RE: Why Gold Is Still the Ultimate Monetary Asset.
I'd argue that physical metals are indeed speculative, due to major contracts being traded with delivery taken on outright positions in futures markets.
In any case, I'd also add cryptocurrencies to the mix, as a new asset class they have certain advantages over outright physical.
The unfortunate part about metal markets is they seem to be completely "captured" by governments. They sell coins to citizens, regulate the markets that are traded, and have restrictions on carrying any wealth across borders using physical.
Sovereign nations stockpile gold for now, but many are looking at cryptocurrencies as a possible store for more flexible asset allocation and transfer.
We've been hearing the "big disaster" story for a while now, and eventually debt will destroy the fiat system, but for now there's no real outlet except crypto. Physical will have severe disadvantages when edicts on holding and transport are enacted.
I beg to differ. PM will always have metal value so it is really less speculation than any other "instrument" with backing or not.
I draw the comparison between stamps and fiat money. The post office will keep printing different design / series. Unused stamps that is supposed to be worth more sitting in someone's collection just translate to them not having to actually do any work for the currency collected. As for the stamp will always have face value argument, inflation will for sure wipe it out. On the same token issuer of fiat would like everyone to think it has value and hold lots of it so the purchasing power can be spent by the issuer and the holder will lose out to the endless printing / inflation.
Crypto at this point seem to have the same issue. Until a required service or commodity is tied to a crypto monopoly like the petro dollar setup, crypto is still a payment method and not a store of value.
I have no problem with disagreement, it makes for interesting conversations.
Your comparison to stamps for crypto wouldn't be accurate. Bitcoin, for example, has a set upper limit on issuance. Network effects and inherent algorithmic enforcement makes changing this very difficult, if at all.
Markets assign value, people subjectively "value" things as they see fit.
My point was that there are inherent benefits to crypto where physical is cumbersome and unwieldy. I can memorize a passphrase and transport millions in value across a border, with complete impunity.
As for the inflation argument, Gold does have inflation, every ~100 years the supply doubles. Its just at a slower rate than fiat currencies. However, that may all come to a screeching halt when Silicon Valley billionaires get their way.
They are planning to mine the Kuiper Belt, and drag a metal-rich asteroid into near-earth orbit. I'd shudder to think what will happen to metal markets once that is a known factor.
Even if that scenario never comes to pass, metals are so heavily scrutinized and regulated by governments it doesn't seem to me that they are too threatened by their existence. If anything, they will just have another confiscation event if it even seems likely there's too much in private hands.
Its happened before, and that is where crypto shines -- no one can come and take my private keys from my brain. They wouldn't even know that they were stored there in the first place.
Gold on a shelf, well, that's a very weighty problem in that scenario, indeed.
Yes you are correct, gold supply increases with time. I was looking at the number and saw a higher population and GDP growth than the supply growth to justify that the increase gold supply does not impact price negatively.
The introduction of service backed/specific crypto drew me towards the stamp comparison.
Yes market assign value to crypto but as long as there is need for root node/exchange, it is easier for Govt. to shutdown / stick in some kind of regulation fee / tax and then it is no different from holding fiat.
They can't print but they can stick in a fee of 2% on every transaction for whatever reason they can come up with, just like target 2% inflation to chew away at purchasing power.
At the end of the day, we are all looking for something to hold that can keep most value for our golden age, right?
Thanks for sharing your thoughts, I thought we are way off from space mining. Got to update myself.
When they pry it from my cold, dead fingers.... hehe.