[AnimalMuppet]

Gold has been a currency. It isn't really any longer. Now it's almost an anti-currency.

If the dollar is a good medium of exchange and store of value, I have no need of gold. Dollars are considerably more convenient. But if the dollar isn't a good store of value (or I suspect it won't be in the future), then I can use gold as a store of value, for the reasons you stated. Gold therefore becomes my alternative to currency. Functionally, it's almost a short on currency.

But the currency has to be fairly bad for this to work. Example: Gold was $1700 maybe five years ago. (Can't get exact dates from Yahoo Finance's current site, so I'm working from memory.) It fell to $1050 maybe a year ago. Now it's $1200. That makes the dollar look like a pillar of stability.

[mamon]

You are taking this from the wrong angle: the fact that gold price changed from $1700 to $1050 to $1200 says nothing about value of gold - instead it says everything about the value of dollar. Simple example:

in 1915, or so, Henry Ford released Model T, first mass produced car. The price of Model T at that time was about $300 dollars, which was equal to 20 ounces of gold. Now, 100 years later, 20 ounces of gold still can buy you a brand new car, while 300$ only buys you set of tires and some gas.

[bubuga]

> You are taking this from the wrong angle: the fact that gold price changed from $1700 to $1050 to $1200 says nothing about value of gold - instead it says everything about the value of dollar.

If what you say was true, how would you explain the fact that gold prices also fluctuated wildly with regards to all currencies used in the world?

> in 1915, or so, Henry Ford released Model T, first mass produced car. The price of Model T at that time was about $300 dollars, which was equal to 20 ounces of gold. Now, 100 years later, 20 ounces of gold still can buy you a brand new car, while 300$ only buys you set of tires and some gas.

You need to discover what inflation is. Adjusted to inflation, $300 in 1915 are equivalent to around $7k in 2016.

Furthermore, prices are dictated by the purchasing power of the target market which also varied significantly since 1915.

[AnimalMuppet]

> the fact that gold price changed from $1700 to $1050 to $1200 says nothing about value of gold - instead it says everything about the value of dollar.

No. The value of the dollar did not change to that degree in the past five years. The only way you can define that as being changes in the value of the dollar is to define the value of the dollar in terms of gold. Then you're correct, by definition, but your argument is circular.

Your example over the last 100 years may be valid. For the last five years (or even 40), though, the change in the value of gold has been a reflection of peoples' fears about paper currency, rather than an actual measure of the value of that currency.

[mamon]

The point is that, unlike gold, dollar (or any fiat currency for that matter) has no intrinsic value, only the value we give it in our minds as average of our greed and fear.

Exercise for the reader: take a look at this plot [1] and this plot [2] and guess which year US government stopped using gold standard for dollar.

[1] http://stooq.pl/q/?s=xauusd&c=100y&t=l&a=lg&b=0

[2] http://static4.businessinsider.com/image/50e77df8ecad049b560...

[AnimalMuppet]

Define "intrinsic".

Gold doesn't have intrinsic value either, except for it's industrial value. Gold's value as a currency is also "only the value we give it in our minds as average of our greed and fear."

[JoeAltmaier]

Be fair; that Consumer Price Index rise also corresponds to the beginning of consumerism. Lots more changed than just a currency basis. That was probably the least important?

[tomp]

> Functionally, it's almost a short on currency.

Every currency (except the one you have to pay taxes/debts in) is a "short on currency" - all FX crosses are long one currency and short the other.