Why do we hoard gold? In defiance of the world of fiduciary payments. Because of fears about war, revolution, devaluation, taxation. To avoid paying inheritance taxes. To remain true to ancestral reflexes that ensure that gold as a refuge and gold as a reserve prolong the gold fetish.

Hoarding gold has both advantages and disadvantages. On the side of the advantages, one has to include its discretion, gold can not be identified. Unlike notes and cheques, which are numbered, coins have no serial numbers and whilst ingots are numbered, it is easy to remove the mark or simply melt the metal. Gold’s longevity must also be added to the positive side of the scales: neither the air, nor the earth damage it; as the Indians say: ants don’t eat it. It does not change over the centuries. Gold is a durable security.

In terms of disadvantages, the metal’s sterility must be considered. It has no yield, unlike a security, goodwill, an industrial company, a bit of land or rental property, it provides no revenues just like a diamond, a precious stone; a painting, a carpet or a collector’s piece. The capital that it represents can even decline if it has been bought at a high price. But gold hoarders usually consider gold to be an insurance policy and the insured does not complain until he/she wants to make a claim. Like insurance, gold only pays when a misfortune occurs.

However, investors often hoard gold more by instinct than for good reasons and, to them, gold’s virtues are primarily sentimental. Even when you demonstrate that they are wrong, they continue.

Their attitude is different depending on their geographical location, their social status, their profession and their age.  Whether it is more or less logic to conserve gold depends on the country where you live, your wealth, the profession you practice, your life expectancy. A amateur philosopher would say “the reasons for hoarding gold are subjective”.

Alongside these simple instinctive gold hoarders, there are others, fewer in number, who see gold as an investment and the opportunity to make a capital gain. These people are looking for a revaluation of the official price. They speculate on a decision that will make them richer.

It goes without saying the gold hoarder, of either type, only acts based on what he or she considers to be in their own best interest without worrying about the general good. From the State’s point of view, they are subject to taxation. From the nation’s point of view, its ties up investment funds which, if used differently, could be productive. From a higher economic and ethical view point, their behaviour is useless and egoist. However, the severity of these negative criticisms does not worry owners of gold. They believe that they are defending themselves against a State that robs them and a society that threatens them. They add that we will be only too happy to have them and their gold when they decide to put it back into circulation.

René Sédillot – “Histoire de l’or” – Publisher Fayard

Tags: Gold, History, Investment

This entry was posted on Monday, January 11th, 2010 at 6:00 pm and is filed under Economy, Gold, History, Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.