What is the "inherent" value of gold?

[Bungeebones]

If gold did have such a thing wouldn't that percentage of it's market price that was indeed the inherent portion be readily distinguishable from the portion of it's value as a currency, hedge against inflation etc?


So how much is it? $5 FRN? $50 FRN? $500? FRN? Should be obvious to everyone shouldn't it? Gold experts should have an answer ready and in which there would be wide agreement upon. If so, how did they arrive at it?

[Neil Desmond]

Based on the exchange markets it's around $1,250 per ounce of gold, but in general it depends.

For example, copper is about 20 cents per ounce. One use of copper is to make electrical wiring. If you want to know what the inherent value of gold is based on how much someone might be willing to pay for gold to make electrical wiring, then it's 20 cents per ounce.

I did a calculation and figured that the value of a bitcoin in dollars, based on equating the ratio of gold scarcity and bitcoin scarcity, is about $550,000 per bitcoin.

Assuming gold is $1,250 per ounce, I suppose the inherent value of gold per ounce in bitcoins, based on a comparison of their respective levels of scarcity, is about 0.00227273 of a bitcoin.

[Travlyr]

Inherent value of gold: It is desirable, divisible, durable, portable, and scarce.

[erowe1]

Gold has no inherent value at all. Just like fiat currency, it's value is completely dependent on the subjective imputation of value to it by people.
http://www.fee.org/the_freeman/detai...#axzz2saKxZb7X

[Tod]

Gold has no inherent value at all. Just like fiat currency, it's value is completely dependent on the subjective imputation of value to it by people.
http://www.fee.org/the_freeman/detai...#axzz2saKxZb7X

You could say that about everything, including air and water. If everyone became suicidal, they may not place any value on being able to breathe or drink. Gold has practical uses and uses based on its unique properties, such as jewelry, and thousands of years of history of being desired, so the likelihood of its value dropping to even near nothing is very slim.

[Neil Desmond]

Gold has no inherent value at all. Just like fiat currency, it's value is completely dependent on the subjective imputation of value to it by people.
http://www.fee.org/the_freeman/detai...#axzz2saKxZb7X

Wow, that's from way back in 1969? Impressive.

[heavenlyboy34]

You could say that about everything, including air and water. If everyone became suicidal, they may not place any value on being able to breathe or drink. Gold has practical uses and uses based on its unique properties, such as jewelry, and thousands of years of history of being desired, so the likelihood of its value dropping to even near nothing is very slim.

That's exactly right. Value is subjective. I don't know of any economists who disagree. Utility informs subjective value-it does not create objective value.

[FindLiberty]

It makes dependable, low resistance electrical connections that are resistant to corrosion and it's very easy to solder to.

[erowe1]

You could say that about everything, including air and water.

Correct.

[erowe1]

Wow, that's from way back in 1969? Impressive.

I just googled something like "Gary North gold inherent value." I've read more recent things he's written on it. And I'm sure I could have picked another author besides North. But that was the one that caught my eye in the results.

[Neil Desmond]

I just googled something like "Gary North gold inherent value." I've read more recent things he's written on it. And I'm sure I could have picked another author besides North. But that was the one that caught my eye in the results.

Because of one of Peter Schiff's most recent videos where he's talking about bitcoin and what it is, I guess I was sort of under the impression that the notion of inherent value was something that wasn't questioned, well understood, or that there was a lack of awareness of what that means. I find it interesting that actually this is an issue that has been thought of and addressed decades ago.

[Bungeebones]

Based on the exchange markets it's around $1,250 per ounce of gold, but in general it depends.

For example, copper is about 20 cents per ounce. One use of copper is to make electrical wiring. If you want to know what the inherent value of gold is based on how much someone might be willing to pay for gold to make electrical wiring, then it's 20 cents per ounce.

I did a calculation and figured that the value of a bitcoin in dollars, based on equating the ratio of gold scarcity and bitcoin scarcity, is about $550,000 per bitcoin.

Assuming gold is $1,250 per ounce, I suppose the inherent value of gold per ounce in bitcoins, based on a comparison of their respective levels of scarcity, is about 0.00227273 of a bitcoin.

