I no more care about the price of gold than I do about the price of frying pans (read Adam Smith), I care about goods and services.

And yes John the price of gold has gone up over the last 100 years, but the real test is who has the most purchasing power now, the guy who brought the cheap gold or the guy who invested in equities.

It's the guy who invested in equities, and I suspect the equity investor will now be buying into iron ore ( to make the frying pans), perhaps gold mines, but not gold.

Regards

Really, Charles? Really?!?

The only thing us "capitalists" fear is the government, along with their printing presses! That's why we buy gold!

Yes if enough people switch to gold from dollars, it devalues the dollar. But it also increases the value of gold! There was no wealth created or destroyed (you seem to be implying the latter). There was simply a shift in the medium of exchange between items of real value (which, again, didn't lose or gain any value during this process).

Buying gold doesn't hurt the economy, no matter what the Bernankes of the world want you to think. It simply protects your wealth against the government theft that is called "printing money".

Taking a few lines from your comment:

“methods used to unwind the great depression” – was world war 2; a couple of the “methods” used to unwind the great depression were limiting work hours (in the name of protecting price pay for labour) and burning produces (in the name of protecting farm gate prices). When the war came they were forced to stop “helping”, as a result the reduced and less experienced workforce (mainly women with many never having worked in factories before) in America producing enough to support themselves, their army as well as their allies around the world.

“free market”– What sort of free market do you mean when governments controls the price AND supply of money? Unless you are over 100 or from somewhere like Hong Kong I can't think where you may have seen a free market

“capital did not deserve to have access to anything” – capital is created by somebody and therefore belongs to somebody; what it have access to depends on terms of exchange that the capital holder and someone who wants the capital can agree upon (ie free trade) and not the whim of some third party.

“capital flight” – As John has already pointed out, this doesn’t actually happen. In the modern world, capital is either invested directly – by the owner of the capital or indirectly – eg when the capital is placed in a bank, from which bank loans are made.

“governments stepping in to stop the financial system from destroying itself. And what thanks do they get” – One of theory of the origin of the dollar symbol $ was the overlapping of the U and S for United States, over time the U became a double vertical || and finally and single vertical |, if this is true how exactly do you thank someone who devalue your national symbol by 98%? ie “dollar” used to represent 1/20 of an ounce of gold, now it’s more like 1/1000; which some may even say have a lot do with the financial system “destroying itself” currently.

Back to what Charles was saying YES gold is just a commodity but it is an inceasingly popular one in the emerging economies.

What about the poor gold miners?? If we don't buy gold then they wont have a job for me its about job creation.

Ademac

Yes buying gold doesn't create the stuff, and handing over the paper with dead people on it doesn't destroy the paper; however capitalist fearful of their own shadows removes their value. If the capitalists aren't willing to take on future risks then someone else has to, and the capitalists should stop whining when they get cut out.

When you buy gold it doesn't take money out of the money supply (aka cut off capital), it simply transfers the money from you to somebody else (the seller of the gold). Before you buy the gold, you have dollars and they have gold. When you buy the gold, you're left holding an asset and they're left holding paper with dead people on it. You're betting that the government will print more paper, thus making the paper worth less in terms of your asset (gold), or in other words that your asset (gold) will go up in price in terms of the paper.

Is gold productive? No. It can't feed you, drive you to work, protect you from the cold, or even walk your dog.

But what about dollars? They can't do any of that either. But they can do one thing gold can't - be devauled by politicians thousands of miles away to fund the further expansion of a beaurocracy.

And before you make another assertion that gold prices are going to collepse, consider the following: Gold has been the free-market medium of exchange for thousands of years. It has outlasted the Persians, Egyptians, Romans, Greeks, Chinese, and it will outlast the Americans as well.

That the system because so many rely on it has to balance itself?

You seem to forget the financial sector is not the economy, it is part of the economy. If the financial sector fails to contribute towards meeting humanities needs, that is aid the production of goods and services we use and need it will be done away with. As you correctly point out capitalism was not what it was after the great depression.

After that stuff-up, free market capital did not deserve to have access to anything, let alone something that matters like financial markets, when the going got tough they ran, it required the creation of institutions like fannie to undo the mess the capital flight had created.

It is no different now, in fact that seems to be the central premise of the advise given on this site, run it's all too scary. Day after day it's "put your money into gold, into gold". Yes I suppose if you have enough of it you could use it for house bricks.

And once again we see various governments stepping in to stop the financial system from destroying itself. And what thanks do they get, "put your money into gold" is the loudest cry we hear.

Quite frankly I hope it's gold you buy and I hope the gold price collapse as you try and get it out again in an attempt to take advantage of the opportunities that arise because sober people supported the system when it needed access to capital.

As gold is no longer tied to the paper it is a real possibility that gold price will collapse ( making the current fall look minor)), it is now just another commodity, traded as any other. Yes I know you lot would like to change that, but tough, it isn't going to happen.