The conversion rate of gold to USD vastly exceeds the intrinsic value of gold. People are investing in gold far more than they would ever invest in any other commodity.
In other words, you'd be a fool to use gold as a commodity material in manufacturing when any other similar material would do, because we've collectively decided that gold has more value than its usefulness as an element would otherwise indicate.
Currencies aren't commodities and have no innate value. The represent wealth, they aren't themselves wealth.
> In the case of a government-backed currency, there's at least some value based on that government's ability to mandate its use for taxes.
That begs the question -- by which I mean it assumes what it should be proving (the real meaning of "beg the question"). The fact that government collects taxes using dollars as a medium of exchange doesn't mean the government's action validates dollars, but that government gives dollars the same regard the public does, for reasons having nothing to do with government itself.
> This doesn't mean that Bitcoin can't be valued but it means that the community has to have a strategy to provide equivalent reassurances.
The validity of dollars results from public familiarity, faith and trust. This may or may not happen with Bitcoin, but that's the usual route to currency validation.
Just like a commodity then. Where does this "intrinsic value" that you think gold has come from?
Your definition of commodity is incorrect. See http://en.wikipedia.org/wiki/Commodity:
“In economics, a commodity is a marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services.
The exact definition of the term commodity is specifically applied to goods. It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market.”
Gold and silver meet this test because they have other uses (jewelry, industrial, dentistry, etc.) dating back throughout recorded human history.
In contrast, bitcoin – like all fiat currencies – has no value except as a unit of exchange. There's nothing meaningful that you can do with them unless you find someone else willing to accept them – defunct paper currency could at least be used for kindling…
1. Jewelry
2. Electronics
3. Dentistry
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Uses for USD (besides trade):
1. Rolling in it
This doesn't mean that Bitcoin can't be valued but it means that the community has to have a strategy to provide equivalent reassurances.