Why Is Gold the Ultimate and Timeless Money?

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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.

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.

(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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the rest of the article

December
29, 2010

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