Talk:Gold as an investment/Archive 1

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I have removed the following which was the first paragraph of the article. It is not necessary because Wikipedia already has policies covering WP:NPOV and current events.

It is a place for facts, not opinions. Thus this article may discuss historical prices, and relative values. It may discuss gold's role as an investment. It may discuss asset allocation strategies, and their implementation. It may discuss the different ways to gain exposure to changes in the price of gold. It can cover other markets and how their relative values have performed relative to gold, from a historical perspective. It can cover the factors which influence the price of gold. Any all facts relating to gold as an investment can be included. Please free to edit this page, but do not express any opinions, nor may you refer to specific gold mining companies or investments if the obvious purpose is to incite others to invest or react. No news of short term relevance may be included, such as last month's change in price.

Any personal opinions can, of course, be placed here on the talk page.

-=# Amos E Wolfe ^talk #=- 00:12, 18 September 2005 (UTC)

[edit] Removed text that supports common fallacy

I removed the section of text that implied John Maynard Keynes held the opinion that using gold as a banking reserve was an outdated concept. He in fact stated that the 'gold standard' was a 'barbarous relic'. The gold standard being a currency conversion system created before WWI that fixed the currency conversion rates between participating nations. After WWI updated currency conversion rates were needed. This is why Keynes particpated in the creation of the IMF and Bretton Woods agreement. Of course now we've moved away from fixed rate exchange systems (a barbarous relic) to floating exchange systems. —Preceding unsigned comment added by 203.164.254.45 (talk • contribs) 02:22, 9 September 2006 (UTC)

[edit] You were a bit too trigger happy.

I was in the middle of editing when you removed the unecessary paragraph. So it is back again. But I agree you have a point. Wikipedia's policy cover it. So when i next edit, I will tidy it up. Swiss Banker 00:46, 18 September 2005 (UTC)

[edit] Gold bug could be merged in?

Does anybody think it would be good to merge into this article the Gold bug article, which duplicates much material here -- or make it clearer that that is a subset of this page ??? mervyn 08:56, 29 January 2006 (UTC)

I think it would absolutely be a mistake to merge this article, which discusses "gold as an investment" into gold bug, which describes a pejorative term. That would seem rather POV to me. It would be like merging African American into Aunt Jemima. Not exactly encyclopedic... This page is not a "subset" of gold bug, although both discuss gold. There is already a category for these articles: Category:Gold. Dick Clark 16:29, 30 January 2006 (UTC)

What I said was ? merge Gold bug into this article.? --mervyn 13:25, 1 May 2006 (UTC)

[edit] Gold of the Americas

Would this be a good place for a mention of the Price Revolution caused by the metals of the Americas? --Error 04:50, 12 February 2006 (UTC)

[edit] NPOV

I think this article is still written with a rather positive view on buying gold for economic reasons.

For a start, the very description of such activity as "investment" depends on your point of view. In the strict sense of theoretical economics, it usually would not be considered an investment.

Just to make clear that I personally am not neutral on the issue, here's a personal view on it (not that I necessarily believe it will happen like that, but it very well could):

gold is a soft yellow metal which is significantly less useful than, say, iron
while gold is rare, in the very few medical applications that it has found, it is rapidly being replaced by molecular materials
gold was used as a form of money in some countries during the past millenia, and in virtually all countries until the end of the gold standard in the early 1970s.
after the gold standard was abolished, gold saw some continued limited use as a form of money in international transactions, particularly between two countries which did not both have a freely convertible currency (that's my understanding?)
since the early 1990s, no one has used gold as a form of money
with gold now ultimately worthless, it's a question of time until all market participants catch on to that idea. ultimately, gold will stabilise at its combined industrial, rarity, and cultural value, significantly below its current value.
there's a significant probability more efficient gold mining will be introduced, the central banks will sell their stores of gold, or one or more countries or cultural communities stop valuing gold suddenly, all of which would drastically increase the quantity of gold available and lower the price.

Now, what's wrong with the article:

the title. I don't have a great suggestion, but ultimately even "buying gold speculatively" would work better. It's definitely not an investment in the strict economic sense, and it's not going to have returns going back to economic growth, unlike those investments considered in those theories. Sustained exponential growth of the gold price is physically impossible.
lead section: no definition of what "as an investment" means. I'd be curious about that myself. If the meaning is "buying gold in the hope of becoming richer than you would get otherwise", say so, if in less informal language.
"For over four thousand years gold has been regarded as a form of money and store of wealth". Possibly true, but wrong tense. Gold is no longer considered a form of money on anything like a global scale, so that statement is wrong as it stands now.
"Gold and other precious metals are unique assets in that they are tangible (i.e. physical, real) and liquid (i.e. easily traded)" Other assets have the same properties. Oil, plutonium (a metal, though), and all other chemical elements that are sufficiently rare come to mind.
"Other traders and investors see gold as nothing more than just another commodity" ... other than who? Gold is, without question, a tangible, liquid, and, in its pure form, rare commodity.
no mention is made of how "Gold bugs" hope gold will retain its purchasing power after an economic collapse. The whole "oh, my, the world economy has collapsed, better get myself some of that worthless yellow metal" train of thought just never appealed to me.
"Hoarder": no explanation is made of why gold should be better than actual investments at maintaining purchasing power
"Inflation hedger": hedging against inflation is easily possible using derivatives. Why do people decide for gold, instead? Gold is historically a very bad store of value; it hasn't even managed to keep pace with inflation over the past 25 years.
"Portfolios that contain gold are better able to withstand market surprises than those that do not": blatant statement of opinion.
"Some recent independent studies have suggested that traditional diversifiers, such as bonds, property and hedge funds, often fail to stand up to market stress and may sell off with equities in times of uncertainty": unsourced. the statement is insufficiently precise to be verified by anything as scientific-sounding as a "study"

"Even a small allocation of gold to a portfolio significantly improves its performance during unstable periods.": another blatant opinion. What's an unstable period? Why wouldn't a sudden fall in the gold price be considered an unstable period?
- Answer: I think the sentence should be re-phrased as follows: "The correlation between the gold price and stock market indices is low, and sometimes negative. As a result, the addition of some gold to a portfolio will generally improve its performance when equities are weak. I will change the text accordingly if there are no objections. (By the way Random, I think you don't really need to add an NPOV tag, although you clearly point out some valid improvements which are needed to the article. But please try to do them one at a time, not all at once, as some of your comments may not be agreed by the majority, and you need to allow other users an opportunity to vote on each change.)Watercolour 14:05, 20 May 2006 (UTC)

Thanks for your comments. Yes, I do believe the NPOV tag is needed. WP:NPOV is quite clear that an NPOV violation doesn't require individual statements to violate NPOV: it suffices if the selection of statements presented in the article is biased.

With some very few words about reasons not to invest in gold tucked on at the end of the article, I believe the article currently does not comply with WP:NPOV, and violates it significantly enough to justify the tag.

About your proposed change: Do you have sources? It seems to me to be barely more acceptable than the original: after all, simultaneously holding two types of assets expecting that there is a negative correlation between their prices is nonsensical. I don't see at all how "as a result" makes sense if you assume there is a low (but positive) correlation.

Sorry, but the whole thing seems tautological. "If stock prices fall, but the gold price doesn't, then holding gold is a better idea than holding stocks". I think if you get to the bottom of this, including gold in your portfolio is only justified if you believe in a rising gold price; a general rule to include gold in portfolios is, of course, a self-fulfilling prophecy: as more people follow it, the gold price rises, "proving" the wisdom of buying gold in the first place.

So, for now, I object. Sorry.

RandomP 14:52, 20 May 2006 (UTC)

Watercolour 21:04, 20 May 2006 (UTC) Actually the addition of any non-correlated asset to an equity portfolio will improve its performance when shares are falling. This does not mean always improve the performance. However, for asset managers who believe that the long term prospects for gold are good, its addtion will reduce the volatility without reducing return expectations. By the way Random, you sound a bit stubborn, and unable to see other people's point of view. I would not like you as a freind. Watercolour 21:04, 20 May 2006 (UTC)

"Speculators attempt to make a profit by predicting the gold price": by that definition, all types of "investors" except for gold bugs are speculators. However, it is not explained why a speculator would buy gold rather than gold derivatives, which should always work better than buying actual gold does.
"The US Dollar (as well as the Pound) were occasionally devalued against gold by government edict. That was known as the gold standard": this is just wrong. The gold standard referred to the theoretical stability of the gold price; the reasons for the impossibility of actually attaining such stability permanently are a separate issue.
"Since 1970, the price of gold has been allowed to float freely": the Bretton Woods system article suggests this happened in 1971.
"About one fifth of all gold ever produced sits in official gold reserves at various central banks, to be used only in a last resort in case of a national crisis": incorrect. central banks have sold gold, and many are free to do so now. This incorrectly suggests that in the absence of such a crisis, no gold will come on the market from central banks.
"the price of gold is mainly affected by changes in sentiment, rather than changes in annual production or gold jewelry demand": opinion. it's entirely possible some efficient method of mining gold, or producing it from other elements, comes around. Gold jewelry demand is dependent on the sentiment towards gold.
"with inflation creeping back into the system": prediction of an economic variable. unencyclopedic and original research, even though it's a consensus opinion.
"any move by Japan, China or South Korea to do the same would be seen as significant": this suggests that those banks might be about to. No reason for that is given.
"Currently the USA has 75% of its foreign reserves in gold, whereas China holds approximately 1% in gold.": the US dollar is the world standard reserve currency. By careful omission of that, the above statement makes it sound like China has "too little" gold, and that's something that might well be corrected.
"Inflation is once again rising": again, a statement that cannot be made without looking into the future. We can say that inflation has increased in 2005 over 2004, but not that it is still rising.
The entire "inflation" subsection is entirely devoid of anything that pertains to the article without further explanation. A link to hyperinflation would suffice, and it is in that article that it should be explained how a fiat currency whose monetary objective is a certain inflation rate will be able to avoid hyperinflation in virtually all scenarios.
"They see gold as a solid asset which will always buy bread or transportation": opinion. The same used to be true of aluminum, for what it's worth. Today, you'd probably just get funny looks.
"Gold demand was at an all time record. Demand from the electronics industry is rising by 11% a year, jewelry by 19%, and industrial and dental by 21%": in the entire section, "demand" appears to be used not in its economic sense, as a function of price, but in some weird sense in which statements such as the above can be made. If it's just saying that 19% more gold has been used for jewelry in 2005 than 2004, well, perfectly possible to do that without using the word "demand".
"However, gold's benefit as a secure asset may only be truly realised when directly owned and stored in bullion or coins.": but who's to say that "truly" realises gold benefits? what if your house is taken from you before you had a chance to return home and retrieve your oh-so-valuable gold? Shouldn't you carry it with you at all times? Irony aside, there's a good case to be made that indirect ownership is more secure than direct ownership. The rest of the section is pretty much a how-to guide.
"the currency offering the lowest interest rate, which as of April 2006 was the Japanese yen": this statement is probably incorrect: real and nominal interest rates are confused throughout the section; technically, the expected outcome at all times is that inflation rates between freely-traded currencies differ exactly so that the real interest rates coincide. In other words, on a free market, the expected effect of taking out a loan in a different currency should be zero. However, since the actual inflation rates vary, it is unlikely that the japanese yen will, ex post, turn out to have been the currency offering the lowest real interest rates in mid-2006.
"However, since the gold standard was ended on August 15, 1971, governments have been free to print as much money as they choose": simply incorrect. Despite the inaccurate usage of "government" to extend to central bank throughout the articles, central banks are limited through treaties and constitutional or national law. It is most important to realise that the entity that prints and circulates money is financially (and, usually, legally) distinct from the one that issues debt notes, and that "the government" cannot just print money to pay its debt.
the rest of the section suggests hyperinflation without so much as a hint as to why it might be impossible for, say, the euro.
"Many argue that gold's role in the world's monetary system has ended": this is, very old contracts nonwithstanding, a fact. Gold might resume to play a part, but the current monetary system has no need for gold.

