normaldude wrote:Chet wrote:This is a valid comparison, because gold is valued mainly as a monetary asset (just ask the world's central banks) than as an industrial or jewelry commodity.
False. The vast majority of gold is used for jewelry (mainly in India & China).
- http://etfdailynews.com/wp-content/uplo ... raphic.png
India's Love Affair With Gold. "No gold, no wedding," is a saying in India, indicating the importance of gold to Indian culture and tradition.
- http://www.cbsnews.com/8301-18560_162-5 ... with-gold/
Gold is a globally traded commodity, and the price is driven by global supply & demand. In America, we think of gold in terms of Fort Knox and doomsday preppers. But that doesn't reflect how gold is used around the world.
There is an analogy I have noticed.
Americans place a much bigger premium on diamonds ('a girl's best friend', 'he broke it off, I keep the ring', 'size of my rock', 'a month's salary for an engagement ring') than I have seen Brits do. It's something of a fashion thing.
On India, I have read the Indian retail market has coughed on the current gold price-- suggesting the smartest buyers have stopped buying, and indeed are selling.
In countries with exchange controls, confiscatory government policies (capital taxes, sequestration of assets before judgement in tax cases, arrest without warrant etc.), then it makes sense to own gold as an alternative to volatile currencies and vulnerable bank accounts. Think India.
Iran is a major retail market for gold-- with high internal inflation and all of the above pathologies, Iran's vibrant merchant class trades actively on the black market in Dubai and Bahrein, and gold is a good way to move money in and out.
Just as middle class Argentines keep USD accounts in Miami or Uruguay, so Iranians own gold.
Gold is a traditional hedge against political volatility.