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Governments can influence the price of gold bullion but not its worth.

October 12, 2011 - Gold bullion prices have weathered the storm and are once again closing in on $1,700. And the gold bears are once again wiping egg off their faces.

Not so long ago they were wringing their hands in glee as the price edged downwards towards $1,500. If it fell below that Wall Street would declare victory over their nemesis once and for all. To their great dismay, it never came close to the magic number, but what if it had?

The fools in charge of economic policy are greatly threatened by gold and will do everything they can to scare people away from it. I have absolutely no doubt that the central banks in developed countries did their best to bring down the price of gold bullion, only to prove its resilience. Even if they had succeeded in dragging the price down lower, they wouldn’t have been able to hold it down for long.

The plain truth is that money cannot equate to wealth when you are free to print as much as you like. Douglas Adams gives us the perfect analogy in “The Restaurant at the End of the Universe.”

A spaceship carrying phone sanitizers, hairdressers, and countless other non-contributors purged from some advanced society crash lands on a planet and haplessly goes about trying to structure a society. Surrounded by dense forests they make leaves their currency, instantly making everyone unbelievably wealthy. Of course, all that “money” couldn’t buy a thing because it had no value.

It is often argued that gold bullion also has no real value, that its worth is just what we say it is. To a degree that is true. But mankind has been consistent in saying what gold is worth for centuries. Why gold’s value has transcended every social, political, economic, and technological change is a question for the philosophers. All that matters to me is that it has done so, and there is no reason to think it will not continue to do so.

While governments can play games with the price of gold bullion in the short term, they are powerless to change its worth.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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