Gold And Its Intrinsic Value

Written by : NGDlover

If you buy the gold, actually you not only buy the price, but you also buy its intrinsic value. what is this intrinsic ? Intrinsic value, in general, is the argument that the value of a product is within the product rather than dependent on the buyer's perception. Intrinsic value, in the truest mean, is a forever's value, not only for sometimes. Its like the eternal value, cannot changed by anything, from thousand years ago until beyond tomorrow, and suit to the precious metal called gold.


Intrinsic value has different meaning in commodity or in  numismatics (see explanation here....).


Due to this intrinsic value, an ounce of gold measured in hundred years ago is exactly similar with ounce gold today and must be similar with ounce gold on the next hundred years. This become a base reason for the gold to be a truly anti inflation investment tools.

If we look at other popular investment tools, such as oil and stocks, as a comparison, they are not fit with term anti inflation tools. They are new to be an investment vehicle (start only from 18 centuries), and the demand for them even could disappear in the market,  here is the reasons :

• The market have a peak point of demand. For example, coffe turn down from its peak price when the demand remain constan but the production overflow. For gold, it never happen. The demand always available, it never saturate !

• When new invention emerge, the demand come down. For example, if the car with electric fuel come into market and becoming popular, what do you think about gasoline demand ? In contrast, demand of gold never influenced by new invention like this, it never happen for gold. The gold is always and always being needed for peoples around the world. Therefore, when commodities like iron, coal, or coffee may getting up and down in price, they will have failed to be a long lasting hedge investment tools.

But we can buy some inflation protected securities, can't we ?. True, inflation-protected securities (like hedging, put call option,etc) is easy to buy and require no storage space to keep it. But can you translate this intrinsic value into real ?

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