Storing Value Since 2500 B.C>

Storing Value Since 2500 B.C>

A strong push by the profit-takers forced gold to retreat today. No one can blame them. It's been a fairly quick, not quite parabolic, ride up in prices that we've seen in the last week or so.

They were lucky to cash in with their particular timing because prices have recovered a bit into this afternoon 

There was other news that hurt gold, but it seems to us that in concrete terms it was news that had already been accounted for by markets prices. Nevertheless, sentiment on the precious metal was dinged when the World Gold Council solemnly proclaimed that global gold demand fell 15% in 2013 because of continued outflows from physical-gold-backed ETFs (exchange traded funds). That outflow ended up outweighing record consumer demand.

It's a kind of "the cat ate my homework" excuse to sell off a bit.

The countervailing figures from the WGC showed that demand for gold jewelry rose 17% and the demand for gold bars and coins rose 28%. 

The Federal Reserve Bank of New York reported that its general business conditions index punched in at 4.48 this month, down from its 20-month high of 12.51 in December. Analysts had expected the index to decline to 9.00. That helped gold recover a little and kept silver in the green, or upward ticking movement area. 

There are a number of articles being launched that predict the imminent fall and destruction of bitcoins, the silly electronic frenzy-producer craze.

Interestingly, a friend of ours pointed out that in the Whole Earth Catalog, "hippie bible" of the late 1960s and early '70s, a page is devoted to the rise of the "token" (literally physically a metal coin unassociated with national treasuries) economy.

The belief 45 years ago by the Utopians was that a barter system based on some sort of privately minted tokens would spontaneously arise that would be backed by small-farm and small-factory products along with a good dose of blind faith.

Like bitcoiners, the tokenistas said that the world economy would collapse soon, and that gold and silver would be useless. Well, let's not get into a discussion here about the stability of the world's economy.

 But do let's get into why gold, which has a very good intrinsic value, but clearly is not as utilitarian as, say, oil, retains its position as a store of value. The answer is actually fairly simple. 

Over centuries, large numbers of people have agreed that gold has value. They imbue it with social, cultural and economic value via consensus. This consensus has been built and nurtured over many, many, many centuries. 

Perhaps one day a newcomer will arrive and dethrone gold. So far, many stand-ins have been shot down: tulip bulbs, Florida wasteland, the above-mentioned tokens, and now bitcoins. 

Yet, here gold still is, the ultimate store of value.  There should be a sign over Fort Knox or the New York Fed vaults that says something like, "Storing trillions in value since 2500 B.C." 

We wonder what bitcoin's motto would be.