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Comment by torginus | Hacker News Reader

The biggest problem with metals is the same as crypto - there's no fundamental underlying value like P/E or product announcements you can anchor the price to - so its free to fluctuate.

How much of a problem that actually is we got to find out last Friday.

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> there's no fundamental underlying value [...] its free to fluctuate

I don't understand this argument since that's how literally all markets work: the consensus is the current price. If we're talking about fundamentals then crypto isn't comparable to gold at all since 1) it's a physical, tangible, durable thing, and 2) has been used for centuries as a store of value.

Gold is easy to understand from a human perspective and doesn't require knowledge of a blockchain or anything tech related. You store it, secure it, and transport it like any other physical asset. Whereas something like Bitcoin involves seed phrases, blockchains, irreversible transactions, a public ledger, and it's all virtual. If your store of value is one mistake away from being lost to the void then it's not very good. I'll just finish with this: there is a reason that central banks have been loading up on gold recently in light of uncertainty and not crypto.

A large fraction of gold mined every year is used for its material properties in industrial and electronic applications. That presents a very real floor on price. If good was suddenly worth 1/10th as much we would use it in far more industrial applications thus driving up the price. Similarly mining would slow down from the current ~3,000 tons annually again driving the price up.

Gold is currently priced way above that level, but just like the stock market were dividends allow people to buy more stock when the price is low there is a very tangible feedback loop propping up the price which eventually kicks in.

Counterintuitively this means using gold as an investment vehicle makes the world a worse place because we fall back to less efficient methods in industry, and efficiency is ultimately the engine of progress.

Gold is also one of the best heat conductors so if it got really cheap it could be used a lot in industry and electronics. Anything from cookware to heat sinks!

> A large fraction of gold mined every year is used for its material properties in industrial and electronic applications.

I thought that was less than 10%. That's a very low floor! (That said, gold is sound money)

Hence why I said at 1/10th the price we would use a lot more of it.

There’s easily decades worth of industrial use in vaults so the instantaneous floor is quite low. However feedback occurs well before you hit the actual limits here.

I read 7% of 2024 demand is industrial. Gold ended 2024 at $2600.

Recycling jewelry to make more jewelry is quite common, which kind of distorts how much the gold supply vs reserve is. If demand to manufacture jewelry ends then the supply of recycled jewelry also dries up.

~3,300 tons where mined in 2024

“Industrial and tech demand accounted for 83 tons of gold in the third quarter” of 2024. 83 * 4 = 332 so ~10% which is fairly typical.

Whats your baseline for volatility? 0%? Outliers aside, metals are still the most stable store of value thats widely used

And the P/E and product announcements your touting as inherent value are for generating value, not storing it. If your purpose was to store and transfer value, it would be stupid to use stocks over currency or gold

Gold and silver, besides industrial uses, have been used both as currency and jewelry for a long time.

> Gold and silver, besides industrial uses, have been used both as currency […]

So has credit, with documented uses earlier (Ur III, 3000BC) than gold (Lydians, 600BC).

And why are/were they used as currency?

They’re durable, resistant to corruption, relatively rare, pretty… Titanium or gems would’ve been equally used if they were equally convenient. Not to mention that coinage could be minted or mixed with, say, copper. Gold makes good alloys and can be recovered later.

Currency as jewelry is a good way to secure and carry your wealth as well as display it as a status symbol (or hide it).

A ring is just a coin you wear on your finger.

> And why are/were they used as currency?

Because there was no useful alternative and/or we didn't know better.

The fundamental underlying value on stocks also depends on fluctuating prices for the goods and services that firms buy and sell, just like commodities.

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