There are major omissions:

A number of possible developments could make gold much less valuable:

New methods of mining gold or producing it (unlikely, but then how likely do most people think it is all current currencies will collapse and we'll be reduced to paying with gold). The historic example of aluminium is extremely important here! Point out the differences if you think them so important (aluminium was rare as a pure metal but extremely common as an element; gold is rare as both, though there is still far far more gold even in the upper layers of the earth's crust than has ever been mined).
loss of "rarity value" if the growth of the world population reverses: fewer people means less gold per person. I believe the educated working-age population (people 15-65 who have what would be comparable to a high school diploma) is actually about to decrease?
loss of cultural value

There are non-economic arguments against buying gold:

gold is a good choice for criminals, dictators, and other bad people. buying gold increases the value of their holdings. Buying gold supports crime (drug dealers, terrorists, genocidal dictators: take your pick).
a special case of the criminal use is tax evasion
stolen gold is indistinguishable from legally owned gold. *Gold can be physically taken from you in ways that a deposit accessible only through reliable identification cannot be.
Gold mining is potentially dangerous to the environment, (used to) support dictatorial governments, and ultimately economically unproductive; it may or may not be dangerous to the health of the workers, but it definitely involves poisonous products. Buying gold supports gold mining.

I could very well see those arguments being translated into a religious or moral edict by someone: If the Pope made the edict that gold was not to be bought by Catholics, that might very well crash the gold market.

It is much easier today to produce something that looks similar to but isn't gold, and while testing methods have also improved, they require significant technology which might not be widely available after a crash as predicted by some gold bugs; wouldn't it be much more logical to buy some of that?

Sorry for the long post. I'm going to refrain from using the NPOV tag for now, and will try to fix the issues mentioned above if no objection is made; however, since I'm obviously not neutral on the issue, it might be easier for others to make this article NPOV.

I'll try to split up this post later, so it'll be easier to reply to it.

But to summarise: Gold used to be money. It stopped being money in the 1970s, and globally accepted money didn't roll around until the Soviet Union collapsed in 1990. A lot of stupid people are still working through the implications of that, and a lot of not-so-stupid people think the gold price will rise because of all the stupid people, and all the other people who buy gold for other reasons. Add to that central banks, which have a legitimate reason to own gold (if things go really pear-shaped, issuing a fully-backed gold currency might be a measure of last resort - and anyway, selling it all would be less profitable than selling it off slowly), and everyone's confused, and confused markets behave oddly. The confusion will end, probably after the gold price has started crashing on its own, and everyone will laugh at how silly people were in 2006. Let's prevent them from laughing at Wikipedia :-)

RandomP 23:18, 30 April 2006 (UTC)

[edit] Replies

Thanks for your excellent comments which I hope will generate useful discussion and editing. This article and Silver as an investment were started and largely developed by User:Nirvana2013 (who has also recently started an article Diamonds as an investment), so hopefully that User will make a detailed response. --mervyn 13:25, 1 May 2006 (UTC)

Just to be perfectly clear about this: The above wasn't meant as an attack on User:Nirvana2013; I was unaware the article was mainly a single person's work. Definitely no personal attack intended. I doubt I myself would have been able to write a fair article on it, so yay for cooperation.

RandomP 06:34, 2 May 2006 (UTC)

[edit] Is "Gold as investment" a good article name?

As I said above, I'm not at all sure we should have an article about "gold as investment". In standard economic theory, investment means capital is bought. Capital is then used to produce something. While you could argue that most people consider gold closer to land (economics): "they don't make more of it" (except that, in the case of gold, they do, just currently in insignificant amounts).

I think all of "gold as an asset", "gold as an economic asset", "buying gold for economic reasons", "gold speculation" would be better names, but none of them seem to be entirely satisfying.

Even "investing in gold" (which sounds like a how-to, but the article does so, too, in places) sounds better, to my ears, since "investing in" is used informally more often than "investment".

RandomP 06:26, 2 May 2006 (UTC)

[edit] Suggestion...

I have just been reading through all the gold info here and found there is a lot of great information but there is also a few key bits missing about the gold market and how the market trades gold assets. Specifically the Loco London OTC inter-bank market, the OTC client market and the derivatives market which is around that. I was trying to find the best place to put this information and can't really find any were that I think is suitable within the current frame work.

My suggestion is that "Gold as Investment" remains, but solely focuses on investing in gold assets. I propose creating a new page called "Gold an Asset" and then have "Gold as Investment" as a sub page. I think much of what is on gold as investment should be on the asset page. On the asset page I would like to put in details on how the interbank market works, what the standards are (LBMA), who the players are, what the various gold derivatives are that are trade, generic pricing formulae, and how that market interacts with gold producers, gold investors, gold consumers and central banks.

What are your thoughts?

--Pt johnston 12:02, 13 September 2006 (UTC)

I like these ideas. Gold as an asset (lower case BTW) is more neutral and covers more ground. Stephen B Streater 12:14, 13 September 2006 (UTC)

You don't think "gold as an investment" is neutral? Okay, just refute all the arguments I made on this page defending it. Thanks. MrVoluntarist 13:18, 13 September 2006 (UTC)

Before I go through your discussion, I'd like to consider specific points, one at a time. Stephen B Streater 17:32, 13 September 2006 (UTC)

I don't see the point. Both kinds of topics can go in this article. MrVoluntarist 13:18, 13 September 2006 (UTC)

The information I would like to cover relates more to the Asset type properties of gold. The current page covers a lot of the information about investment or investing in gold assets and the gold page covers a lot about gold as a chemical element and a metal and its physical properties etc. as their headings suggest. an example of the information i would like to add is:

OTC gold swaps are traded as a "Contango" Rate which is the percentage increase in price from the spot date, which is 2 London and NY business days from the trade date. The contango rate is the annualized percentage increase in price. the formula is:

F o r w a r d = S p o t * (1 + C o n t a n g o * d a y s f o r w a r d / d a y s i n a y e a r)

This type of information is not about investment in gold it is about specific gold assets that can be traded in the market, they may form part of an investment if you buy it, but selling (shorting) or borrowing an asset isn't really an investment. For example, you can be the payer on a quarterly fixed/quarterly floating gold interest rate swap, which means you make money if the gold interest rates rise and loose if they fall. I wouldn't say entering into this type of contract is an investment, but it is generic contract that the OTC market trades regularly and in very large volumes. --Pt johnston 14:32, 13 September 2006 (UTC)

I'm just thinking out loud now: but maybe the name needs to encompass more the fungiability of gold as an asset, a liability and various derivatives contracts. How about Gold as a financial instrument for a title for a new page? Thoughts? --Pt johnston 15:14, 13 September 2006 (UTC)

[edit] Okay, let's start at the top ...

RandomP is currently engaged in Mediation regarding changes to inflation.

Carbonate 06:37, 4 June 2006 (UTC)

I'm going to add signatures throughout this so there's an obvious place to reply.

This article discusses the use of the precious metal gold as an investment.

As above, what exactly does this mean? Gold is not an investment in the classical sense: you do not expect to receive a return on it. "Buying gold in the hope that the gold price will rise and you can sell it at a profit" is more accurate, if wordy.

RandomP 13:36, 16 May 2006 (UTC)

Er ... what? All investments are so that you will have something more valuable after than before. Both purchasing things in the hope they will increase in value and purchasing things from whence you will receive income are investments. MrVoluntarist 16:48, 26 May 2006 (UTC)

I realise understanding the word that way seems to be common, but it also conflicts with what at least a few dictionaries have to say on the matter, so it's probably safe to say it's not universal. For the title of an article, it might be worth it to go to some extra trouble to avoid bias, at least IMHO

RandomP 23:04, 26 May 2006 (UTC)

What bias? Are you saying we should go through every article on, say, real estate, and replace every use of "investment" with "Buying in the hope that the price will rise and you can sell it at a profit"? What about investment in stocks? And how does "selling at a profit" not constitute "receiving a return"? With all due respect, and I mean that in the nicest possible way, I have no idea what bias or indeed, ambiguity you're asserting arises. Are you claiming someone is going to read the article and say "wait ... if I buy gold, I'll get periodic checks in the mail?" MrVoluntarist 23:16, 26 May 2006 (UTC)

Okay, in order:

Unlike gold, real estate does provide returns to the owner, in most cases - either someone else pays rent for it, or the owner lives in it, thus saving rent they would otherwise have to pay (virtual rents are widely accepted ...)

This situation is different from gold. (Stocks, of course, pay dividends, unlike gold).

"selling at a profit" does not constitute "receiving a return on an investment" because it ends ownership of the asset sold.

I did not assert that any ambiguity arises. Article names should be chosen not only to be unambiguous, but also to conform to a neutral point of view. I am sure you can think of many examples yourself of titles that would violate one policy but not the other.

All I am claiming is that buying gold in the hope that its value will increase is not universally recognised as constituting an "investment".

RandomP 23:39, 26 May 2006 (UTC)

In what sense does "losing ownership" negate "that you got a return on it"? That makes no sense whatsoever. And buying something in the hopes that it will increase in value (appreciate) is everywhere recognized as an investment. Some people deny this? Okay, but by the same token, I'm sure you can find people who deny the "not paying rent is imputed income" doctrine. (I'll give links if you want.) And about ambiguity, excuse me but you said right above: "I realise understanding the word that way seems to be common, but it also conflicts with what at least a few dictionaries have to say on the matter, so it's probably safe to say it's not universal." Call it what you want, that's a charge of ambiguity.

Your claim that because you get an imputed income by owning home, so it's a "real" investment, seems very POV. Some people buy real estate, not to rent, or to live on, but to hold out for a higher value. (Georgists hate these kinds of people.) Most of the monetary gain in buying stocks is because the corporation's assets increase in value, not from the dividends. So again, I ask, should all articles related to real estate or stock market investing remove use of the word "investment"? And are you contesting the names of silver as an investment and diamonds as an investment as well? MrVoluntarist 01:05, 27 May 2006 (UTC)

[edit] Line by Line

Please try to keep the accusations down a bit, okay?

I didn't make any accusations. I refuted your position and you took it personally. I'm going to respond to the rest line by line for ease of reading and because pretty much every statement you made is in error for separate reasons. MrVoluntarist 00:53, 31 May 2006 (UTC)

I was referring specifically to things like "That doesn't make any sense at all". Unhelpful, at least :-)

RandomP 03:23, 31 May 2006 (UTC)

First off, I agree that it's possible to define "return" and "investment" consistently so that gold is a perfectly good investment.

No, it's not "possible" to defined them to make gold a possible investment. The definition I gave you is the one that normal, well-adjusted people use, not some kind of sly trick. MrVoluntarist 00:53, 31 May 2006 (UTC)

Or indeed this suggestion that I am not "well-adjusted" for using a different of the several definitions the Wikipedia article investment includes.

Very unhelpful.

RandomP 03:23, 31 May 2006 (UTC)

I was just trying to emphasize how overwhelmingly accepted my concept of investement is compared to the one you are using here. MrVoluntarist 18:29, 31 May 2006 (UTC)

However, those definitions aren't universally accepted.

Nothing is universally accepted. On Wikipedia, we don't cater to extreme minorities. See flat earth problem. MrVoluntarist 00:53, 31 May 2006 (UTC)

Thanks for linking that. Interestingly, I'd guess that it is indeed only a flat-earth minority who shares this article's POV. The vast majority of the population, for example, either is unaware of the threat of hyperinflation, or has understood how hyperinflation is impossible without violating monetary policy. RandomP 03:23, 31 May 2006 (UTC)

That's a good point (though your bit about hyperinflation is POV). Reading below, you give some of your reasoning for wanting to make these changes. I understand why you might think the article is POV. However, the solution is not to change what appears to be a reasonable name for the article. You should go through and balance what you believe to be POV. Add the approrpiate caveats. However, I've noticed that some of it is *anti* gold, such as citing the highly selective year 1980 as being a time in which gold would have been a bad investment. (And for my full disclosure, I just did my first investing, and put none of it in gold or its derivatives, so in case you were planning to, you can avoid bias accusations.) MrVoluntarist 18:29, 31 May 2006 (UTC)

I agree that that sentence has an unacceptable bias, though a posteriori a peak-to-peak analysis (along with a trough-to-trough one) might be interesting.

RandomP 21:15, 31 May 2006 (UTC)

Few would speak of holding cash as an investment, or of making a deposit for a bet as an investment.

That's because cash as currently used necessarily depreciates because they print more of it, and bets necessarily have a net negative average return, not for the definitional reasons you gave. MrVoluntarist 00:53, 31 May 2006 (UTC)

Bets necessarily have a net zero average return, you mean?

RandomP 03:23, 31 May 2006 (UTC)

I meant precisely what I wrote. In the real world outside of the ivory tower, bets have transaction costs and thus can't even recover to zero. State lotteries take a 50% cut usually, and for profit gambling events take ~3%. Even in the person-to-person betting, you lose the time. MrVoluntarist 18:29, 31 May 2006 (UTC)

The classical theory is this:

I don't care what the "classical theory" (whatever time period you're referring to) says. I care what modern, mainstream, sourced definitions of investment say. In any case, the classical theory is wrong. See below. MrVoluntarist 00:53, 31 May 2006 (UTC)

I'm sorry, that was a mathematics/physics jargon term.

