Best Answer We've Seen To The Question: Is Gold Money?

there's a reason it's called "precious metals". All the gold there is is all that will ever be. there's no such thing as man made gold. you want more gold? melt the gold somebody else has and make some bricks. that's only way "new" gold is made.

camels for sales.....get yer camles here!!

Don't agree with the article writer.

Criteria is...is gold exchangeable or not.

Money is a symbol of what it represents, and the writer put forward the argument that he can try to buy a drink after trading hours with a chunk of unidentified metal, and he will get no drink.

I can assume he is talking about bars around Wall Street, and thus the Dollar is the going currency.

Well...come up with an AU Dollar, or Mexican Pesetas, and try the same trick.

According to the same logic, AUD and Mexican Pesetas would then not be money.

A valuable can be easier or harder to exchange, but it does not disqualify it from an exchangeable valuable, that can be used .....as money.

If Banake doesn't understand that....oh well....I could expand on that, but I digress.

Paper money is the intermediary only, gold have the value as it has, ....( and probably better than papermoney).

If you want to keep the gold or exchange it for paper, doesn't make any difference, money is money, but paper money have an advantage for day to day exchange, as it is normaly denominated in smaller easier to handle and recognized denominations. An unknown piece of gold have to be put on the scale to determine it's value, while a Dollar bill have it right there on the bill.

If a currency have a gold standard, each piece of papermoney represents gold.

They are then direct interchageable, not only at the gold store, but also in the bank, and one is money as well as the other, It's just that paper money is so much easier to handle and do day to day transactions with.

You may ask, well if I can buy a tractor, and exchange that for Dollar bills...then a tractor must be money.

It could be, theoretically, but likely not. Money in the past in different cultures have been represented by feathers, gemstones, pelts and similar objects.

A piece of Iron could theoretically be money, but you would have to bring with you a ton of it for small purchases, because it is too common. ( you get the change back in railroad spikes)

Gold is very compact, and rare, and thus have all the attributes of concentrated value.

Money is the media, in where stored energy can be released at the bearers convenience.

You work one day, and get one days wages.

You get it in paper, representing that energy you just put into it, and can release it slowly...stop buy convenience store on the way home, and buy a cup of coffe.... or you can release it fast...fill up your car and you have probably released a half days works worth of energy.

If you work a day, and get papermoney, you exchange it for gold...you still have the same energy stored in the gold as you have in papermoney. ( gold is going up in value, so it is probably the better bet right now...but that is not the point and is another dicussion)

Energy storing unit...that would be another way of describing money.

Gold, paper, doesn't matter, money is money.

Ron Paul is right, and Barnake doesn't have a clue.

I want to remind you all, that Barnake is then the Federal Reserve President, that are handling ( suppose to...) all of our nations financial transactions and needs.

Guest,

Two things changes price...first...the amount of money...lot of money out there, you pay more for the goods. The money is inflated, and worth less.

Second..demand and supply....Everybody wants tickets to Superbowl, but there are only so many seats, so you see scalpers selling tickets for ridicuous sums. then the price is determined with how high people are prepared to go to get the item....a good example of that is an auction.

If the world see big risk in papermoney ( with good reason I must say) people get gold ....so we now have a run for gold....so prices goes up.

They pay for it with inflated money...so the price is even further up.

Guest,

We are describing the same thing, the only differrence is that I am describng the basics, while you are describing the details in the foodchain.

The basics remain, price is dependent on how much inflated money that pays for the goods, and the current supply and demand.

That supply and demand have inherent parts of it, and you describe a breakdown of that chain, like delivery, oilprices, and on and on.

Oilprices have it's own supply and demand...controlled or not is another issue, but taken the whole economy as such, and then determine the condition of it, oilprices is part of the price picture...of course.

However nothing of that, takes away from the two basic principals what price is, ....how valuable the papermoney is, that you are holding in your hand....and supply and demand.

Guest,

I see what you are saying...yes FIAT money is not backed by anything at all.

