Why Is Gold the Ultimate and Timeless Money?

     

I have posted below the year-end price of gold starting with the year 2000, the first up-year of one of the greatest and least appreciated bull markets in history. Take in this series, you may never see its like again.

2000 – $273.60 2001 – $279.00 2002 – $348.20 2003 – $416.10 2004 – $438.40 2005 – $518.90 2006 – $638.00 2007 – $838.00 2008 – $889.00 2009 – $1118.40 2010 – ?

I’ve been around a long time, and I’ve studied many primary bull markets. And now I want to venture a few of my observations.

Gold: The Once and Fut... Nathan Lewis Best Price: $1.94 Buy New $21.11 (as of 04:35 UTC - Details)

In markets, I have never seen a series like the above end with a whimper or a fizzle. The end or the wind-up of such a series usually arrives with an upside "explosion," as those who have failed to participate in the series finally rush in to join in the apparent endless advance. This is the wild and wooly speculative phase of a great bull market. Big bull markets don’t end with a sigh, they end in exhaustion.

Money, Sound and Unsound Joseph T. Salerno Best Price: $31.95 Buy New $51.85 (as of 08:00 UTC - Details)

(1) Most great primary bull markets last longer and carry farther than the majority of investors (even the bulls) expect.

(2) A great primary bull market is an expression of something changing in a very fundamental and meaningful way. Following a great bull market, the world is never quite the same.

His father, Congressman Howard Buffett, understood gold, but his son, Warren Buffett, does not understand gold.

Maybe this will help Warren. Why is gold the ultimate and timeless money?

Good money must have a number of unique characteristics.

(1) It must be durable, which is why we don’t use wheat or corn.

(2) It must be divisible, which is why we don’t use a Picasso painting or jade statues.

(3) It must be convenient, which is why we don’t use lead or copper or real estate.

(4) It must have value in itself, which is why we don’t use paper.

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December 29, 2010