RandomP 03:23, 31 May 2006 (UTC)

No, it was a wrong term. You don't seem to know what time frame or reference "classical" uses. It was a subtle way of avoiding saying "my POV theory". I hold a degree in mechanical engineering. The "oh, that's just math/physics jargon" trick doesn't work on me. MrVoluntarist 18:29, 31 May 2006 (UTC)

Please take that back. I explained that I used "classical" in a jargon meaning. Feel free to look up its precise meaning. It was not a wrong term.

I'm not here to convince you I'm smart. Do not accuse me of trying a "trick" when I explained and apologised for what actually happened.

RandomP 21:15, 31 May 2006 (UTC)

No, you called gave your own POV theory a phony name to lend it an aura of credibility. Your "apology" was an attempt to cover up this dishonesty by attempting to spook me with "oh, it's a math/physics thing, you wouldn't understand". I will not look up the term. I have studied math and physics -- extensively. If you can cite the meaning of it you were using that would somehow make sense of your use of it here, which I can verify, and thereby show that your use of it was not an attempt to deceive, I will apologize. But not until. MrVoluntarist 05:10, 1 June 2006 (UTC)

The value of real estate, or stock in a company, is nothing but the expected future returns, properly compounded.

Note that those are, if you insist on that distinction, "non-destructive returns". You hold a ten thousandth of a given company, or own an acre of land with a house on it. You rent out the house, or let the management of the company do their jobs. A year later, you still hold a ten thousandth of the company (albeit it has changed slightly, and thrown away the old office chairs), or own the house (which might have deteriorated a bit), but you also have the dividends, or the rent.

And again, if you are *only* going to allow payments to count as a return, most stocks and some real estate are not investment. Are you familiar with the stock market? Like I said before, most of the return from buying stocks is due to appreciation or accumulation of the corporation's assets. The stock stakes a claim to more valuable things. If you ignore the value of the stock itself and just count dividends, the overwhelming majorit of stock investing is at an extreme loss. And again (I offered to give you citations last time) at least as many people dispute the "imputed income" doctrine as cling to the "classical theory" of investment you gave. If you don't understand why, think about this: Is marriage an investment in the sense you're using it? After all, I get imputed income from sleeping with MrsVoluntarist, since I don't have to hire prostitutes. I also get the imputed income of her services as surrogate mother and nanny. MrVoluntarist 00:53, 31 May 2006 (UTC)

Feel free to give me citations. RandomP 03:23, 31 May 2006 (UTC)

That's not how it works, I'm afraid. First, you clarify what counts as evidence, then I meet it. I've been through far too many goalpost-moving on Wikipedia to give the evidence first. MrVoluntarist 18:29, 31 May 2006 (UTC)

But, really, I think the theory holds up exceptionally well for both companies and commercial real estate. If you get hung up about the imputation necessary only to deal with real estate the owner lives in, forget about that. Clearly we disagree about quite enough as it is.RandomP 03:23, 31 May 2006 (UTC)

The theory holds up well except when it doesn't? Both are glaring contradictions of your unsourced theory. It ignores the main reason people buy stocks, as well as all real estate speculation. But okay, let's say I accept imputed non-income income as being income. Then you have to count gold as an investment. By holding gold in your home, you insure againt a political/economic crisis, such as hyperinflation. By having the gold, you get an imputed income: the cost of an insurance policy that would pay out when your money becomes worthless. Of course, no one would ever buy such an insurance policy, since a political crisis would most likely cause them to be unable to pay precisely when you need it, but insurance against this eventuality does have value and by your own metric would have to count as imputed income.MrVoluntarist 18:29, 31 May 2006 (UTC)

Source: financial capital. RandomP 21:15, 31 May 2006 (UTC)

And which part of the article supports you and contradicts me? Seems to side with me. MrVoluntarist 05:10, 1 June 2006 (UTC)

Also note, again, that it isn't necessary for you to agree with that theoretical definition of value. All that's necessary is for you to acknowledge that the statement

"stock has value beyond the expected future dividends, properly compounded"

violates NPOV.

RandomP 03:23, 31 May 2006 (UTC)

How??? It does have value beyond future dividends. If you meant the "properly" part is a bit off, I agree. MrVoluntarist

Some people (like you) think it does. Some people (like me, or 9 out of ten economists) think it doesn't. Unless you can prove one group wrong (and you cannot, since there's no objective way to measure expectations), the NPOV policy demands not taking either POV.

RandomP 21:15, 31 May 2006 (UTC)

o...k. Where to even begin on this one. It's not that "some people" think it has value beyond the dividends. As a matter of fact, you can sell it for a positive price. In the economic sense, that means it has value. That's not a POV issue. Second, economists are quite capable of using "investment" in more than one sense; the fact that it would not meet one economic definition being used here does not mean economists "agree with you". Rather, 10 out of 10 economists agree with me that when you buy something in the hopes that it will be more valuable after than before, that is an investment. Third, gold can qualify as a capital good if it is used in the production of other goods, which it often is. Fourth, since there are no notable people who hold the "it's not investment unless you draw income or imputed income from it", it is not a violation of NPOV to exclude it. MrVoluntarist 05:10, 1 June 2006 (UTC)

Again, in classical theory, the way to determine the value of a house is to add up all possible future rents, properly discounted and with some probability theory thrown in.

If you do that with gold, the unfortunate answer will be 0.

So, under "classical theory", ending up with a set of goods and money more valuable than when you started counts as a loss. MrVoluntarist 00:53, 31 May 2006 (UTC)

Not at all. Where do you get that?

RandomP 03:23, 31 May 2006 (UTC)

From your posts. Again, you said if there are no dividends (or imputed non-income income), "it doesn't count as a return". So if you buy a stock, which pays no dividends but accrues additional value, you gained nothing, and lost the cost of the transaction. Under your unsourced fringe POV "theory", if I buy stock that multiplies a thousandfold in value, allowing me to live like a king from selling the stock thereafter, I lost the full value of the transactions. MrVoluntarist 18:29, 31 May 2006 (UTC)

Incorrect. If your stock increased a thousandfold in value, by my "fringe theory", that means that market expectations of how much that stock will eventually start returning have increased a thousandfold.

21:15, 31 May 2006 (UTC)

No, not necessarily. It could (and most often does) just mean that that stock stakes a claim to a quotal share of more valuable goods. If the corporation liquidated its assets and held only cash, the stock would still have value -- possibly more than you started -- because it would entitle you to more non-income-delivering cash. The stock could possibly never pay dividends and the investors could still make a profit. Please, stop speaking out of ignorance on the stock market. MrVoluntarist 05:10, 1 June 2006 (UTC)

That's a significant difference between investments in the strict sense (mine, or the one that is described in the investment article as being the one used in theoretical economics),

Right, in macroeconomics, investment has a specific meaning, just as "profit" has a different meaning. So what? Everyone understands the use of the term here as referring to finances. MrVoluntarist 00:53, 31 May 2006 (UTC)

Again, as I said above, it is not enough for the title of a Wikipedia article to be unambiguous (regardless of whether this is the case here). It also needs to comply to the NPOV. It's not that macroeconomics took a term with a well-known definition and decided to use it differently: it's that "investment" has a formal definition (essentially, capital or land) and an informal one ("spending money", pretty much. Paying a prostitute or buying cigarettes is just "investing in your future happiness", just like you "invest" in education to make yourself more employable.) RandomP 03:23, 31 May 2006 (UTC)

In macroeconomics, they use "investment" like we use the term "sugar" or "wood" -- as a mass. (I forget the name for these terms.) So you would buy "sugar" or "a grain of sugar" but never "a sugar". If someone sees "gold as an investment", it's clearly not indicating the macroeconomic sense. And I don't understand your point about education. Would an "education as an investment" article that covers the financial concerns that go into deciding the merit of getting a higher education be an inappropriate title for the article concerning the subject matter? I don't understand your prostitution reference either, in light of how you seem to think that marrying MrsVoluntarist gives me imputed income from not having to hire prostitutes, and should thus be considered an investment. MrVoluntarist 18:29, 31 May 2006 (UTC)

Good point. I usually enter "gold as investment", and didn't notice the redirect.

I'm sorry! I have no idea where you got the impression that I was condoning the idea of treating sexual interactions as economic transactions! Would you please point it out to me so that I can apologise properly? Thank you!

RandomP 21:15, 31 May 2006 (UTC)

Would you point out where you got the idea that you can arbitrarily call something "sexual, and therefore necessarily non-economic"? Above, you said that living in a house you own (which I guess I can classify as a "living action" rather than an "economic action") draws "imputed income" because "you don't have to pay rent". I pointed out that by the same token, getting married is an "investment" because it draws "imputed income" due to how I "don't have to hire prostitutes". Remember? In the future, try to read what I post. MrVoluntarist 05:10, 1 June 2006 (UTC)

And, ultimately, I think wikipedia should have no part in watering down the English language like that, NPOV issues aside. RandomP 03:23, 31 May 2006 (UTC)

Good. It doesn't. MrVoluntarist 18:29, 31 May 2006 (UTC)

and investments in the loose sense (yours, which presumably would include such things as bets, cash, or hoarding rocks in the hope that they will suddenly become immensely valuable).

My sense is not a "loose sense" except in that it doesn't adhere to your novel theory. See above about bets and cash. If someone hoarded rocks in the hopes they would become valuable, yes, that is investment. Risky investments are still investments. (Since you're about to pull a "gotcha!" and totally misinterpret that statement to imply that a bet can still be an investment, no, because all betters must average out negative, while all investors can average positive.) MrVoluntarist 00:53, 31 May 2006 (UTC)

Why are you so convinced that bettors "average out negative"? The type of bet I was thinking about was "if he makes it across the street without falling over, I give you $10. Otherwise, you give me $10." Negative doesn't come into it, because it's not like we're going to burn the money.

RandomP 03:23, 31 May 2006 (UTC)

See above. MrVoluntarist 18:29, 31 May 2006 (UTC)

Of course you can buy a home speculatively, in the hope that it will increase in value (see above) because people will get higher rents for it. It's an extreme case, of course, where you forego rents in the short term but hope that there will be some in the future, but due to various properties of real estate (essentially related to the fact that housing is not a fungible commodity), it can actually be a good idea.

So, in other words, I was right. MrVoluntarist 00:53, 31 May 2006 (UTC)

Er, no, I didn't say that. Note the highlighted section. I might not be expecting immediate returns, and I might not be expecting the future returns to go to me, but they are still the reason I buy the house: in the future, the expected future returns are going to be higher (because people's expectations change); I can thus sell the house at a profit.

RandomP 03:23, 31 May 2006 (UTC)

RIGHT! Even though you don't get those higher future rents, those higher future rents make the real estate worth more when you sell it, giving you a profit even though you never once received rents. You earned a return, due to the rents, though you received no rents. You invested. MrVoluntarist 18:29, 31 May 2006 (UTC)

I'm sorry if that wasn't clear, but the expected returns are compounded over the lifetime of the asset to arrive at the value of a financial investment, not just over the time that you hold it.

RandomP 21:15, 31 May 2006 (UTC)

And I'm sorry if I wasn't clear in showing that your distinction (between an asset that draws income and gains value, and an asset that draws no income and gains in value) is arbitrary. The distinction is unsupported by any notable source on the matter. MrVoluntarist 05:10, 1 June 2006 (UTC)

Note that gold, unlike housing, is a fungible commodity, and that the only reason anyone would ever want to own an empty house is that housing is not.

RandomP 03:23, 31 May 2006 (UTC)

That housing is not ... fungible? People buy empty homes because they're not fungible? That's a disadvantage of the purchase, not a reason to purchase. MrVoluntarist 18:29, 31 May 2006 (UTC)

If you could move into or out of houses at no extra cost, there'd be no reason to leave a house empty, even for a day. just have someone move into it for a day, rent it out to them, then they move out at midnight.

RandomP 21:15, 31 May 2006 (UTC)

Well, not true, because there could be more houses than people, but even so, following back up to your "note that gold, unlike housing...", what was your point again? MrVoluntarist 05:10, 1 June 2006 (UTC)

And yes, I will contest the names of those articles similarly. (Note that diamonds, much like fine art, do conceivably have a return in that people will pay you to exhibit them .. not necessarily a huge consideration on the minds of those who actually hoard diamonds, of course).

I do not see what there is even to argue about.

