Because it’s shiny? Who says I like it? 🙂 I was simply trying to get you to read this opinion. Gold is sure shiny but remember how it was going to replace the U.S. dollar? That never happened, maybe because Democrats, Socialists hadn’t been in office long enough yet back in 2001 in order to promulgate the lie; something tells me that Democrats and lies are related? But gold did have a monumental run, probably its best ever run the decade beginning in the year 2000 and then the run came to a screeching halt by the end of 2010; eventually reaching a high price of $1,910/ounce before falling back down to just $1,000/ounce. However, it has made a comeback into the low $1,900’s as of this writing.

Ask the Communist Chinese and the Indians from India if they like gold, these two countries are likely gold’s biggest supporters, China has the highest estimated gold reserves and is today’s largest producer of gold. But keep something in mind, China is a repressive Communist country and most homes in India still don’t have one indoor toilet so there’s that, but suffice to say these two countries cherish their gold jewelry? And what a compromise – I think I myself would opt for a running toilet instead? 🙂

Gold is a commodity. And so are these Wheat Chex and Rice Krispies I’m munching on, they’re commodities too, along with oil and orange juice and several other things. However, there is now a new kid in town, a new classification known as a “virtual” commodity. One that lives in the non-physical world. This would describe NFTs and crypto-currencies. Note that the term “crypto-currency” itself is really a misnomer because cryptos are not currencies at all, they are commodities. However, by adding “currency” to the end of their descriptions they have no doubt convinced many out there that they will be replacing the U.S. dollar one day. Gee that’s an idea that sounds familiar huh?

Many commodities are reference to a “natural resource”, but gold bugs want you to never forget how gold will one day replace the U.S. dollar. Got a large enough purse, or perhaps a wheel barrel to haul your gold around? Because it’s mighty heavy! Plus the thing you need to understand about commodities is that they don’t necessarily [price] behave, in fact they are horrible about behaving, nor do they generate incomes on their own, they are simply physical supplies, an ends to a mean. Commodities are traded for [use], they are finite entities whose prices only respond under two distinct circumstances – either plentifulness or scarcity, one or the other. So if you’re hoarding a commodity that is plentiful your money is essentially at huge downside risk. Only in those times when you’re holding a commodity that is rare will you find a particular commodities’ price working for you. Some of the best investors in the world make “searching for scarcity” their mantra. Very few commodities in the world can meet the high hurdle of this “scarcity” criteria.

Back to Gold –
Gold veins are normally found within quartz rock structures. When two tectonic plates rub against each other [along fault lines] there is a sudden release of pressure underground and it is believed that gold forms instantaneously along these pressure vacuums before the tension settles and fills back in. So it is believed that gold deposits form very quickly, as gold deposits have been found all along these fault lines. But this does not mean that an earthquake must result as there are minor fault [cracks] forming under the earth’s surface all the time, and many of these shifting events do not turn into major earth quakes that we ever hear about. Still, it is predicted that most of the gold in-ground has been mined with estimates being as high as perhaps 80-90% of all available gold deposits having been recovered.

Does gold have any industrial or medicinal uses? After all, inquiring minds like me want to know. We wonder if there’s a function for gold other than just being pretty to look at. I have read where a thin layer of gold is effective in providing astronaut’s helmets with a way to block harmful, unfiltered rays from the Sun, and maybe one other use in manufactured parts for a technology application. All in all, I would have to say gold has [limited] industrial uses, that’s not to say that more may be found going forward, but at a cost of $2k per ounce? How about just using a piece of plastic instead? Or if you really want something shiny, how about using that reflective side on a piece of tin foil? However, gold does have some unique properties – it will never corrode or dissolve, so it’s kind of indestructible. And it can be melted and re-formed into about any shape, hence all those gold jewelry pieces and coins.

Where I want to go with this on the subject of holding gold is this preface:
If you were to somehow calculate all physical gold deposits across the world, from personal to government holdings [good estimates exist], and the market capitalizations of all public gold mining companies then add to that all the [recoverable] gold deposits remaining in the ground, would that tie out to all the investment dollars already committed into gold bullion, gold coins, and gold miner’s stocks? Would it, does it make sense from an investment point of view? This bothers me. Just from an investor perspective I think this should be considered before placing one additional dollar into this speculative asset. So let’s take a look at this from a 52,000 ft. perspective. The total value of physical gold that has been mined and is on deposit [with government entities, jewelry, bars and coins, ETFs and other fabrication and “unaccounted” fors] is around $8 trillion dollars (Statista, 2018). However, the amount of total gold mined equates to almost 200 tons, and unmined reserve estimates tend to total between 53 to 63 tons. Let’s use the lower number, 53 tons. Therefore, total gold on hand and in reserves [in existence] has been estimated to be around 250 tons. At $1,933.80/ounce, that means that the current value of one ton of gold is $61,881,600.00. Since there’s potentially 250 tons in existence [et. al.], therefore, the current market capitalization of all gold [mined and in-ground] totals around $15.5 trillion dollars.

Is something wrong yet? I could only find five public corporations with a market capitalization that meets or exceeds even $1 trillion dollars, only five – that’s it! Microsoft, Saudi Aramco, Apple, Alphabet, Amazon, and Tesla, and all these companies make and sell something [everyday]. Plus only one, Aramco, is in a commodity’s based business. Is your stomach feeling queasy yet? My question to you is – does the current market capitalization [and price] of gold make sense given that the total market capitalization of the S&P 500 Index itself stands at only $40 trillion dollars? Again, remembering that this index is made up of five hundred different organizations – five hundred of the largest corporations domiciled inside the United States. And the price of a single ounce of gold [in relation to the worth of the S&P 500 Index] holds 40% of the value of 500 very large operating companies? Sorry, that makes no sense at all to me… this is not even close to being realistic in my book. I think people get very caught up in all kinds of speculative pursuits when they have money burning holes in their pocket. So if there’s one take away for you from this writing, remember this particular truism as it will re-surface from time to time. Perhaps something shiny catches our eye quicker than a real business? For if you go and tour a real money making concern it can almost put you to sleep [from boredom]. Looking inside most businesses gets kind of ugly as it rarely rates anything shining back at you… but the funny part is, profitable businesses with all their ugliness, these 1,000’s of American companies don’t stand still long enough to look shiny; no, they dig under the weeds with a pure profit motive, and most end up doing nothing but making money for their shareholders! 🙂