> And didn't Nixon go off the gold standard to avoid a collapse of the
> dollar? Then came the oil standard, which Kissinger and all used to
> prop up the dollar, no?
> Marta
No currency is on a gold standard any more.
John Thornton wrote:
> Since use of these metals, especially platinum, is rising every year why
> shouldn't they rise in value unless we started finding large deposits
> elsewhere and they flooded the market?
I can't speak to platinum, but a vast quantity of gold is held by central banks and private investors. So, if you are thinking of gold as a commodity to be used in industry, it would be very easy to find large deposits of it to flood the market -- I would start digging at the Federal Reserve of New York and my next prospecting would be done at Fort Knox, which together hold 6% of all the gold ever mined (slightly less than 3 years' global production). The top 11 gold reserves hold 8 years of global production amongst them (according to http://en.wikipedia.org/wiki/Official_gold_reserves).
I'm not saying this is going to happen -- but imagine that one day all the governments holding gold start having the same existential doubts about the intrinsic value of gold that I do, and decide it's time to get out of the gold-reserve-holding-business for good. They suddenly drop 8 years of global production all at once onto the market. What would happen to the price of gold, then? (And if your currency *were* on a gold standard -- boy howdy you'd be hurtin'...)
This thought experiment suggests to me that the idea that the value of gold as a hedge against inflation is just as dependent on the goodwill of government entities as the presumed unwillingness of central banks to indiscriminately run the printing presses is. "Investing" in gold is, much more than investing in anything else, a matter of second-guessing speculator psychology and government policymaking.
Like I said, I don't understand it -- but I did put some money into it in the form of investments in mining and prospecting concerns. I did make a concession to my reluctance to invest given my ignorance of the actual market mechanisms; mining companies have actual capital involved, as well as some diversification in which minerals and metals each company produces, so it's ever-so-slightly hedged against the mad psychology of crowds and governments that drives the market price of the shiny stuff.
-- "The more I practice, the luckier I get." -- Ben Hogan