I’d actually indicate it’s been a poor inflation hedge as well. There was a whole period from the 80s to the 00s where gold price dropped while inflation continued. It also has this little problem with paying to store it.

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