Is gold really scarce to justify its value?

Answer 1

Value is relative - it does not just depend on the scarcity, but on what people at a particular time hold to be valuable. Gold is currently (notice currently) scarcer than fresh water, but if you are dying of thirst, you would swap it litre for litre.

If your question relates to the relative values of precious metals, then I would advise that gold is the one to go for. It has been so throughout history, but with peaks and troughs like any investment.

If your question relates to the current increasing value of gold, then I would hazard to say that this trend has a lot more legs on it. I personally do not care much if there are more or less tonnes in the world than the experts tell me, as I see the metal as a catastrophe hedge against the value of paper printed by governments. It is interesting to note that central banks have now stopped selling gold on the open market. The next step will be to reverse their previous policy, and buy it before the man in the street realises that he has been hoodwinked. That will see the price soar, but it will be too late for most currencies. Stick with the Swiss Franc, because the Swiss at least run their fiscal policy half reasonably, if you allow them the odd mistake like trying to defend the indefensible (EURSFR). No 120% mortgages there.

If your question is about the relative price of gold in relation to other standard investment vehicles, then my advice would be to make sure you have fresh water, food (have you seen the price of fish recently?), clean air and freedom. They too will become scarcer. Gold is not the total answer, just part of it. Land to farm will be good, but bricks and mortar and hi-tech goods etc., will become cheaper, as will stocks and bonds (even worthless in some cases). If you are young enough, try becoming a farmer, bee-keeper (did you know that honey is the only foodstuff that doesn't go off? - but they still put sell-by-dates on it!), smith, or shoe repairer (a real one, not Mr. Minit), doing clothing alterations etc. - vocations that most in the present western society think a waste of time. Having a degree in Law for example will not be the slightest bit interesting when the whole world can do it on the internet. When they give out diplomas like confetti, it won't be long before that is what they are worth.

Nothing stays the same for very long, but at least gold doesn't rust!