Nor do I. It seems like you have some kind of POV axe to grind. Like you either want to promote the idea that unless you get real income (or fake/imputed income, as long as the fake/imputed income is unrelated to the value of what you purchased), it's not a "real" investment, or you got burned investing in gold and you want to stop others. I don't know, and to be honest, I don't care. Your objections just don't make any sense to me. What's really going on here? MrVoluntarist 00:53, 31 May 2006 (UTC)

What is really going on here, in the interest of full disclosure, is that the article is a blatant advertisement for buying gold.

I'm assuming this is an accident, of course. So I'm working to fix it.

I did not speculate in gold, and get burned doing that; I have no intention of buying gold or derivatives in the foreseeable future, and have no personalised economic interest in how gold does, at all.

Though I'm willing to argue my point, of course, I'm not all that concerned by the article title. In that respect, my apologies. While I do think it's a bad title, in being an inaccurate use of the English language, as well as instilling an investors' POV from the start, it's not something I should have wasted so much time on. I'll probably just summarise the arguments for changing to another title, and if there appears to be consensus for it, do it.

It uses the term in the precise manner people have always used the term. MrVoluntarist 18:29, 31 May 2006 (UTC)

Nonsense. The term is relatively new, so people haven't "always" used it, and it's changed its meaning over time, as words do. RandomP 21:15, 31 May 2006 (UTC)

I didn't say people "always used the term"; the English language hasn't always existed. I said that *as long* as it has been used, it has had that meaning. There's a difference. And if you can show its financial meaning changing over time recently I will agree that it's a bad term. Unfortunately, you can't. MrVoluntarist 05:10, 1 June 2006 (UTC)

But, really, this article needs a lot of change. Since discussion has so far mostly failed to happen, it's time to be bold ...

RandomP 03:23, 31 May 2006 (UTC)

The investment article on Wikipedia lists several definitions for the word; gold doesn't meet all of them, it's not perfectly clear from context which one is meant, so obviously the article title is unsuitable.

RandomP 21:46, 30 May 2006 (UTC)

Yes, it is clear. Crystical clear. MrVoluntarist 00:53, 31 May 2006 (UTC)

You have, again, accused me of a couple of things. In particular, you accused me of trying a "trick" by explaining to you how I meant a word I'd used. You also alleged I had said something about the sexual relationship between you and "MrsVoluntarist". Again, if I have, I would like to apologise. But I don't think I have.

RandomP 21:15, 31 May 2006 (UTC)

Why don't you just apologize for conveniently "forgetting" the whole purpose of me bringing up MrsVoluntarist, which was to show why some people dispute your "imputed income is real income, and owning a home provides it" claim? And see above about your "trick". MrVoluntarist 05:10, 1 June 2006 (UTC)

ANSWER: Of course gold is an investment. Anything into which you store your wealth is an investment. Of course there are investments where you aim to make a profit and investments where you simply seek to keep what you already have. Of course most people buy gold because they expect to make a profit, but others buy it because they expect it not to depreciate.Trickyt 17:48, 16 May 2006 (UTC)

That's not what it says in the dictionary. In fact, the definition of "wealth" is similarly controversial. Even the WP article is very clear that the term has several definitions.

There's no difference between expecting gold to make a profit (relative to buying or investing in something else) or expecting it not to depreciate in value (as much as other items you could have bought or invested in).

RandomP 18:21, 16 May 2006 (UTC)

For over four thousand years gold has been regarded as a form of money and store of wealth.

I challenge the assertion that gold is still used as a form of money. Please provide sources that point to its use as money on a notable scale.

There is also no source for the four thousand years time frame.

RandomP 13:36, 16 May 2006 (UTC)

Of course gold has been used as a form of money in the past, but I would agree that is very debatable today. Listen to the financial channels and you WILL hear the words "Gold is money" being used for the first time in decades. However tense change would be appropriate to read "gold was regarded....".

As for the the four thousand year claim, I am not a historian, but it does not sound terribly wrong, but this what the internet turned up: "The first metallic money dates back to approximately 2000-1800 BC and was made of bronze." "Some of the Earliest Gold Coins Were Made in Turkey The world's first coins were Greek coins made in Lydia about 640 BC," "King Ardys of Lydia (652-615 B.C.) established a mint in the Lydian capital of Sardis where coins were produced from a naturally occuring alloy of gold and silver known as electrum." I also find references to the storage of valuables including gold from 3000BC in "Chronology of Money" In short, the 4000 year claim looks like it should be reduced to about 2600 years or so... Trickyt 17:48, 16 May 2006 (UTC)

I'm not aware of anyone actually using gold to settle their bills, giving out loans, or as a unit of currency in other contracts (except on the financial markets, in very limited situations). It doesn't do everything a currency does, so it's not money. Cute slogans on the financial channels do not change that.

Also note that money is generally not considered an investment ...

RandomP 18:34, 16 May 2006 (UTC)

The use of gold superseded alternatives for a number of reasons including its rarity, luminosity, character (weight, softness), malleability, fungibility and resistance to tarnish.

Source? What were those alternatives?

RandomP 13:36, 16 May 2006 (UTC)

Since the collapse of the gold standard, gold has largely lost its role as a form of currency

I'm not sure "collapse" is acceptable here. The gold standard was abolished for a number of reasons.

RandomP 13:36, 16 May 2006 (UTC)

but is still considered by many, especially by central banks, as a store of value and a safe haven in times of crisis.

Says who? The central banks ended up having lots of gold on their hands after the gold standard was abolished, and selling it all at once might not have been profitable.

Note also that central banks have a fundamentally different view of the world from other participants in the economy.

What type of crisis are we talking about here?

RandomP 13:36, 16 May 2006 (UTC)

Gold and other precious metals are unique assets in that they are tangible (i.e. physical, real) and liquid (i.e. easily traded)

In absolute terms, those properties seem to be shared by all metals of non-negligible value. Other examples would include drugs (both the legal and the illegal varieties) and such oddities as ambergris.

I don't see anything unique here.

RandomP 13:36, 16 May 2006 (UTC)

unlike real estate which is real but not liquid, or company shares and bonds which are liquid but not real (i.e. a share certificate is just paper).

Why are we suddenly substituting "real" for tangible?

RandomP 13:36, 16 May 2006 (UTC)

Other traders and investors see gold as nothing more than just another commodity, such as copper or lead, and treat it as such.

Other than who? This seems to be a definition by example of "commodity", and is unnecessarily wordy and colloquial. "nothing more than just another" should be replaced by "a".

Why is it only traders and investors that count?

RandomP 13:36, 16 May 2006 (UTC)

In regards to the "There is also no source for the four thousand years time frame" by user RandomP. I found a source for gold being used as a medicine "over 5,000 years ago". If gold was ingested as a medicine, then it would be considered useful, since it is also scare it would be valuable as well. Its use as money would naturally come from its other properties such as durability and divisibility. That is gold in the form of bullion (bars, nuggets) would have been used as money before (gold) coins were invented. Here is the link [1] - Anonymous

[edit] NPOV--counterpoints

Now, what's wrong with the article:

the title. I don't have a great suggestion, but ultimately even "buying gold speculatively" would work better. It's definitely not an investment in the strict economic sense, and it's not going to have returns going back to economic growth, unlike those investments considered in those theories. Sustained exponential growth of the gold price is physically impossible.

I think "Gold as a financial asset" would be the most technically correct. Sustained exponential growth of the gold price is possible...it implies a collapse in the value of the currency in which the price is measured.

lead section: no definition of what "as an investment" means. I'd be curious about that myself. If the meaning is "buying gold in the hope of becoming richer than you would get otherwise", say so, if in less informal language.

Agreed. Although the article does later cover "Types of gold investor" which might be reworked into "Reasons why gold is held as a financial asset".

"For over four thousand years gold has been regarded as a form of money and store of wealth". Possibly true, but wrong tense. Gold is no longer considered a form of money on anything like a global scale, so that statement is wrong as it stands now.

Well, that change applies only to recent decades, a very brief period in written history. And, as noted in the article, it is making a resurgence in the form of digital currencies. If "form of money" were replaced by "medium of exchange" it would be more accurate.

"Gold and other precious metals are unique assets in that they are tangible (i.e. physical, real) and liquid (i.e. easily traded)" Other assets have the same properties. Oil, plutonium (a metal, though), and all other chemical elements that are sufficiently rare come to mind.

From an individual perspective, it is much more difficult to trade oil or plutonium than it is to trade gold or other precious metals.

no mention is made of how "Gold bugs" hope gold will retain its purchasing power after an economic collapse. The whole "oh, my, the world economy has collapsed, better get myself some of that worthless yellow metal" train of thought just never appealed to me.

This is based on the idea that people have always used gold and other PMs as a medium of exchange and store of value. While it has been replaced as a medium of exchange in living memory by fiat currency, it is not unreasonable to suspect that it would regain this role in case of a collapse in the value of fiat currencies.

"Hoarder": no explanation is made of why gold should be better than actual investments at maintaining purchasing power

"Actual" investments (such as stocks, bonds, bank deposits) are essentially promises by someone else to deliver you value at some time in the future. They are all worthless unless the promise is kept. Those who believe that such promises are less likely to be kept in substance in the future may wish to hold PMs.

"Inflation hedger": hedging against inflation is easily possible using derivatives. Why do people decide for gold, instead? Gold is historically a very bad store of value; it hasn't even managed to keep pace with inflation over the past 25 years.

Firstly, derivatives are complicated for the average individual to understand. Secondly, gold is historically an excellent store of value, viewed from a longer perspective. Gold reached a peak around 1980, then declined somewhat, and has recently gained ground again. On average, gold should exactly keep pace with inflation. Using any period other than 25 years (such as 10, 50, 100 or 2,000 years) gold has done at least that well.

"Speculators attempt to make a profit by predicting the gold price": by that definition, all types of "investors" except for gold bugs are speculators. However, it is not explained why a speculator would buy gold rather than gold derivatives, which should always work better than buying actual gold does.

All speculators attempt to make a profit by predicting future prices. The author does not ever say that holding physical gold is the only way to make a profit from it. And one can still speculate, even if less efficiently, by buying physical gold.

A number of possible developments could make gold much less valuable:

New methods of mining gold or producing it (unlikely, but then how likely do most people think it is all current currencies will collapse and we'll be reduced to paying with gold). The historic example of aluminium is extremely important here! Point out the differences if you think them so important (aluminium was rare as a pure metal but extremely common as an element; gold is rare as both, though there is still far far more gold even in the upper layers of the earth's crust than has ever been mined).
loss of "rarity value" if the growth of the world population reverses: fewer people means less gold per person. I believe the educated working-age population (people 15-65 who have what would be comparable to a high school diploma) is actually about to decrease?
loss of cultural value

All of those seem highly unlikely but are admittedly nonetheless possible.

There are non-economic arguments against buying gold:

gold is a good choice for criminals, dictators, and other bad people. buying gold increases the value of their holdings. Buying gold supports crime (drug dealers, terrorists, genocidal dictators: take your pick).

Yes, and "bad people" also use telephones, the internet, cars and guns. When something is useful, it's used by all of society, including some less-desirable elements. And since the majority of gold holders are unlikely to be drug dealers, terrorists or genocidal dictators, one would be helping non-criminals more than criminals by buying gold.

a special case of the criminal use is tax evasion

First, how does gold facilitate tax evasion more than any other anonymous store of value, such as cash or gemstones? Second, some people view taxation of income as immoral. It was unconstitutional in the United States until the passage of the Sixteenth Amendment to the United States Constitution in 1913. From that perspective, gold's usefulness as a means to evade taxation of income is a positive quality, not a negative one.

stolen gold is indistinguishable from legally owned gold.
Gold can be physically taken from you in ways that a deposit accessible only through reliable identification cannot be.

True, but these apply to all physical assets, including cash and gems.

Even if such an edict were followed, and the gold market "crashed", gold would have only been a poor store of value during the crash. For example, let's say that the Pope issues your edict and gold immediately loses 90% of its value. Gold would trade at $70 an ounce. Obviously that would be unfortunate for current gold holders. However, the edict would not change any of the reasons why people hold gold today. So immediately after the crash, gold would become just as good a financial asset as it is now.

Gold has been valued by man since before he invented writing. It seems more logical to me to trust that than something recently invented.

I've written this because your comment seems to be at least as opinion-based as the article and I don't think you really understand the well-reasoned arguments that convince some people to buy gold (and paper assets tied to the value of gold, such as gold derivatives and gold-mining stocks).

--Contemplative 18:46, 16 May 2006 (UTC)

"I've written this because your comment seems to be at least as opinion-based as the article"

Er, I'm not arguing it isn't. That's why it's not in the article.