It is kind of a weird system, but it works as long as people agree to take it.

I do belive we are going into a bit of a different subject here, but by all means....yes, the concept of creating money out of nothing is for many hard to grasp, even if the worlds Central Banking Cartell is getting world control by it.

Either way...if gold...or in some arab countries with a strong currency...oil...is backing it, ...or if nothing backs it...it still works the same once it is on the market.

Granted a backed currency is the more healthy system, but just to look at the currency itself, while it is taking it's round in the society...it works the same.

The groucery store clerk doesn't ask if it is backed with gold...for him it is a Dollar bill, backed or not.....he will take it... A Dollar bill is good enough for him.
A currency is not inherently more prone to more inflation under a fiat system, than under a gold system, whast determines that, is the amount of Dollars out there.

If you have a certain amount of gold, and it is good for ten Dollars, ...and you decide you want to print up ten times more Dollars...the same amount of gold will now cover one hundred Dollar bills.

Same thing if it not covered at all, and you can get X amount of goods for ten bucks, increase the money ten times more, and the same goods will now cost a hundred bucks.

However, there is a mecahnism in the Fiat system that makes the currency be less and less valued, by extensive money printing, it is not because it is a Fiat system per see, but with the use of Central Banking, (Federal Reserve, Bank of England, Deutche Bundesbank....)...and the reason is... it is set up as a debt system, means that it will set itself up to a debt spiral, that means that more and more money have to be printed in order to pay for the previous debt....and THAT will inflate many automatically.

Darkforce,

I went to a local goldsmith the other day and asked what would be the best way to buy gold. He had been in business many years and bought and sold gold quite a bit.

He claimed that the best place he use is APMEX, and he recommended them strongly.

You can get bits. bars, silver, platimun gold, in Troy ounces or grams, bars, Gold coins like Canadian Maple leaf, Liberty coins, Krugerrand and whatever you want from there.

Gold bars are sent discretely and they charge between 20 or 40 bucks over spot. You might want to check it out.

I do belive in case of upheaval, or bankcloures, that the best bet is to sit on the gold yourself. I would hate to have it in a bank safety box, and have a "closed" sign on the front door.

...from what I understand, Silver have actually outperform gold..but belive that this may be temporary.

Guest,

Yes I get it,(don't worry) it is another facet of it here...and a lesser known phenomenon.

As this easing have continued, and we have heard pretty much that the Feds have bought out securites, and thus have let a lot of money out on the market, a phenomenon called "The Dutch Desease" can set in, and have.

It is a phenomenon that was described during the first year of the North Sea oilrush in Europe and the effects was noted especially in Holland.

Investments was done very much in oilrigs. That in itself took a lot of logistics, and almost small cities of oilworkers, and oil contruction sites grew up. That work was very highly paid compared to the rest of the society, so a local surge in prices, at those sites took place...those prices then migrated into the rest of the market, where the same conditions was not met, and thus this imbalance took place.

Basically what it is, is two markets that have been created in one big general market.

This imbalance is what have been taking place with the money easing that the FEds have been trying for a long time, without success.

As this easing have happened, it is logical to think that there should be a lot more liquidity in society, bit the truth is, as you may have noticed...the consumer market is very very starved of liquidity, thus we have a hard time kickstarting the economy.

The easing did instead create , like in Holland during that first oil boom years, two markets.

In the US , it created two markets ok, but they reacted differently than those in Holland...but created two markets it did, in where very little interaction is happening.

One market , the consumer market,is not affected by the influx of money, and another market, the banking market, where money have come to an "end user" and are locked into accounts.

That is the big big mistake, the feds , and the government are doing.

They take all these Dollars, and invest it in big corporations or bank institutions, that are faultering. Or push billions into the bond market.

What has been accomplished with that is that no liquidity have been pushed into society, but instead, the money have ended up locked up in big bank account earning interest instead, there are no lack of liquididty, and money in the US, it's just sitting, and doing the wrong thing right now.

