Comment by barrkel | Hacker News Reader

Comment by barrkel | Hacker News Reader

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"Red gold" would be exactly as valuable as gold is in the same way that gold is; that is, if everybody agreed that red gold was valuable, then it would be valuable. If they didn't, then it wouldn't. Scarcity doesn't give rise to value. You also need demand.

In so far as red gold acted in the same way as gold for jewellery and industrial uses, it would probably decrease the value of gold to some proportion, and set a base level on this red gold production. But this is like asking why diamonds are valuable, or designer clothes, or expensive watches. In many cases, it's a combination of marketing, status display effects (ostentatious useless consumption), artificial restriction on supply, and market fixing (e.g. arranging to buy watches on secondary markets at headline prices for PR purposes). They too are confidence games, and if the confidence goes due to a bad association with the brand, the price will fall through the floor. All that is left is productive uses like industry.

I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years. The reason for the scarcity of gold, and it's value, is that this gold is not for sale. One gold owning organization could make a great deal in other currencies by attacking the gold market, much as quantum fund used it's sterling holdings to attack the British currency with great success.

Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same. Am I missing something important here?

I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults

Quite possible.

A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years

Say what? A few large organizations, who are not governments, hold the vast majority of the world's gold? Are we into conspiracy-theory talk here?

Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same

"Safe" depends on what you mean. For instance, you could say "US dollars have a 99% chance of retaining at least 80% of their value in five years, and a 99.9% chance of retaining at least 10% of their value in five years. Gold has only a 80% chance of retaining at least 80% of its value in five years, but a much higher 99.999% chance of retaining at least 10% of its value in five years".

Gold gives you much more volatility in the short term, but acts as a hedge against the collapse of any particular currency.

I wouldn't buy it though. I'd buy land (with houses on it), which acts as a hedge and pays you income.

Of course, your ability to continue to own that land is also dependent on the continued existence of a government that remains able and willing to enforce the laws of property ownership and does not decide to raise property tax rates to confiscatory levels.

Google around. General consensus seems to be that 75-80% of gold production goes to jewellery, and there's some fraction going to industry too. As the most ductile element, it's used in microelectronics, though of course in small quantities.

http://symmetricinfo.org/category/goldprices/ estimates 50% of gold stock is in jewellery, 12% in industry. Of course, some fraction of that jewellery is bought because people believe that the gold will be a store of value, not just because of how it works; though I wouldn't expect selling jewellery for its gold content to give particularly good returns.

Just to add to your point about marketing being important to assess something's value, take black pearls. They used to be worthless and producers couldn't sell them at bargain prices. But then one jeweler placed them next to sapphires and other precious gems on display and they became a quite expensive item.

I'll add a link to this story if I can dig one up.

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