Your main argument seems to be an extrapolation from history. Essentially, "gold was universally regarded as extremely valuable throughout human history, with the possible exceptions of the time period from 1985 to 2005. Let's settle the matter by majority vote".

I do not have anything against that argument. It's something that convinces a lot of people, and it's probably something the article should mention.

However, it's not something the article should believe in. There is any number of very silly arguments following exactly that pattern, and the casual reader should be made aware when nothing but the assumption that things will revert to a prior state backs up someone's behaviour.

RandomP 18:58, 16 May 2006 (UTC)

[edit] Suggestion for article structure

I suggest the following structure, which would change the current article considerably (the article headings are meant to be descriptive, not NPOV-compliant, for now):

History
Buying gold for the gold price
- Reasons for buying gold (why would the gold price go up)
- Risks for the gold price (why would the gold price go down)
Buying physical gold
- Central banks (inherited gold from the gold standard)
- Apocalyptic gold bugs (think fiat money is going to fail)
- Crime and tax evasion
Gold as money
- history
- digital gold currencies

(in particular, one argument I'd like to see here is that digital gold currencies' protections against hyperinflation are arguably worse than those fiat currencies with a reserve requirement have: in the libertarian uncontrolled banking system many seem to envision for DGCs, there is no way to limit the speed of circulation, and there is no way to limit the equivalents of M1, M2, or M3; even M0 cannot be reduced. Inflation, thus, cannot be limited. For fiat currencies, as long as monetary policy is adhered to, money supply and speed of circulation are under control.).

modern forms of gaining exposure to the gold price
- the current "methods of investing in gold"

I think it would be significantly easier to achieve a neutral point of view using that structure.

Comments?

RandomP 13:49, 19 May 2006 (UTC)

I'd just like to say that it might be a good idea to show a graph showing the price of gold vs. inflation. This will show that gold is not actually a good investment, as if someone bought gold in 1980 they'd still be nowhere near making a profit today. In fact, they would be about 50% in the red.

Agreed. By the same token, however, maybe we should remove the comment about gold being "one of the worst investments one could make over the past 20 years". For that to be true, you would have to ignore every business that ever failed or lost more than ~30% of its value since 1980. MrVoluntarist 23:33, 28 May 2006 (UTC)

True, gold would have been a terrible investment if you bought in 1980 and sold today. However, if you extend the time period it would have been a good investment, as far as I am aware. For example if you (or your family) bought gold in 1930 and then sold today. Also you are speculating that gold will not become a good investment in the future, if people choose not to sell and hang on to their gold (the price may increase and rise above 1980 prices in real and nominal terms). It is like saying in 1950 that stocks are a terrible investment following the Wall Street Crash of 1929 and the Great Depression (see Great Commodities Depression). It took until 1955 for the Dow Jones to reach pre-1929 prices and for people to receive at least their original investment back (in nominal not real terms, it would be much longer if you took into account inflation). In 2006, we are told that stocks will always be a good investment long term and will outperform other asset classes. Well yes this may be true, but not if one bought shares in 1928 and sold in 1950. However if one bought shares in 1928 and sold today, then you have a different story, as they would have been a great investment. I believe the issue we have here is not whether gold is a good or bad investment, it is just a question of timing and timescale. I suppose what would clear this point up is a graph showing the gold price versus holding cash over the last 100 years (or longer perhaps). There would need to be at least two cash lines plotted - one line showing cash held on deposit in a bank earning cumulative interest (the percentage would vary) and another showing cash stored "under the mattress". It would also have to show all currency revaluations over the period. Plus just a side point that any cash stored "under the mattress" becomes illegal tender anyway because all governments periodically change their currency design, rendering all previous notes worthless if the money is not exchanged by a certain date. It is a simple but effective system of control. nirvana2013 07:41, 29 May 2006 (UTC)

Using the date 1980 is a very poor choice and demonstrates bias as the gold price reached a historical apex that year. Don't assert the biases of others, when your own are glaringly apparent!--Morgan 06:42, 9 June 2006 (UTC)

[edit] Unsourced claims

Please provide sources for these unsourced claims (I'll try a simple google search, but not more) as I will otherwise remove them shortly:

central banks consider gold a safe haven and store of value
precious metals are uniquely liquid tangible assets
inflation is once again rising

RandomP 12:51, 1 June 2006 (UTC)

Actually, since I've asked for verification before, I'll just go ahead and remove those claims.

RandomP 13:07, 1 June 2006 (UTC)

[edit] Gold: the cheapest metal at ~19 g/cm³?

Tungsten appears to have a density of 19.25 g/cm³, and I believe is (somewhat) cheaper than gold.

Uranium, particularly Depleted uranium, has a similar density (the precise density probably depends on the amount of U-235, but is slightly less than that of Tungsten. Of course, uranium is radioactive, and gold isn't (all radioactive gold isotopes have short half-lives, while uranium has an extremely long one). Depleted uranium is extremely plentiful, though, with many times the amount of tradable gold.

I think a good source on how easy it is to verify what you're offered is indeed gold (not just gilded tungsten) would tremendously help the article :-)

I also doubt that anyone is currently using a geiger counter to check gold they're offered, though maybe they should try.

What do people who are actually offered gold from untrusted sources do? Melt it down to see if it's homogeneous?

RandomP 01:54, 3 June 2006 (UTC)

(Of course, a difference of .05 g/cm³ might still be detectable using highly calibrated instruments. However, it's possible that a gilded tungsten coin with a tiny platinum core has exactly the same density as a gold coin but still costs less).

RandomP 02:03, 3 June 2006 (UTC)

Okay, I believe what I added said "historically" this test was useful. In Ancient Greece, all the way up to about 1900, I don't think people had to worry about someone stacking the coins with depleted uranium. Good point about Tungsten, but according to its article, it wasn't hypothesized to exist until the late 18th century, and recognized and made expensive much later. MrVoluntarist 03:00, 3 June 2006 (UTC)

I was referring specifically to

any metal with similar or greater density than gold is about as valuable

which is still in the article, if in parentheses. I don't think it should be deleted entirely, because this is a good point: gold is very dense; it's not like, as I had naively assumed, there is some high-tech but cheap material with a density much greater than gold.

Just for kicks: assuming mercury were free (it's the densest cheap and plentiful substance I can find), the price of gold would have to go up to 72% that of the gold price to make that particular mode of counterfeiting worthwhile.

Iridium appears to be somewhat cheaper than gold, though I'm not sure about that site possibly confusing grams and troy ounces.

Are there any Iridium bugs?

RandomP 03:46, 3 June 2006 (UTC)

I don't think there are Iridium bugs, no. And I think that site is referring to grams. From what I've read (can't remember the source right now) that would be more realistic. As for the parenthetical comment, I'm okay with clarifying that it was in the past in which the statement about value held. I didn't know Tunsten was so cheap now. MrVoluntarist 00:12, 4 June 2006 (UTC)

Hmm, I found another page which claims it's in that approximate range per troy ounce, not per gram. I'm still giving Iridium the benefit of the doubt.

I'll give it a shot.

RandomP 00:50, 4 June 2006 (UTC)

Okay, I like your revision of it to mention the present. MrVoluntarist 02:14, 4 June 2006 (UTC)

The Ir spot price page, clearly indicates above the spot price readout, "US$/ troy Oz." The price is in troy ounces.--Morgan 06:46, 9 June 2006 (UTC)

[edit] Proposal: remove "Investment strategies" section

I see nothing in the investment strategies section that applies to gold specifically. I think this should be essentially removed, and put into an article on speculative investment.

What needs to stay:

WGC numbers, though they need explanation
mention gold-yen carry trade, which is widely assumed to exist

Does anyone want the Dow/gold ratio to stay specifically? It seems a general case of tracking one investment (I've given up. I'm officially using the term now :-) ) against another.

RandomP 02:47, 4 June 2006 (UTC)

Okay, I'm going ahead and reworking that section. Will do the NPOV problems first.

RandomP 12:10, 16 June 2006 (UTC)

[edit] Inflation section

I'm removing the following, with reasons:

Most paper currencies which ever existed have been inflated out of existence.

I'm not sure whether this is correct, but it seems irrelevant. No one considers paper currency "an investment".

I don't see why it not being an investment is irrelevant to the discussion of gold as protection against rising prices. And the reason people don't currently see paper currency as being an investment is because of its predictable decline in scarcity. Paper claims to a corporation (shares) are considered an investment. MrVoluntarist 16:11, 4 June 2006 (UTC)

Even the very few which have survived a hundred years or more, have seen almost all of their value eroded by the printing of paper money, or the inflation of the money supply.

Again, no one considers paper currency an investment, so the expectation that it would work as a store of value for a century seems odd.

Unless those pieces of paper could reasonably be expected to be redeemed for gold. MrVoluntarist 16:11, 4 June 2006 (UTC)

Rising prices, known as inflation, are a symptom of the inflation of the money supply.

Right, that's what inflation is. Not relevant to this article, though.

That's one definition of inflation, the other being the inflation of the money supply. MrVoluntarist 16:11, 4 June 2006 (UTC)

In times when inflation is high, or is expected to be high, because it is rising, people seek protection through holding real assets rather than fiat currency

False dichotomy between holding real assets and holding fiat money.

Sorry, I can't help but laugh when you say this, given your above defense of income-drawing assets as being "real investments" while non-income-drawing assets aren't. I agree this statement could be made more precise, i.e. "seek protection through holding assets valued for their alternate uses, irrespective of the present political conditions" or "through holding assets that can't be as easily inflated" or something like that. MrVoluntarist 16:11, 4 June 2006 (UTC)

, which can be printed ad infinitum.

This suggests that "governments" somehow print paper money to pay their expenses. That's flat out not how it works.

???What? That's exactly what many governments have historically done, though of course they've tried to hide it through a number of instruments. MrVoluntarist 16:11, 4 June 2006 (UTC)

History is littered with examples of currencies which have collapsed in hyperinflation.

Redundant, and possibly incorrect. While a bit unusual, hyperinflation doesn't actually appear all that harmful, and usually the new currency introduced afterwards is based on the hyperinflated currency, so it does live on, in a way.

RandomP 04:23, 4 June 2006 (UTC)

Hyperinflation isn't harmful? Is that really what you mean? MrVoluntarist 16:11, 4 June

2006 (UTC)

Feel free to revert, for now, if this is indeed controversial. I'll try to do it in smaller chunks, which can be discussed more easily.

The main point is that the article quite clearly stated that, essentially, gold might be a better asset to hold than fiat currency due to inflation - the difference being that people do consider holding gold, but do not consider holding fiat currency. I don't think a comparison between a strategy that is actually being followed and one that is not is appropriate.

Note that today, inflation rates are not unpredictable - three of the four major currencies are on regimes with a clear target range for "core inflation", and it's debatable for the US dollar.

RandomP 16:23, 4 June 2006 (UTC)

RandomP is currently engaged in Mediation regarding changes to inflation.

Carbonate 06:37, 4 June 2006 (UTC)

Firstly, please stop nitpicking the term "governments" when it is used to refer to federal bodies that print and coin money. It is understood that governments refer to either the central bank or whatever institution that has been delegated the role of printing and coining money by the federal legislature, or constitution of that country. Hyperinflation is a drastically bad thing to happen to a country, its denizens and its economy. A good example is the Weimar government of post WWI Germany. As the British and French decided to extort Germany after the great war with absurd reparations, the German government decided to simply print more and more fiat currency to pay of the French and English. As a result, the currency became absolutely worthless and eventually saw denominations of up to one million deutschmarks, which at the time might have purchased a loaf of bread. Key point here is that anyone who did not hold thier assets in gold, silver, platinum, palladium or some other reasonable platinum group or precious metal lost all of thier assets (I am excluding real estate and the like). This dire economic condition contributed to the development of WWII. Hyperinflation is horrible, your attempts to trivialize it by saying a new currency will emerge from its ashes misses the point. It also seems that you are trying to avoid mentioning the fact that you lend credence to the idea you attack, namely holding gold as an asset, because such persons would have been better protected agaisnt asset loss.--Morgan 06:58, 9 June 2006 (UTC)

A second example occured to me. During the Roman Republic, a silver coin of fair value known as the denarius was introduced. When it was first introduced it was mandated to contain approximately 4 grams of pure silver. When the Roman government found itself straddled with immense expense, usually a consequence of thier militarist endeavours, the denarius was simply debased by decreasing the silver content slowly over the course of the country. Eventually, the denarius contained so little silver that it mostly lost the white lustrous apperance characteristic of silver. So the government undertook endeavours to "silver" the coin which is to say have it plated to maintain the appearance of having silver. Eventually, the denarius contained no silver whatsoever and the denomination was removed from circulation/no longer produced. This happened no later than Diocleatian's coinage reform and may have occured earlier. The point is that governments, can do and will inflate thier curriencies often to pay debts and attempt to conceal this subversion. Quod erat demonstrandum {not to be an arrogant bastard, but it seemed appropriate}--Morgan 07:06, 9 June 2006 (UTC)

I think it's important to consider at this point that gold can also suffer from inflation when used as currency. For example Spain was so awash in gold from Americas in 1600s that less and less goods could be purchased for the same amount of gold. So there is nothing magical about gold's ability to preserve value other than scarcity. However the same can be said for any rare commodity. This attribute alone does not make gold an investment. gb 21:06, 9 February 2007 (UTC)

I agree with everyone above except RandomP, who seems to be stupidly nit-picking on pointless lines. Sounds more like a school teacher who is learning the ropes. Please would someone revert RandomP's changes so they can be dealt with one by one.Watercolour 12:14, 10 June 2006 (UTC)

I would like to thank RandomP for challenging the POV and making the article better. Instead of labels maybe you can contribute some interesting content as well. gb 21:11, 9 February 2007 (UTC)

Morgan, thanks for the historic information. I'm not going to respond to it (with exceptions below) because I don't actually see how it relates to the article; if you've got specific suggestions please make them.