It looks like the society is getting greased with liquididty because it is widely reported how much money that is pused on the market. The money is getting there yes, but to the money market, not the consumer market. The consumer market is in fact getting starved of liquidity.

Would ALL the money that have been spent so far, in Bailouts, and bondpurchases...each person in the US could have 15.000 bucks.

Now, if instead, each person had actually got 15.000 bucks, that would put all the liquididty back into the society. Cars would be bought, houses could have been saved, shopping malls would been full, and all the positive chain effects would have been quickly built up. Jobs would be created, that in turn starts the wheels spinning.

That is the imbalance you are looking at here, that will keep this recession going, it will be there until liquidity is again starting to flow in the society.

This recession could be over tomorrow, if the powers in charge would decide so.




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EmptyEterniT,

A sidenote here on rare earth elements.

Geologically it's not that it appears in the ground in China only, in the US there are enough of it, to sustain any of ur needs and more so.

Australia is by known geological surveys sitting on most of it, Afghanistan have enormous quantities of it, and so on.

The reason China is thought to "sit" on it, is because it is economical not feasible to mine it out side of China, ...it's economical reasons, not geological reasons.

EmptyEterniT,

Same as with Gold, China and Russia are mining it, and thus are increasing their reserve in big parts that way.

In the US you get arrested if you put a shovel to the earth because you are disturbing the habitat of a frog.

Ever heard of a gold mine?

Guest, regarding your question about why Ron Paul asked if gold is money, the Constitution specifically states that only gold and silver are legal tender, so I believe he is building his case that the Federal Reserve is unconstitutional.

When the dollar was backed by gold, the Coinage Act did not contradict the Constitution. Now that the dollar is backed by the "full faith and credit of the US government", the contradiction arises, since the Constitution does not name the "full faith and credit of the US government" as legal tender.

If you look at oil prices in terms of gold instead of dollars, it has been pretty flat, which to me means the markets (right or wrong) are not yet concerned about peak oil, but are rather concerned about the ability of the dollar to hold its value against real assets.

Guest, good point about peak gold. However, the thing about peak oil/gold, for one thing, is that rumors of it bring prices up, so I would not necessarily trust Mr. Regent, since it is in his best interest for gold prices to do just that.

I also have some evidence to the contrary, that gold exploration and worldwide gold production have not peaked, and that current prices are making production very attractive.

The other thing about peak oil and gold is that it seems like a bit too much of a coincidence that both peaks occur at the same time. I understand that peak oil could have an influence on bringing the peak gold timeline up, as it would raise the cost of gold extraction, but for it to occur virtually at the same time still doesn't seem realistic to me, since oil prices have not reached a point where it would be severely prohibitive to gold extraction.

As far as the gold:silver price ratio going haywire, that I can't explain, and can only hope that you're wrong about its cause . I'll make it a point to research that more though.

The point of holding gold is not to spend it now, but rather hold it until sovereign issue currencies loses value through inflation. By then people will force to abandon and use something that have a stable value base instead.

The fact that gold is not a common medium of exchange doesn't mean it won't be one.

Fiat currencies always crash...gold will be with us forever. Right now Canada and Russia both have warships in the Antarctic getting ready to mine not only tonnes of gold but also rare earth elements of which at this time China holds the supermajority of.

Ron Paul was right, gold is money, its why all the central banks bought it. Personally when I say Gold I mean silver too. Silver has more to gain since its used in the majority of technological items and is a smaller tradeable monetary unit. Silver will be 200 an ounce when the Fed Reserve decides to kill our currency for the one world currency..

The U.S. Geological Survey recently estimated that China has about HALF the world's 110 million metric tons of rare-earth deposits, however. Mining in the U.S. and elsewhere fell off several years ago, in part because of environmental concerns. Australia's Lynas Corp. U.S.-based Molycorp Inc. and other companies are ramping up operations. But a new mine can take a decade to develop, and processing of rare-earth elements will remain concentrated in China for years.