I was looking for some answers saying something like " gold's inheritent or intrinsic value is X% of it's market value" or something like that. I've heard a lot of people such as Peter Schiff and Jim Rickards and others always harp that gold has this so called intrinsic value and Bitcoin doesn't. So what/how much is it?

[Ronin Truth]

What is the "inherent" value of gold?

Marketplace purchasing power protection insurance (over hundreds of years).

[erowe1]

Marketplace purchasing power protection insurance (over hundreds of years).

That's not inherent.

[brandon]

Inherent value is $0. Currently the extrinsic value is around $1250

[Ronin Truth]

That's not inherent.

http://dictionary.reference.com/browse/inherent

[erowe1]

http://dictionary.reference.com/browse/inherent

Precisely.

[Ronin Truth]

Precisely.

See?

[erowe1]

See?

You mean do I see that marketplace purchasing power protection insurance over hundreds of years is not an inherent property of Gold, using the definition of inherent that you just posted? Yes, I do. That was my point.

Marketplace purchasing power protection insurance over hundreds of years is a property that Gold can only have on account of the decisions of people, without whom Gold would still be Gold.

[Occam's Banana]

The phrase "inherent value" is an oxymoron - "value" is not (and cannot be) a quality or characteristic that "inheres" in a thing by itself.

The concept of "value" denotes a relationship between things - a subject (the "valuer") and an object (the thing that is "valued").

Thus, "value" is always subjective and extrinsic (and never objective or intrinsic).

[gwax23]

Value is subjective.

[Ronin Truth]

You mean do I see that marketplace purchasing power protection insurance over hundreds of years is not an inherent property of Gold, using the definition of inherent that you just posted? Yes, I do. That was my point.

Marketplace purchasing power protection insurance over hundreds of years is a property that Gold can only have on account of the decisions of people, without whom Gold would still be Gold.

Picky, picky, picky.

[erowe1]

Picky, picky, picky.

Well, I mean, that's the whole point of saying "inherent."

[Ronin Truth]

Well, I mean, that's the whole point of saying "inherent."

Perhaps for you, fine. I can see that. I was/am going for a human utility as an "inherent value".

[Neil Desmond]

Since this thread was originally in the bitcoin/cryptocurrency section, I thought it was about trying to figure bitcoin's "inherent" value with the same criteria used to determine that gold has "inherent" value.

One of the ways that gold's value can be measured is in terms of the average amount of energy exerted to extract gold from the ground. The price of gold is proportional to its mass/weight, and physically mass is proportional to energy, so I suppose it's just a "matter" (pun coincidental) of finding a coefficient to determine its value. I'm not sure if people will accept that as a way of finding gold's "inherent" value or not, though.

Incidentally, the same could be done for finding the "inherent" value of a bitcoin, by directly measuring how much energy it takes (conversion from mass/weight can be skipped) to electronically mine a bitcoin.

[Ronin Truth]

Its not gold that has value really. The value in gold is what it represents. It is a STORE OF VALUE. the properties that give it a store of value are the fact that it is rare and cannot be easily produce. You are correct that it has no value as far as being able to sustain life. All the gold on an island wont keep you alive unless you have the ability to trade it for those items. You have to understand what money is. To start with money has 5 elements. The 5 elements of money are...

(1) A medium of exchange - something of value to exchange for the payment of goods and services
(2) Money must be easily recognizable - in other words people must be able to easy recognize that medium of exchange as being valid and not counterfeit
(3) Money must be divisible - you must be able to easily make change, to take larger amounts and be able to make them smaller
(4) Money must be a store of value - In other words the ability to buy goods and services must be able to be stored for spending at a later time, also called savings.
(5) Money must eliminate DEBT. The payment of money must be able to eliminate any and all debt that is created in the marketplace.

