This is generally the same reason there are buyers of sovereign debt (i.e. Treasury Notes) at a negative interest rate.

If the Eurozone collapses, as is more possible every day now, then that's a case in point for diversifying away from Euros. Some other choices in this Great Recession are USD, U.S. Treasury Notes, Japanese Yen, Swiss Francs, etc, none particularly attractive right now. The Chinese Yuan isn't a viable choice because it is pegged to the dollar.

[Edit:] The point is to deal with the current high risk of currency free-fall, not your normal everyday investment ebb and flow.

Because people are heavily influenced by the "panic! panic!" media nowadays.

Supposedly things would "never be the same again" after September 11 and the industry for comedy would collapse. Then we were meant to be dying of avian flu.. and then swine flu. And then the economy was meant to collapse some time in 2009. And then.. oh yeah.

Another panic, another year..

Since these traits, at least on planet earth, endure regardless of the various cultural and economic trends which overtake economies from place to place and from time to time, gold is insulated from the shifting winds of human whim like no other substance on earth. THAT is why gold has = money for thousands of years. No store of wealth based upon GDP or legal tender laws can compare because all such stores of wealth are transitory, and given time, will fail.

China is not likely to stop intervening in foreign currency markets, though there is a substantial risk to their economy if they do so. But people forget that long before China was subsidizing US trade imbalances, Japan was. And they'd likely replace China as the purchaser of dollar securities in order to stave off the inflation of the yen.

Please visit http://www.bookstore.petersoninstitute.org/publications/inte... for more information.

It's battering. Gold is a commodity. So if things really did get that bad, gasoline, food, water or anything else (batteries), would be a much better bargaining medium.

That's what people don't understand when they make this argument. If you hold the physical gold, the value is up to debate and barter, your $1000 worth of gold just became $50? If you hold certificates, then it's just worthless paper.

So the scenario where gold works best is short of total collapse and in which you can get it converted to some foreign currency that is still accepted in you home country.

Again, in New Orleans, people didn't suddenly break out doubloons and start normal operations, so the short term is out.

Where is gold a reasonable investment for the "doomsday" scenario? I'd really like to know, because logically I can't think of a good reason to hold gold.

I question. You clearly take that as virtually axiomatic, but I question. Gold's ultimate value is that it is pretty and shiny, and industry has produce metric shitloads of prettyshiny since the last time gold had any real independent value as uniquely prettyshiny.

Your gold is only worth what people will give you in return for it. If society collapses, who is going to trade you gold for food? You'd better hope enough people buy your propaganda about gold's value because it's going to be your only hope; the market for gold jewelry is going to be pretty small and effectively saturated.

Gold has no value anymore. Yes, historically it was valuable, but times have changed. A lot.

God help those who are long on gold once we start asteroid mining. Be sure to dump your gold holdings before then, ideally several years before; once the market figures out what that means gold will plunge even before the asteroid gold hits the market. (By "plunge", I mean that I could see it losing 99% of its value in less than a year. No joke.)

Really, I think gold is interesting because it's rare and thus coveted.

edit - no offense if you enjoy gold, I was just making sweeping generalizations for expediency

Well, there's also expectation of future gold jewelry markets. Assuming we live like Mad Max until the end of time, sure, who needs gold. But if we expect things to improve later, with luxuries becoming a reality again, people holding lots of gold have it made.

Is it an investment? No, and anyone treating gold as an investment is acting very foolishly. Gold is money, plain and simple. It has retained its essential value for centuries.

Gold has real value as, for example, a material used in electronics. That is about it aside from aesthetics.

Additionally, humans ascribe (nonexistent) value to gold for the reasons you mentioned. You can certainly argue, as some others seem to, that being suitable for use as currency is value inherent but that assumes the necessity for currency. In the past, perhaps.

Not to detract from your point though - it just has wider uses than merely electronics :-)

However, even then the unspoken and often ignored requirement is that there is something of real value that the currency can represent. This also ignores fluctuations in the perceived value of gold, which belies its valuation not being tied to its function as currency. Arguing that e.g. mining for gold is a service whose end product is currency, "consumed" by others is circular (but in reality that does not matter.)

I suppose it can simply be said that gold is considered to have value by common agreement; but that agreement is not irrevocable unlike some believe.

EDIT: Also, why is it so hard to imagine taking care of the debt? Or is it because he has little faith in taxpayers' willingness to pay into it?

I imagine that's why Scott's friends are buying gold. Not because they think the end of the world is nigh, but because they think the dollar is going to have to be devalued to sidestep the crushing debts that have been run up.

Commodity based currencies prevented this sort of shenanigans because of the non-zero cost of adding to the money supply (the cost of mining gold and silver is much much greater than the cost of adding a few billion dollars to a government accounting ledger).

So it seems to me the value of gold is at least in part tied to the sense that governments will need some part of their money supply to be commodity based, and at least in part to the sense that fiat currencies will eventually fail.

Can someone clearly explain the positive argument for going off the gold standard?

Fiat money was an answer to this, it allows the Fed to inflate the money supply during hard times to keep the money supply liquid enough to keep trade going. Of course, they're supposed to deflate the money supply during boom times to stave off unnecessary inflation and prevent bubbles.

* Is easy to arbitrarily divide * Is scarce * Can't be inflated * Is easy to transport

These are the properties that make it valuable as a currency, not some irrational desire for shiny objects.

You can make pretty much anything look like a good or bad investment if you pick your start and endpoints carefully.

I think the most interesting, non-arbitrary comparison would be an investment starting in 1971, because this whole discussion is really about a fiat currency system versus gold, and how people value gold relative to such a system. 1971 is when the U.S. went completely off of Gold to a fiat system.

At the end of 1971, a few years after Gold started trading on open markets, the price was $41.25 an ounce [1]. Today, it is $1,100 an ounce [2]. That is a 26 fold increase.

At the end of 1971, the DJIA was $900 a share [3]. Today, it is $10,000 a share [3]. That is an 11 fold increase.

Gold outperformed our current dollar system, since its inception, by more than two fold.

That's not to mention the fact that you didn't have to do anything with Gold -- you just held it. With our dollar system, you'd be a fool to just hold the dollars themselves (because of inflation), so you are forced to speculate in the stock market or other risky vehicles.

[1]: http://www.measuringworth.org/datasets/gold/ [2]: http://www.cmegroup.com/trading/metals/precious/gold.html [3]: http://www.google.com/finance?client=ob&q=INDEXDJX:DJI

edit - and smelled as well