Taken from WSJ http://online.wsj.com/article/SB10001424052748704124504576117511251161274.html

Not so, here in Cleveland Ohio, the gas companies are allowed to drill sideways underneath your property to get to gas, often contaminating many properties and waterways...noone will do anything about it either...

it was and still is

Keep your gold.... I'll stick with lead........

Yes, there is man made Gold. It's not a problem, but expencive. It's quite easy to make radioactive Gold, but would You buy it. And as with Diamonds (man grown from D seed), everything can be made by man. Only question is - TIME....

Seriously who gives a crap? It's only money by definition if someone decides to accept it as payment. The same could be said for camels!

The central quality of money in the modern era is government control - any medium of exchange that cannot be directly or indirectly controlled by a central government does not qualify as money - Get it. Ben is with it - everyone else is guessing the answer.

Also let us not forget while on the topic of what is money - any definitions that at the core deviate from mine compromise national security - think, think, think. Money is too precious a resource to be outside the control of governments. That world has not come.

Sure but look how they track drug lords - money laundering - and let me stress governments do not "want" but absolutely "need" to control money supply. My point really is that regardless of how we state it - government backed money goes beyond economics, it is the ultimate form of state power, even more crucial in essence than the armed forces. Dig?

Money is Debt. Value of GOLD is just a Historical agreement.

IMHO: gold, silver, paper, iron, I don't think it matters. Money is money.

Interesting timing.A huge legal suite is on file against JP Morgan Chase and HSBC for manipulative practices in the Silver Markets.
It could potentially blow the doors off and send precious metals syrocketing.
Swissy should do good if the scenario plays out and these manipulators take a bath.
I don't think they were counting on further financial problems worldwide or the constant demand out of China which is becoming an awesome market.
The demand from central banks is back as well so on the dips,big players are stepping up.
Should be interesting to see how this effects certain currency pairs.

Maybe the Morgan Chase/HSBC legal action is related to why US traders can no longer trade leveraged precious metals instruments.

Dodd-Frank was in a partnership with MC/HSBC to tie up precious metals trading.

At least, we should start a conspiracy theory and get Dodd-Frank deported to the Canary Islands.

Is gold money? That cannot be answered with a simple "yes" or "no".

@LoadedGun... Of course the government(s) want to control money supply. But if Central banks were to sell gold reserves would that not equal money to pay down national debt?

I wonder if drug cartels really care if Bernanke says gold is not money? Do you really think "that world" has not come yet? How do you explain the skyrocketing value of gold? Certainly, it isn't because so much more of it is in demand for industrial applications.

I wonder why so much is being made out of a question that should not have arisen in the first place. We all know that money is the accepted means of exchange for goods and services. Can you legally compel parties involved in business transactions to accept gold as the means for settlement of outstanding obligations? The answer to this question settles the issue as to whether gold is money or not.

"Can you legally compel parties involved in business transactions to accept gold as the means for settlement of outstanding obligations?"

End of story!! All is well and we have nothing to worry about.. Thank you for clearing this up.

I wonder why Ron Paul asked this question... in the video he asked "if gold is not money, why then do central banks hold gold as reserves?"

video here: http://blogs.forbes.com/afontevecchia/2011/07/13/bernanke-fights-ron-paul-in-congress-golds-not-money/2/

does anyone know what Ron Paul was trying to get at? I know that he believes gold is at an inflated price because of the fiat money supply,, but what was he implying by asking this question that has an obvious answer?

can anyone help me out on this one? thnxs...

"Constitution specifically states that only gold and silver are legal tender"

well I, for one, just got schooled on the constitution!

As a currency trader, it is good to know whether fiat money is constitutional or not, won't help me trade,, but if you take this business seriously,, that definately is something to know!

thnks fierceman!!