The store of value element is very important in the role of money. In fact I would submit that is is the most important role. Money is a payment that one receives for the value of their time and expertise. That payment of ones labor is a claim on goods and services in the marketplace. Instead of bartering by accepting goods or services as payment one can accept money that allows that person to buy the goods and services they need that the person making payment doesn't have. The ability to buy the same amount of goods and services at anytime in the future is the store of value. If one can fill up their car with gas when they receive payment for their labor today then they should be able to so so at anytime in the future. Sadly this is not the case because the ability to buy the same amounts of goods and services from ones savings is debased by a hidden tax called inflation. The effect of inflation is an increase in the amount you pay for goods and services in the numbers of dollars. Price increases is not inflation and inflation is not good in any amount because it debases your buying power that you have labored for. Once you begin to understand this concept you can therefore conclude that the store of value element of money being debased is the same thing as SLAVERY. The ability to steal the value of ones savings through inflation means that you must labor even more and harder to keep the same standard of living over time. Therefore inflation by debasing money (creating money out of nothing) is immoral. Money is the store of value of ones labor.

Gold is money and a store of value. It is the "Currency of last resort" as Greenspan has stated many times through the years. Gold doesn't pay interest, dividends, doesn't restate earnings, has no lawyers, accountants, CEOs or CFOs lying to you on television. Gold doesn't ask for bailouts, doesn't go Bankrupt and cannot cook its books. Gold cant be debased or printed at the will of a company or government and holds its purchasing power.

Gold sits there as a store of value, is labor intensive, and a one ounce coin will not split into a bunch of half ounce coins at the direction of the "Pin Striped Bandits" on Wall Street. Also Gold is the ONLY asset class in the last ten years to increase in value and retain every dollar of its purchasing power. These are the reasons why gold has intrinsic value.

Can gold go down? Yes. However that would mean that all essential goods and services must fall as well. Gold is and acts more like an insurance policy.

"Borrowed" (ahem) Best Answer and Voters Choice from http://answers.yahoo.com/question/in...1205038AAz6ciH AKA

Why does gold have intrinsic value?

[erowe1]

"Borrowed" (ahem) Best Answer and Voters Choice from http://answers.yahoo.com/question/in...1205038AAz6ciH AKA

But notice that the question itself is fallacious. It asks why Gold has intrinsic value. But that's the thing, Gold doesn't have any intrinsic value.

The answer gets off on the wrong foot when it says, "the properties that give it a store of value are the fact that it is rare and cannot be easily produce." In reality, it is the subjective evaluation of people that gives Gold that property.

And then it ends on the wrong foot, saying, "Can gold go down? Yes. However that would mean that all essential goods and services must fall as well." That's not true. Gold can, and does, change in price relative to everything else, as a function of how people constantly change their evaluation of its worth relative to them.

A lot of the rest of that answer goes over properties that commend some things, like Gold, to people as media of exchange more than other things, like sea shells. But these are constantly subject to the choices of people.

[Ronin Truth]

But notice that the question itself is fallacious. It asks why Gold has intrinsic value. But that's the thing, Gold doesn't have any intrinsic value.

The answer gets off on the wrong foot when it says, "the properties that give it a store of value are the fact that it is rare and cannot be easily produce." In reality, it is the subjective evaluation of people that gives Gold that property.

And then it ends on the wrong foot, saying, "Can gold go down? Yes. However that would mean that all essential goods and services must fall as well." That's not true. Gold can, and does, change in price relative to everything else, as a function of how people constantly change their evaluation of its worth relative to them.

A lot of the rest of that answer goes over properties that commend some things, like Gold, to people as media of exchange more than other things, like sea shells. But these are constantly subject to the choices of people.

http://answers.yahoo.com/question/in...5192735AA91bcL

[erowe1]

http://answers.yahoo.com/question/in...5192735AA91bcL

The guy's own explanation for his question proves that it has no intrinsic value. He starts right off saying that people have used it for money for 5,000 years.

Well, if that's what value is, then that value is obviously not intrinsic.

And it's not people all of a sudden saying that it doesn't have intrinsic value. That dictum has been part of Austrian Economics all along. Check out these Mises quotes. The people in those Yahoo answers look like they've never even really thought about all this before.
http://mises.org/quotes.aspx?action=...&subject=Value

[Madison320]

I was looking for some answers saying something like " gold's inheritent or intrinsic value is X% of it's market value" or something like that. I've heard a lot of people such as Peter Schiff and Jim Rickards and others always harp that gold has this so called intrinsic value and Bitcoin doesn't. So what/how much is it?

You're missing the point. Suppose you've worked hard for many years and accumulated a lot of wealth. What's the safest place to store that wealth so that in 20 years it will still have purchasing power?