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Here’s One Reason Gold Is Money

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Gold is money. Gold has been money for thousands of years. And one of the reasons gold is money is because it’s immutable.

That’s just a fancy way of saying it can’t be changed or destroyed.

Aristotle listed four characteristics of sound money: it must be durable, portable, divisible, and have intrinsic value. Gold possesses all of these characteristics, which is why gold has served as money for thousands of years.

During the Ultimate Gold Panel at the Vancouver Resource Investment Conference last month, Roy Sebag talked about one of these four characteristics – gold’s durability.

Things rot and evaporate and tarnish, but then there’s this thing that for whatever reason, called gold, is the rarest and lasts forever, and that’s what money is. Money is the baseline for all economic cooperation.”

The Perth Mint offers a poignant real-world demonstration of the indestructibility of gold. Seven times a day, the mint hosts a public gold pour. During the demonstration, a worker melts a 14-pound gold bar at 1,945F and then pours it back into a castiron mold. Within about 90 seconds, it hardens back into a solid bar.

Here’s the kicker: the Perth Mint has melted this exact same gold bar more than 65,000 times since 1993.

Try doing that with your Federal Reserve notes.

According to Bloomberg:

In that time, it has been worth as little as $51,000—in 1999—to as much as $390,000—in 2011. At a price of $1,310 an ounce on Feb. 14, the bar was worth about $267,000. At the end of each day, it’s stored in one of the mint’s vaults.”

Here’s another important point to note: while the price of gold has fluctuated, it’s never been zero. And it never will be. Gold has intrinsic value.

Despite what CNBC commentator Jim Leventhal might say (he once claimed gold is a “useless metal”) gold has a wide range of uses from making jewelry to high-tech applications.

Here’s the bottom line: nobody can destroy your gold. They can’t destroy it physically and central banks can’t destroy its value by printing it out of thin air.

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