The U.S. Constitution, Art. I Sec. 10 Cl. 1, states, in part:
No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

On the other hand, coins made of gold or silver may not necessarily be legal tender, if they are not fiat money in the jurisdiction where they are preferred as payment. The United States Coinage Act of 1965 states (in part):

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts.
—31 U.S.C. § 5103

There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.
Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise

this is what I dont get--
if the price of gold is inflated because of the money supply... wouldn't we have the following situation of everybody walking arround with an extra $17,000 in their pocket because money is so abundant and the price is becoming lesser and lesser because the supply is greater than the demand?

I just dont see it that way... if the money supply is increased,,, it has no affect on the value if the demand is not met... and the demand of money is definately stronger than the supply when were speaking of the average US citizen..

I know there is much debate behind the money supply theory of price level and the keneysian argument... but were talking fiat money here where the exchange rate is an endogenous variable... where there is an equilibrium of supply and demand that is met with rational expectations from that of speculation,,,

the current massive external debt imbalances are basically that of surplus countries that are holding there wealth in reserves... or for that matter,, anyone skilled in finance whose wealth is tied up in assets and savings,, but the average person still has HUGE unmet demand for this undervauled fiat money...

gold is probably inflated because of central bankers and the rich keep buying it or for whatever reason... and the rest of the inflated goods are a shadow of high oil prices... you can argue that oil prices are because of huge money supply,, but it makes more sense if you look into the ever increasing demand but limited supply,,, when were speaking of cost and price of trade/exhange,, oil prices will directly effect this in the global market

and because of usd is THE nominal unit of account for import/export oil exhanges,, the US is a supply constrained ecomomy while the rest of the world is demand constrained as directly compared to notional supply/demand where money supply probably would have a direct affect on overall price levels,, but that is only in a balance equilibrium global market,, we definately dont have that here..

but if the money is not "out there",,, in other words,, the trickle-down theory didn't work....

'If you feed the horse enough oats, some will pass through to the road for the sparrows" well if the oats don't make it down to the sparrows then the supply never met the demand...

what your saying is supply flooded out the demand........ but in reality the supply is tied up somewhere at the top...

price is not determined strickly by demand in your superbowl analogy... there are COSTS as well that determine the price... now consider that one of the COSTS in the price level is DELIVERY,,, for an example,,, due to the spillover affect that oil prices have on ANYTHING that is associated with delivery of goods through gasoline, and you have a good basis for inflation-- as far as the reason of high gas/oil prices-- look into peak oil-- as we near the limited supply of a finite resource, and global demand increases through growth,, we see higher oil prices that spill over into the costs of just about every other market on earth

in 1998, gold mining production hit its all time peak,,, consequently, between 1998 and 2006, gold reserves in central banks grew by 28%, as the mining production decreased by 20%....

5% of the worlds energy (crude oil, natural gas and electricity) is devoted to that of mining production,,, on top of that you have jewellery production and industrial consumption, which is subject to oil costs

believe it or not--Just like the Hubbert peak of a resource for oil, there is peak gold also... and if the central banks knew about it, that probably explains why we didnt...

In 2009, Barrick Gold Corporation CEO Aaron Regent claimed that global production of gold had peaked in 2000.
In 2006, with gold at $650 per ounce, Roland Watson claimed that gold production had peaked in 2001 due to falling exploration in the 1990s, when gold prices were low. He predicted that higher prices and new technologies would boost gold production to higher levels in the future.

you can find some more evidence about peak gold here:http://seekingalpha.com/article/16607-in-defense-of-peak-gold-evidence-gold-production-peaked-in-2001

if finite resources such as gold and oil that have such limited global supply are inflated because of USD money supply, then what explains the $40 silver prices that has not reached peak supply?

