I have just acquired the latest Barrons magazine and in it there's an article entitled:
'Gold: The Ultimate Fiat Currency.'
This excellent article should be required reading for the goldbugs. It' puts to bed a lot of the theories the goldbugs desperately hang on too, hoping that the gold price is about to go through the roof. It points out that the demand is so great that a huge premium is being demanded, $200/$300 because of the ETF fund acquisitions and demand for gold coins has jumped 65% so far this year. This is where the 'smart money ' is but makes the point that;
"Wall Street is just a corner of the public mind. It follows fads, so money congregates in outlandish places. In the counterintuitive world that is the investment markets, you don't want to be where the smart money is. You don't want to be "where it's at".
A vital observation of the fun-starved Austrian school of economics is that investors err together, so unanimity of opinion is a danger sign."
and
"Only 15% of gold is used as a monetary metal; the rest is used as a commercial metal, and that use, particularly as a corrosion-resistant electrical conductor for semi-conductors is declining. Regrettably, it is a soft, semi-useless metal with very few industrial applications."
"Gold is just another fiat currency. The only reason gold is valuable is that we believe it is valuable. Ultimately, this gold bubble ends in tears. When and how far gold's price will decline is anyone's guess, but a smart bet is "sooner rather than later".
"Another part of the logic for gold - that whole flight to safety thing - doesn't exist anymore. Maybe once upon a time, gold was a handy way to buy passage out of an oppressive country but not anymore. When everybody obsessed about gold, and it was highlighted as a great doomsday hedge against inflation, financial futures didn't exist. Now they do, so gold is a third-rate safe haven: It pays no interest and cost money to insure.
(Textbooks say it has a 'positive cost to carry')."
I will put some more of this article on here as I have the time but make the point that Barrons is a magazine for contrarians.
I have no problem with punters putting their hard-earned money into gold tricha, the only thing I take issue with is some of the goldbugs spurious, illogical arguments.