Use of "the government" to refer to any public institution seems to me to be unbearably inaccurate, particularly when (as is the case here), the "they print money that isn't backed by anything to pay for their deficits!" nonsense is close at hand. I'm also a bit confused why you think that every currency-issuing country must automatically be a federation? If inaccuracy isn't a problem for you, that's okay; but correcting inaccuracies shouldn't be something that's a problem.

How much damage hyperinflation has done still seems questionable to me - I get the impression that countries regularly take stock after episodes of high inflation and, it turns out, their economy is still about as good as it was before. Sure, there might have been a couple of years of economic growth missed, and wealth might have shifted some, but overall economic damage seems, at the very least, easily reparable.

RandomP 12:32, 10 June 2006 (UTC)

Just FWIW, I've pretty much suspended editing this article until a) some comments come in, if they do b) I can find consensus with Carbonate on a closely-related article. a) seems to be happening, and I'm not giving up on b) yet.

RandomP 12:38, 10 June 2006 (UTC)

Inflation and hyperinflation are highly relavent to the issue of holding gold in that namely inflation and its inflated cousin (a slight pun) provide one impetus to hold gold in the first place. Simply put, gold prevents your purchasing power from being eroded away by inflation and particularly, hyperinflation. For the record, you are nitpicking details of minor significance that are offered simply to put in motion a counter argument to your proposols. To address hyperinflation consider that when economically stable curriencies undergo "high" inflation these days, the actual percentages are almost never near double digit values, and usually are rather less. Hyperinflation by contrast, is inflation of 20% and up, usually within a short time frame. The damage caused by hyperinflation is on the individual level, quite severe. Take as a hypothetical example the Japanese Yen, which we will assume to worth 1 us cent per yen; the actual value is rather close to this. So I am a Japanese citizen and have in my bank account 1,000,000,000 Yen which is worth 1 million US dollars by the value that I gave. Please note, that the actual value of the currency does not matter for the purpose of illustrating the destructive affect of inflation and hyperinflation. Now then, hyperinflation occurs and the value of the Yen agaisnt the dollar is now .001 cents per yen. That means that 1000 Yen now equals one US dollar. Now the one hundred million Yen I have in my bank account is worth a mere 1000 US dollars. As such, my purchasing power has severly declined and most of my net worth is totally gone, aside of course from whatever gold and other precious metals I hold (as well as a few other types of asset classes, though under the circumstances of hyperinflation thier worth is debatable). I hope that this explanation of the damage of inflation is clear to you, because I do not know any clearer way to explain the matter. On to other matters. Do not nitpick points that are not relevant to the argument themselves, it is not constructive and is indicitive of intellectual bankruptcy which I am not accusing you of having. Not every country is a federation in the most technical sense. However, we see the job of producing money being inherently delegated to a central authority, which by a non technical definition would indicate a federation because a federation is simply an agreement in action between any types of groups. There are no countries of global political significance that do not have a central government. A central government is a defining feature of a country with a federal system. This btw, is an example of your nitpicking saying that, "I'm also a bit confused why you think that every currency-issuing country must automatically be a federation?" This is not relevant to the point I was making!!!!! Your contending it does NOT address my argument and you are not effectively contributing to cogent and intelligent discussion. If you disagree with the use of the term government as it is too "inaccurate" (btw, it is not inaccurate, it is imprecise. Why you ask? Because technically, accuracy is an absolute measure of being correct, otherwise known as the identification and delineation of the one objective truth and yes, there is one objective truth in all natural considerations and many others as well. Using the term government is not "inaccurate" because the body that coins money is a government body by definition. The term you were looking for is "imprecise." Precision is the ability of a measurement or term to finely discriminate between two things or ideas that are closely related. Government as an umbrella term is therefore imprecise because it fails to discriminate between this particular body and that other one but is not inaccurate. Now there is a point to this rather protracted tanget. Do you know what it is RandomP? The point is that this tangent is exactly what you do when nitpicking concepts that are not significant to the argument, albeit in a slightly and only slightly satirized form--Morgan 07:10, 16 June 2006 (UTC)

Yes, I am highly vexed with the controversy you have sown upon this page and as a result you have managed to draw my ire. You should not change the article anymore and any changes by you ought to be reverted on the grounds that your biases are glaringly apparent and your contentions are not based on any valid information, nor have you reasonably attempted to cite any of your sources. Furthermore, the other contributors to this talk page point disagree with your methods and take contention with your ideas. You are in an extreme minority position here and you do not have the right to unilaterally make editions that are not supported by your arguments, the people on this page, or fact.--Morgan 07:15, 16 June 2006 (UTC)

As to who does or does not have the "right" to edit any article, that's not your decision to make, and it certainly doesn't depend on my being in a minority position among the editors of this page. I do hope we can get to the point where we have an article that's acceptable to both of us.

As a general rule, removing statements doesn't require the removing editor to cite sources. I try not to remove statements unless they are either flat out incorrect or I've posted the suggestion on the talk page and no real discussion has ensued.

RandomP 11:56, 16 June 2006 (UTC)

[edit] Gold is/is not currency

The amount of ideological bias in this discussion is dreadful. As to whether gold is still considered a money or currency here in the modern age of global finance, I'd suggest one visit WP's page on the FOREX. Once you read up on the FOREX, visit their real-time exchange page. JoeBjr 14:59, 14 June 2006 (UTC)

May I suggest you summarise what you think those references have to say about whether or not gold is currency?

As far as I can see, gold isn't mentioned in the forex article, and the external link doesn't load properly for me ...

RandomP 15:24, 14 June 2006 (UTC)

I agree with you, JoeBjr, RandomP is attempting to hijack this article with his claims of its "lack of neutrality" when the ideological bias of RandomP's asserations are EXTREMELY evident. It really is a shame.--Morgan 06:50, 18 June 2006 (UTC)

Please assume good faith. It's not just WP policy, it's also a generally good idea.

I freely acknowledge my bias. When you find it creeping into articles, stop me. I fully accept that everything I put on Wikipedia is there to be edited mercilessly, and you can do that!

RandomP 10:02, 18 June 2006 (UTC)

Gold is/is not currency? See digital gold currency. 189.129.146.139 18:38, 2 October 2006 (UTC)

[edit] Gold's usefullness in Industry and Production of goods

Our good friend, RandomP here to protect us from "blatant statements of opinion" by offering his own asserted very early on in this talk pages history that gold is less useful than iron. While ferrum does have its applications, to say that gold is of minimal utilitarian value ignores a large part of the reason that people hoard the metal in the first place. Gold is fantastically useful in electronic connectors and circuitry, including computers. Iron by contrast, cannot be used for any component of a computer because of its magnetic properties which would result in a messed up hard drive, if you will. Because aurum(gold) is highly resistant to oxidation, it can be used to ensure that a proper connection is maintained between electrical components, one particular aspect of gold's usefullness to computational technology. Gold is extremely useful as an alloying material for a wide variety of purposes, including the obvious ornamental ones. Gold is useful both as a catalyst in organic chemistry(as a number of platinum group metals are) and for the purposes of staining in scanning electron microscopy. Gold reflects infrared and visible light rather well, leading to applications in aeronautics and the production of telescopes and the like. Gold is one of the most malleable and highly ductile metals known, a single gram can be used to create a sheet of metal with an area of 1 square meter. --Morgan 06:33, 18 June 2006 (UTC)

If people hoard gold because of its industrial utility, that really needs to go in the article! Please be bold and put it there, with proper references.

I, personally, believe that's unlikely; as far as I'm aware, gold-plated connectors aren't so much necessary as good-looking, and the remaining applications are well-covered by newly produced gold; but hey, I'm not arguing with properly sourced and referenced statements!

(Note that most of the article does not need to go in this article - it's about gold as a financial asset, not gold as used in industry. If people treat gold as a financial asset for its future use in industry, we need to say so)

RandomP 10:14, 18 June 2006 (UTC)

Apparently, RandomP didn't learn his lesson the first time. This time, look at the nuggets he has to offer: because he personally doesn't suspect that gold is useful in electrical connectors, that must hold higher weight than all the manufacturers that do use it. The "real" reason they use this extremely expensive alternative is just because it "looks good". Right.

And then we have his next dose of brilliance: because gold speculators aren't the ones who will eventually put the gold to use, obviously, obviously, gold's industrial uses are irrelevant to its price and rate of return. Remember guys, you have to personally plan out the use of a good before you speculate in it.

It's apparently never occurred to RandomP that one thing driving gold's price is the fact that, worse comes to worst, even if no one ever accepted it as a liquid payment, you could sell it for something to researchers or manufacturers. In fact, on top of this he has the breath-taking audacity to claim that the only use of gold is to pass it off to some other sucker, even after, on his user page, he praises the current fiat monetary system, whose notes' value depends on being able to pass it on to another sucker, and hoping people don't stop accepting them before you redeem them. So, once again, paper based on faith: not a pyramid scheme. Something that will have a use for all the forseeable future: a pyramid scheme.

Note: I'm not necessarily a gold enthusiast, but you don't have to be a gold bug to drop your jaw at some of the stuff RandomP says. Remember "hyperinflation isn't harmful because they print a new stable currency"? MrVoluntarist 16:51, 19 June 2006 (UTC)

It's very simple.

If people treat gold as a financial asset for its future use in industry, we need to say so.

That's in the article, not in the talk page. With references.

But until sources are presented for that claim, I remain skeptical. The articles about silver, for example, have no problem talking about silver having an industrial use value that's much lower than the silver price, at times.

I think it might be a good time to stop discussing personal opinions; just don't write that inflation causes a recession without having sources, please.

RandomP 17:08, 19 June 2006 (UTC)

Uhh, I thought that I was tripping when I read your comment that gold is used on electrical connectors because it looks better, as oppossed to being there for some utilitarian purpose. Are you bloody serious man? For one, most connectors are not seen by thier owners, they are integrated into everything electronic. Secondly if gold really was used for looks, then why just not use yellow brass, an allow of 67% copper and 33% zinc which looks similar to gold especially when shined. Brass is far far cheaper then gold. Once again Random, you have provided perfect reason why you should refrain from modifying the article any further as the ignorance contained within your statements, is quite impressive. Please note that this is not a personal attack as I am not attacking you, RandomP, as I am sure you are a fine person; rather I am merely stating explicitly that your ideas clearly clearly do not conform with large portions of accepted and in quite a few contexts, empirical reality.--Morgan 09:07, 21 June 2006 (UTC)

Oh another little bit occured to me. The line directly below the, "iron is more useful then gold" statement is that in the few medical applications which gold does have, it is being replaced with molecular techniques. However, you do not provide any reference for that asseration whatsoever and YET demand citations for the most trivial bits of information which are well known by the general public and therefore, not in need of citation; specifically that gold is used in electrical connectors. Asking for citations on things like this is akin to asking for a reference for the assertion that the sun rises. This is a highly hypocritical position to adopt, Random; I would like to hear your explanation of this apparent "language malfunction."--Morgan 09:14, 21 June 2006 (UTC)

Indeed. I do not give sources for a personal opinion (or view, in this case) specifically marked as such, but I do demand sources for statements that are

in the article, not on the talk page
statements of fact, not statements of opinion.