Jolly Rancher,

I understand your point of view... the problem with associating fiat money supply with inflation is that when it is created out of nothing and is not in circulation it might as well not exist at all... that is logic as the average consumer who deals with inflation cannot simply have access to the overabundant fiat money when it is counted as demand deposit data in a countries reserve account... simply put, because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports... just look at china's reserves full of USD-- just sitting there not being recycled or circulated in the money supply

"it still works the same once it is on the market."

well that is the problem Jolly Roger... The markets are in disequilibrium causing the system to be inefficient to normal monetary policy with dollar hegemony,, i'll explain it again... oil's daily increasing demand is rising faster than the calculated limited supply is being used up-- this causes a disequilibrium in supply/demand, raising the price of oil... the higher cost of oil then spills over into the other markets causing cost-push inflation-- that is where the cost of delivery/exchange in a import/export trade increases because of higher fuel prices and therefore takes more currency to now purchase the products ( let alone, it takes more money to purchase oil itself)..
Now we have disequilibrium spread into the entire economy, where the supply/demand is unbalanced,, setting the stage for the 2007-08 crisis.. now what happens when monetary policy comes in to do the clean up job through quantitative easing, but since the unemployment rate is higher the money supply never gets passed down to the income level because there is no job to meet the demand of labor... so now if the fiat money is not circulated, how can you consider that it is Oversupplied to the consumer? if it is not oversupplied to the consumer, then why do you suggest that the USD is higher because of inflation? -- no matter how much fiat money that is pumped into the market, if it is not being circulated through income, than it is useless.. consider when the financialized fiat money is created.. it is just a digit on the screen.. now ask yourself-- if the Fed ads another zero on the screen, and that extra zero is exchanged for imports and that extra zero does nothing but sit on a balance sheet in china's central bank.. and it is never turned into hard cash.. now they just take that zero away,, it will not have produced inflation at all... why? because the unbalance trade deficit is already in disequilibrium because of increased demand for oil in a limited supply has boosted prices and now we need more USD to supply for high oil price,,, get it?

at least we can narrow down and separate the two extremes from one another

limited supply of resource = value increase in time
unlimited supply of money = value decrease in time

the guest was right to bring up the point of inflation not solely based on just one element of money supply

the money supply has to be control and issued at the same rate that energy resource is supplied in order to maintain a non-inflated price

if the resource supply is slowed down because of the fear of running out or if it is just slowed down for whatever reason - then the reaction is higher price because now you have more money supply then resource supply

if the resource supply stays at the same rate with no disruptions, but for some reason the money supply is increased - then the reaction is higher price because now there is more money supply then resource supply

for those economic junkies out there - that is the balance between supply and demand - or "equilibrium"

so you see- it is either one or the other - or a little of both

Which is it? Well, with whether or not peak oil is a reality or not at this moment - I do not know, but I believe it already has had an affect in the price - because even if it hasn't happen yet, researchers for oil companies are aware of it. And if they are aware of it, then there has to be a restrain on the supply limit - and that is higher prices - once the price is allowed to be at it's peak (2008) - then the money supply is expanded to match the demand for for higher prices - this is done in increments until a balance is met at the higher price that is intended to control the limit of oil supply

So I believe the price of oil is intentionally high right now because that is what is needed to be done in order to slow growth

The higher prices can be intentionally driven higher due to consumer spending - so what they try to do is put cash in the hands of consumers and encourage spending - this is done through interest rates, tax reliefs, and job creation - unfortunately, this works against the purpose if consumers chose to save and buy gold -

I believe silver is still at a reasonable price for the simple fact that the resource is not very limited at all -

Gold has a Paradox of value in that it is not much useful as a tool
I believe that this paradox of value is the reason why it is priced higher than oil

oil has a value of usefulness, but is lacking the element of people buying it for investment purposes

in a time of crisis, the paradox is that everybody wants a useless tool more than a useful tool - that is why gold is higher - but its a tool that can be used for medium of exchange that won't lose its value - so I guess it is not a useless tool, but you get the idea, you get heat from oil and nothing from gold

I could keep typing more and more about it - on the website of Peterson Institute for International Economics (of which rockefeller is one of the board of directors) you will find archives of research papers - some of which were written on the overvalue of the dollar and what can be done to bring it down - and these were written before this big mess

Gold has value.... and it always will.

You could argue that gold is worth more than money.... but then so is food.

If money = "medium of exchange", then no, it doesn't fit the description.