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(18-12-2017, 04:44 PM)holymage Wrote: To answer these questions of risk, we have to look possibilities. For example,
1) "What if everyone in the future aren't students of history?"
Is it possible that history will be abandoned in totality? I read somewhere that historically, most people's portfolio will typically have 5-10% weightage in gold. This is to provide a hedge due to the low correlation of gold against other asset classes. Today? It is close to zero portfolio allocation as gold doesn't provide any yield and "does nothing". Despite gold being misunderstood by today's general public, gold price increased from $250 in 2001 to $1260 in 2017 (peaked at $1900 in 2011). This is an annual return of 10%. Central banks still own tons of gold. Why do Central Banks do so when most countries' citizens trust their fiat currencies. Maybe, understanding how the US dollar obtained the status of the world's reserve currency is able to provide an explanation.
2) "What if Asteroid mining makes Gold worthless in the future?"
In fact, gold can be created from other elements using nuclear reactions by altering the atomic structure (protons) of an atom. But are asteroid mining and gold alchemy feasible? Will the cost of energy consumption justify the creation of gold? No. Simply because these are inefficient and expensive compared to current gold prices. There is a very low possibility in the next 50 years that creation of gold will be economically feasible. This is akin to saying "Why invest in stocks or properties when an Asteroid will befall upon earth and unlucky strike the assets you own". That being said, this is definitely one point to take note of as scarcity is a property of money.
Lastly, the value of most assets in this world is a function of supply and demand, nothing less, nothing more.
The same goes for stocks, bonds, property, gold, cryptocurrencies, tulips etc.
For example, "Why share price of a company increase? Most likely because earnings increase and future dividends could possibly increase and so more people desire ownership of the company, and thus the share price will be impacted".
Gold Price: I'm agnostic regarding Gold Price. I'm just providing the perspective that Gold may not be as revere as before as a storage of value to people today. Sure, people will likely continue to study history, but they may draw different conclusions from them. Just because Gold price has been growing throughout history, doesn't mean it will repeat in similar fashion to the future. In fact, in the case of gold financial instruments (with some form of fees involved, like GLD), most likely Gold price would under-perform inflation over extended periods of time. AT BEST, gold retains value over the last 50 years, inflation adjusted (https://goldprice.org/inflation-adjusted...price.html)
Asteroid Mining may be closer than you give it credit for in your reply, the advances in Space Exploration has been tremendous in recent years with the advent of SpaceX, Blue Origin and other private sector companies. https://en.wikipedia.org/wiki/Asteroid_mining
Value of Asset: I disagree; "Price" may be a function of supply and demand, the "Value" however can be determined to some degree of accuracy for productive assets like Bond, Stocks and Property.