I'm not quite sure why I have to write this, but there is a difference between personal opinions, which you can criticise but which do not disqualify me from editing any article, and bad edits, which, in theory, might, if I insisted on violating Wikipedia policy.

Again, statements in the article need sources. statements of opinion don't. Are we agreed on that, at least?

I'm not sure I ever asked for a source that gold is used in electrical connectors, and I should have been clearer that I was referring to the now-widespread use of gold on headphone connectors, usb cables, and the like when I said that the reason to use it there was that it looked good - both on the connector, where brass could be used (though possibly at higher expense), and on the packaging, where it says gold.

I do want a source for people buying gold because of its future industrial value, though, if that statement is to go in the article. If it isn't, maybe it shouldn't be bandied about as fact. It's far from clear to me.

RandomP 09:42, 21 June 2006 (UTC)

Again, feel perfectly free to criticise my opinions. I gave them on this talk page, so I think it's fair that either my opinions be deleted or yours given the same exposure. Just don't criticise me for not giving references that prove every personal opinion I hold. I believe the statement that gold in its principal medical use, dentistry, is rapidly being replaced by other materials (if only because people with gold teeth die and fewer people use them these days), and that "molecular techniques" (okay, I admit that's hardly a rigorous description) will replace it in most other medical uses is correct, or at least a good guess.

RandomP 09:48, 21 June 2006 (UTC)

RandomP doesn’t get it…

Suggested sources: The Bible, IMF, BIS

Gold market important news and charts analysis blog (bullish bias)Gold Global Perspective

Might be a good idea to add Blogs section for the article

[edit] Request for comment on reverting to May 16

RandomP tagged this article NPOV without any discussion from those who created the initial content and has since been injecting his own declared POV.

I would like to request comments on reverting the artcile to May 16th when the NPOV tag was first added. Carbonate 00:44, 21 June 2006 (UTC)

There's a lot to compare between the two versions. Could you list what you still consider to be unacceptably biased? We could probably remove any remaining POV and soon have the tag removed. MrVoluntarist 00:51, 21 June 2006 (UTC)

I agree. IMHO, the "Types of gold investor" section should go, after the inflation and libertarian sections have been added to other parts of the article. But that's not an NPOV problem; "methods of investment" reads like a howto, but, again, not an npov problem. I'll add something about the World Gold Council, if no one minds, simply because I think it's worth pointing out that there are people who advertise gold, but no one who advertises against gold.

I do think "bulls vs bears" needs some more work, but I wouldn't restore the NPOV tag at this point if someone else takes it out (unless I reread and find a new problem). I'll take it out myself after a couple more edits.

RandomP 09:33, 21 June 2006 (UTC)

Why don't you like the "types of gold investor" section? It's an excellent survey of the goals of people who would want to buy gold, and why those goals would be suited by gold. I definitely learned from it. I agree "methods of investment" could be trimmed down, but it's necessarily going to sound something like a howto regardless. What do you mean by "advertising against gold"? Who advertises against any kind of investment? Isn't anyone soliciting investors for anything else "advertising against gold? MrVoluntarist 12:58, 21 June 2006 (UTC)

Good points. I don't mind the information in the "types of investors" section at all; I just don't think it's a good idea to describe people when we could equally well just describe their reasons, as the new sections do. If this is controversial at all, we should start a new topic, though. Anyway, definitely not an NPOV issue, just an issue of style.

I'm also not sure how to describe the advocacy situation on the gold market, which is why I haven't tried putting anything about it in, so far: the world gold council is spending a lot of money trying to convince people to buy gold (nothing wrong with that). They're also one of the main sources of information about gold, as far as I can tell, which is an interesting coincidence. Again, I won't put anything like that in the article.

RandomP 13:12, 21 June 2006 (UTC)

Good point about explaining their reasons as opposed to assigning labels, but that method would have kept me from learning the term "cacheur" (and that there is a term for what it refers to -- and no, I don't expect people would already know that term). MrVoluntarist 13:36, 21 June 2006 (UTC)

We definitely need the notable labels in there - gold bug, speculator, and probably libertarian, too. If cacheur is a real word, we need it too, but google doesn't seem to have an english match that's not from this page ...

RandomP 14:25, 21 June 2006 (UTC)

If you look back in the history, you will see that RandomP forced the NPOV tag after repeated removals by a number of people. RandomP added the tag without any previous discussion and then used his lone comments as justification for repeatedly readding it. RandomP has also removed content like history, etc. Why should the article be held hostage to one person's accuisation of POV after they themselves declared a laundry list of POVs in the discussion? I can practically guarentee you that RandomP has never invested in gold so why is he contributing in the first place except to censor ideas he doesn't agree with? Even in this rather simple RFC RandomP is deflecting the debate to what he thinks is appropriate regarding "types of investors". The request is for comments on reversion.Carbonate 22:06, 21 June 2006 (UTC)

"I can practically guarentee (sic) you that RandomP has never invested in gold so why is he contributing in the first place except to censor ideas he doesn't agree with?"

That is my problem with the "gold as an investment" title. Investing in gold is not a prerequisite for editing this article, just as little as we preclude virgins from editing the article on .. well, I hardly have to go on.

You are aware, I assume, that if there were consensus for reverting (there isn't), I'd insist on the NPOV on the old version, which did have real NPOV problems?

Wikipedia is NOT an experiment in democracy. As it says there, its primary method of finding consensus is discussion, and that's what we're doing here.

RandomP 22:23, 21 June 2006 (UTC)

While we are quoting,

"I think this article is still written with a rather positive view on buying gold for economic reasons.

For a start, the very description of such activity as "investment" depends on your point of view. In the strict sense of theoretical economics, it usually would not be considered an investment.

Just to make clear that I personally am not neutral on the issue, here's a personal view on it (not that I necessarily believe it will happen like that, but it very well could)"

is probably going to rub the "...That's a good thing. But please note: 'be bold in updating pages' does not mean that you should make large changes or deletions to long articles on complex, controversial subjects with long histories, such as..." part of Wikipedia:Be_bold_in_updating_pages the wrong way.

Carbonate 01:29, 22 June 2006 (UTC)

Er, huh? Can you please explain how a comment on a talk page, in your word, "rubs" [[WP:BOLD] "the wrong way"? I don't see that at all. I voiced my concerns on the talk page, and those things that no one stepped forward to defend/discuss, I fixed. Since I wanted to go slow, I put an NPOV tag up first ...

Nothing to do with being bold.

RandomP 12:06, 22 June 2006 (UTC)

I can go for either suggestion, though I am a bit more inclined towards a revert to May 16th on the basis of the absurdity of the notions presented by Random and the screamingly clear bias of his ideas. If the list of specific contentions isnt too long, that might be the more practical way of going about it. --Morgan 08:57, 21 June 2006 (UTC)

Sigh. Please don't base this on my person or "ideas", whatever those may be, but on my actual edits. So far, you've not expressed an opinion about those. Thanks.

RandomP 09:33, 21 June 2006 (UTC)

Revert Despite the potential lose of good material, RandomP's POV should be purged. Carbonate 22:06, 21 June 2006 (UTC)
Keep. Nevermind that this RfC is ridiculous — it's not even made clear which edits you disagree with, other than the NPOV tag (which was added after trying for more than two weeks to get anything like a comment from "those who created the initial content"). Note that no matter the actual opinions uttered in this rfc, the phrasing makes it impossible to achieve consensus on anything other than "oooh, RandomP is evil". RandomP 22:23, 21 June 2006 (UTC)

Coming in and reading this article on a bit of a wikisurf, I'm amazed to find an NPOV tag on this article. I don't know what damage, repair and/or reversions may have gone on in recent times, but as far as I can tell the current version of the page has more to worry about from unsourced comments and a USA-centric perspective in places (which I've tried to correct) than it does from NPOV, because I can't find anything which would concern me vis avis neutral point of view. I've removed the NPOV tag: feel free to put it back if you feel that strongly about it, but NOT by simply reverting my edit because that'll destroy what I hope (and sincerely believe) to be useful modifications.

Happy-melon 20:33, 29 June 2006 (UTC)

I don't quite get what you're saying: if the article violates the NPOV by taking a US-centric POV, then there is something to concern you wrt the NPOV policy — not necessarily justifying a tag (which I said above I am not going to restore at this point), but an NPOV violation nonetheless.

I still think the article has significant NPOV issues, but I don't think they're severe anymore. US-centric POV is one of them, but another is that Keynes's quote is given somewhat inadequate exposure compared to, say, vague speculations about inflation.

RandomP 09:07, 30 June 2006 (UTC)

Random, you keep slinging around this NPOV charge, and you keep delaying when you'll substantiate it. I'm tired of waiting. I'd love to make this NPOV, but I need to know what I'm fixing, first. And please try to be as brief as possible. If you can avoid showing off your knowledge, that would be great. MrVoluntarist 15:15, 30 June 2006 (UTC)

Brief?!?! Have you seen the volume of comments RandomP makes without actually saying anything? And for all the NPOV claims, he adds his own anti-gold POV (and that is all it is, anti-gold. not US centric). Carbonate 06:47, 2 July 2006 (UTC)

Hehe, yeah, that's why I asked him to "avoid showing off his knowledge". He has a regrettable tendency to do that. Makes him feel smart, I guess. I just took some of one of his off my talk page. MrVoluntarist 19:26, 2 July 2006 (UTC)

I've substantiated it quite often; if you disagree with me is another matter entirely. In order to remain brief, let me just agree with the original poster that there is a US-centric POV, which of course violates WP:NPOV.

RandomP 19:47, 2 July 2006 (UTC)

Right, but every "example" you bring up, someone shows you how ridiculous you're being. Hyperinflation "isn't that harmful"? Gold isn't a "real" investment because it doesn't draw income, er, imputed income, er, imputed incomd that you approve of? Would you like to list your remaining NPOV objections, or do you want to quit alleging them? (Request about not going on lengthy show-off rambles still in force.) MrVoluntarist 23:18, 2 July 2006 (UTC)

How exactly does the article contain a USA-centric viewpoint? Another alleged violation for this article that is not substantiated with examples of any sort. --Morgan 06:13, 7 July 2006 (UTC)

Before my first edit:

Gold is sometimes treated as the fifth world currency... It is therefore bought in a process analogous to currency speculation: when it is expected that the dollar declines against other currencies, buying gold or other currency before the decline and selling it afterwards could realise a profit.

After my first edit:

Gold is sometimes treated as the fifth world currency... It is therefore bought in a process analogous to currency speculation: when it is expected that the dollar will soon decline against other currencies, for an investor who receives his salary in dollars, buying gold or other currency before the decline and selling it afterwards could realise a profit.

It's very subtle - merely an assumption that any potential gold investor will receive his salary in USD. Of course this is not the case, therefore = US-centric viewpoint. Of course, this is not in the text any more, but there may be other similar phrases which randomP is refering to. ~~ Happy-melon 14:47, 7 July 2006 (UTC)

The currency of one's income is irrelevant. Only the currency of one's expenses are important as they relate to holding gold as a hedge against inflation. This is equally true for foriegn currency and equity holdings and foriegn income. People generally do not eat money but they must spend local money to buy local food and shelter. Carbonate 06:00, 8 July 2006 (UTC)

[edit] Gold as a store of value

This is related to the Gold as an asset idea as a title. The question is whether the existing title Gold as an investment is too narrow. Some buy gold, not to make a profit, but to conserve value. Looking through history, the real price of gold is relatively stable compared to the value of fiat currencies. So often it is the value of paper money which goes down, giving the illusion that the price of gold is rising. Central banks hold gold as a store of value and a currency outside the control of any rivals, not as an investment. Stephen B Streater 17:37, 13 September 2006 (UTC)

Holding onto gold to preserve value is an investment, just a very conservative one. What (POV, unsourced, and OR) definition of "investment" are you using? MrVoluntarist 17:43, 13 September 2006 (UTC)

My dictionary (Chambers English Dictionary, 7th edition (1990)) gives: any placing of money to secure income or profit. So buying gold as a store of value does not count as an investment according to this definition. Stephen B Streater 18:03, 13 September 2006 (UTC)

It also excludes stocks. Find another definition, and maybe don't skip to the last one this time. MrVoluntarist 18:18, 13 September 2006 (UTC)

Buying stocks to secure a profit is not unusual. This definition does not exclude stocks. Stephen B Streater 18:46, 13 September 2006 (UTC)

If buying stocks is attempting to secure a profit, so is buying gold. Dude, just give it up. We've been over this a trillion times.MrVoluntarist 19:01, 13 September 2006 (UTC)

Some people buy gold as an investment, but not everyone. Some people buy gold as a store of value. Stephen B Streater 21:26, 13 September 2006 (UTC)

