The Value of Gold
So, does gold have any value or not?
Well, that is a good question. However, there has been a merciless battle raging for quite some time now regarding whether or not investors should consider including gold in their portfolio.
On the subject of whether or not gold has any value or not, Warren Buffet completely disagrees.
According to him, gold is worthless, he stated that gold is getting dug out from beneath the ground in Africa or some other country, melted, buried in a hole again with people getting paid to protect and secure it.
He says gold carries zero utility.
While Warren Buffet being an investment tycoon is right on a plethora of things when it comes to the financial industry, this is something that he couldn’t be more wrong about.
Here, it is important to understand that the people who deny gold as a viable addition to an investment portfolio analyze and evaluate its utility under the microscopic view of a standalone asset. They only regard gold’s absolute value and disregard it as fiction.
This is a point of view and perspective is completely wrong. Gold’s value is eternally relative.
And that is primarily because of the fact the value of gold will always be relative to any other type of asset, the economy, or the currency, for example, GBP, US Dollar, Euro, etc.
In simpler words, the value of gold is just the same as a gallon of milk stored in the fridge before you’ve had a glass of it, but the value of gold will also be relative to the cost of production associated with producing, processing, and packaging that gallon of milk.
With that being said, it is agreed that the absolute value of gold can remain the same throughout its frighteningly long history; you have to realize that its relative value today is also subject to the same factor of fluctuation that affects global currencies like the Euro or the US Dollar.
So, you may get more currency for your gold in less fluctuating markets and at the same time, you may get considerably less currency for your gold when things are a bit shaky in the economy.
However, whenever inflation bloats, which it will, the value of the currency will be subject to considerable depreciation – while relative to this depreciation of the currency, the value of gold will begin to significantly rise and will go higher.