Tuesday, June 1, 2010

Golden Lies in Barron's Strengthen the Bull Case

From a Credit Writedowns post today, quoting someone named Richard Wiggins from this past weekend's Barron's:

Only 15% of gold is used as a monetary metal; the rest of it is used as a commercial metal, and that use, particularly as a corrosion-resistant electrical conductor for semiconductors, is declining. Regrettably, it is a soft, semi-useless metal with very few industrial applications.

Of course, the above is BS. Gold's use is as a store of wealth. The largest gold importing country, India, primarily bends gold a bit and people wear it as "jewelry"--but it is basically a wearable form of bullion.

Gold's use as a monetary metal is intrinsically part and parcel of its limited industrial uses. Thus, its pricing is insulated from economic cycles and is determined by the perceived usefulness or debasement of paper/base metal "money".

Mr. Wiggins' use of the term "regrettably" gives his game away.

More likely his major regret is that personally, he didn't get long gold when the getting was good.

The more I see this sort of low-quality attack on gold, the more I am inclined to overlook for now the growth in gold-dispensing ATMs for the trading part of my precious metals portfolio and go with the major trend.

Gold has more industrial usefulness than Federal Reserve notes or the alloys that we use as coins, all of which are more useful than the electronic entries we accept as money.

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