Buying gold as a store of value is not mutually exclusive with buying gold as an investment. MrVoluntarist 21:45, 13 September 2006 (UTC)

I agree. But buying gold as a store of value does not imply buying gold as an investment. Stephen B Streater 09:21, 14 September 2006 (UTC)

You agree with what? You claimed that people buy it as a store of value to the exclusion of buying it as an investment. But buying it as a store of value *is* and investment. MrVoluntarist 13:44, 14 September 2006 (UTC)

I agree that some people buy gold as an investment. But others buy it as a store of value, which according to my dictionary is a different purpose. Stephen B Streater 19:02, 14 September 2006 (UTC)

Yes, I know you can pick and choose definitions that exclude some things in this article. Did you have a broader point? MrVoluntarist 20:30, 14 September 2006 (UTC)

This is the definition in my dictionary. Published reliable sources take precidence over personal experiences of editors. This is how Wikipedia works. The broader point is that using this definition would exclude holding gold purely as a store of value, but this is not necessary beneficial. Stephen B Streater 11:46, 15 September 2006 (UTC)

I know how WP works. My point was that you deliberately left out definitions you didn't like. There just needs to be one definition gold meets, not all. You're really claiming that no common definition thinks of "a method to hold your money's value" as an investment? inflation-indexed bonds really aren't an investment? MrVoluntarist 15:30, 15 September 2006 (UTC)

My dictionary doesn't have another definition. This is the only one (apart from clothes and other things). And I only have one paper English dictionary. Perhaps you could quote me a (published WP:RS) definition which confirms your position. Inflation linked bonds do indeed pay above the inflation rate, and are an investment. Stephen B Streater 16:44, 15 September 2006 (UTC)

The definitions about clothes come first, but there are not relevant here. Stephen B Streater 18:46, 13 September 2006 (UTC)

Actually, scratch that - even that one covers gold. When some body buys the gold to have something more valuable than they otherwise would have, that is securing a profit. Next? MrVoluntarist 18:19, 13 September 2006 (UTC)

Making a smaller loss is not making a profit. Profit is defined as: gain: the gain resulting from the employment of capital: the excess of selling price over first cost ... Stephen B Streater 18:46, 13 September 2006 (UTC)

Sure, that's one definition. I can pick others, just like you. MrVoluntarist 19:00, 13 September 2006 (UTC)

It would be good to know which sources you use and what their definitions are. Stephen B Streater 21:26, 13 September 2006 (UTC)

Source: normal, well-adjusted people. And [2]. MrVoluntarist 21:45, 13 September 2006 (UTC)

Where is your source that normal, well adjusted people use your definition? And you can't use Wikipedia as a source for content here - see WP:CITE and WP:RS for details. Stephen B Streater 09:21, 14 September 2006 (UTC)

Don't patronize me. The Wikipedia entry is just to show how common the definitions are that accept gold purchasing as a possible investment. The source you cited has compatible definitions. We've got the flat earth problem here -- you're trying to deny the patently obvious. Can I please just ask what your goal is in having the title not be "gold as an investment"? MrVoluntarist 13:44, 14 September 2006 (UTC)

Wikipedia is supposed to contain things which reliable sources report - verifiability rather than truth. Just because you think it is obvious doesn't mean that it is verifiable. My Apple dictionary has: the action or process of investing money for profit or material result. I think it is not obvious that Gold as an investment covers all reasons for buying gold which could usefully be in this article. For example, I have bought gold, which has conveniently doubled in price, but I didn't buy it for this reason. Stephen B Streater 19:02, 14 September 2006 (UTC)

That's one definition of several in your dictionary. Education is also an investment. A dance pad is an investment. The article doesn't say financial investmen. MrVoluntarist 20:30, 14 September 2006 (UTC)

All these examples may be investments. Consider something which is not an investment, according to my dictionary - something which is not bought because it is expected to increase in value. Stephen B Streater 11:46, 15 September 2006 (UTC)

Really? Education could be an investment? It doesn't increase in value, so obviously that's not a criterion. Guess the matter is settled then. Next topic? MrVoluntarist 15:30, 15 September 2006 (UTC)

How about Gold as a store of value as our next topic. Are you saying that every asset you own is an investment? Stephen B Streater 16:44, 15 September 2006 (UTC)

I don´t quite understand the problem here. Gold is a store of value, or in other words a "safe haven investment". So whether one agrees with it or not, gold is an investment. Governments, pension funds, mutual funds, and individuals like you and I, buy (or invest in) gold because they hope that it will either go up in value or retain its value versus alternative money stores (such as currency, stocks, property etc). Governments would not be so vulgar as calling the gold they hold as an investment, but that´s exactly what it is. Since the end of the gold standard, they are not required to hold gold (Canada hold practically none, for instance) but can hold foreign exchange reserves instead. And this is exactly what some countries have done i.e. sell their gold and hold currency instead. For example, the U.K. sold half their gold at a price low in 2000/1, after hanging onto to it throughout the 80´s and 90´s while watching its price drop in value from 850 USD to 250 USD/tonne. After selling at a low they have watched the price rise to 540/740 USD, costing the U.K. taxpayer billions. This is what you call a bad investment decision whether you are an individual like you or I, or the Chancellor of the Exchequer of a G8 country.

Just as a side note for those of you who are anti-gold, there are many reasons why not to buy gold. For example it produces no income (unlike rent from commercial/residential property, interest from a bank account and dividends from stocks, for example) unless you are willing to take the risk of leasing the gold out or writing options. Some financial gurus, such as Robert Kiyosaki, only even consider an investment to be an asset if it produces an income. He states that investments that generate expense, such as one´s car (fuel, maintenance etc), own home (heating, lighting, maintenance etc) and precious metals (storage and insurance costs), should be classified as liabilities and not assets at all. I do not see such a section in the article i.e. arguments against buying gold. Love and peace. nirvana2013 20:45, 20 September 2006 (UTC)

For the record, Robert Kiyosaki is a strong advocate for owning gold. http://finance.yahoo.com/columnist/article/richricher/7810Prestonp 07:30, 23 September 2006 (UTC) Prestonp 07:26, 23 September 2006 (UTC)

Also just for the record, I never said Kiyosaki did not like gold but just that on his investment model he would be aware that it was a liability, not an asset. I would speculate that he leases his gold out at 3-5% per year, turning it into an asset (using his criteria, not mine). nirvana2013 19:00, 23 September 2006 (UTC)

I doubt that. Interest rates for gold loans tend to be very low indeed (on the order of half a percent p.a.), and last I checked, the market appeared to be dominated by central banks giving out some of their gold reserves in loans.

(My personal guess is he might just be inconsistent.)

RandomP 19:17, 23 September 2006 (UTC)

(apologies for the first edit summary. I meant to write "leasing", though I was thinking about risk-of-loss premiums as a potential explanation for Nirvana2013's high estimate). RandomP 19:22, 23 September 2006 (UTC)

I think they have moved around a bit in the last 10 years. From a low of 1% to a high of 10% "Lease rates jumped to 10% in the first few days after the agreement (Washington Agreement on Gold in 1999), and though they have fallen back, they remain at a still high level of 4-5%, more than two times the rate the 1-2% the market is historically used to. The market remains tight, with very little gold coming onto it" World Gold Council [3] If you lease gold today the published rates are at an all time low of just under 0.1% [4]. However I was offered 3% for my gold holdings by the founder of 1mdc only two weeks ago, so there must be deals to be found out there if you are willing to take the risk. nirvana2013 20:59, 24 September 2006 (UTC)

[edit] Why is gold valuable?

There doesn't seem to be any explanation on either this article or on the main gold article as to why gold is valuable, apart from the fact that it makes nice jewellery. Is this the main reason for gold's extremely high value and if so does this not suggest that it would be particularly susceptible, as a luxury good, to price fluctuations due to the world economic climate? Also, isn't it a little, umm, unusual for the hard-headed economists of this world to base such important things as currency values on something of great cultural and aesthetic value yet little intrinsic or utilitarian value? Sorry if this has been covered elsewhere - if so could someone point me there. --Kick the cat 23:04, 15 November 2006 (UTC)

Why is gold valuable? "The use of gold superseded alternatives for a number of reasons including its rarity, luminosity, character (weight, softness), malleability, fungibility and resistance to tarnish". There are very few elements in the world that can act as money, jewelry and an industrial commodity, which match these characteristics. This line used to be included but was deleted [5]. I agree the explanation could be expanded.

As gold is a luxury good, would the gold price fall during bad economic times? History shows us that gold, unlike diamonds, performs well during bad economic times (such as the Great Depression) as people seek save havens for their capital. nirvana2013 18:09, 20 November 2006 (UTC)

Because it's relatively scarce and perceived to have value as a currency. This perception is strong since gold was used as a currency or related to currencies throughout history. In reality gold is no more valuable than other similarly scarce metals with similar demand. gb 21:52, 9 February 2007 (UTC)

You say, In reality gold is no more valuable than other similarly scarce metals with similar demand. You are making an assumption about how value is imputed. If something is commonly valued it is "valuable" by definition. Saying that there is somehow some sort of objective value for gold outside of human assessment seems to be a reach. Either way, there are plenty of sources that describe gold as valuable, and few if any that would deny this. That is pretty much what matters here. Of course, citing sources that offer the opinions of notable folks on this matter would be helpful for readers too. DickClarkMises 00:56, 10 February 2007 (UTC)

The monetary value of gold is imputed as with anything else - by supply and demand. Only reason why I went as far as saying 'reality' is the phylosophical nature of the question why is it valuable. Take away the historical use of gold as money and gold might be valued like any other industrial metal. While gold may never again be used as money it will take a while, if ever, before perception catches up and it is seen in the same way as titanium.gb 23:52, 10 February 2007 (UTC)

[edit] Gold and the Great Depression

Article states that gold bugs 'hope for another Great Depression'. This implies that there are sources stating that gold was used to preserve value during TGD. This makes no sense since TGD was caused by deflationary pressure and iliquidity where assets including gold would be loosing value in currency terms. Can anyone shed some light on this? If not, this needs to be removed from the article. gb 21:38, 9 February 2007 (UTC)

The Causes of the Great Depression are hotly disputed. Some economists argue that inflation of the US money supply by the Federal Reserve played a role in causing and lengthening the Great Depression. For those who are inclined towards this theory (and others), gold is a hedge against inflation because central banks engaged in inflation can't "print gold." DickClarkMises 01:19, 10 February 2007 (UTC)

Gold and other material assets can be a hedge against inflation. However, that's not my point. If there are no references on gold being used as a shelter during TGD, this statement is false and should be removed from the article or reworded to avoid reference to TGD.gb 22:57, 10 February 2007 (UTC)

Talk:Gold as an investment/Archive 1

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Contents

[edit] Removed text that supports common fallacy

[edit] You were a bit too trigger happy.

[edit] Gold bug could be merged in?

[edit] Gold of the Americas

[edit] NPOV

[edit] Replies

[edit] Is "Gold as investment" a good article name?

[edit] Suggestion...

[edit] Okay, let's start at the top ...

[edit] Line by Line

[edit] NPOV--counterpoints

[edit] Suggestion for article structure

[edit] Unsourced claims

[edit] Gold: the cheapest metal at ~19 g/cm³?

[edit] Proposal: remove "Investment strategies" section

[edit] Inflation section

[edit] Gold is/is not currency

[edit] Gold's usefullness in Industry and Production of goods

[edit] Request for comment on reverting to May 16

[edit] Gold as a store of value

[edit] Why is gold valuable?

[edit] Gold and the Great Depression

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Talk:Gold as an investment/Archive 1

From Wikipedia, the free encyclopedia

Contents

[edit] Removed text that supports common fallacy

[edit] You were a bit too trigger happy.

[edit] Gold bug could be merged in?

[edit] Gold of the Americas

[edit] NPOV

[edit] Replies

[edit] Is "Gold as investment" a good article name?

[edit] Suggestion...

[edit] Okay, let's start at the top ...

[edit] Line by Line

[edit] NPOV--counterpoints

[edit] Suggestion for article structure

[edit] Unsourced claims

[edit] Gold: the cheapest metal at ~19 g/cm3?

[edit] Proposal: remove "Investment strategies" section

[edit] Inflation section

[edit] Gold is/is not currency

[edit] Gold's usefullness in Industry and Production of goods

[edit] Request for comment on reverting to May 16

[edit] Gold as a store of value

[edit] Why is gold valuable?

[edit] Gold and the Great Depression

Views

Navigation

Interaction

Search

[edit] Gold: the cheapest metal at ~19 g/cm³?