Rodney

Of course, here is where we leave the realm of pure logic and enter the realm of belief and trust; more specifically, what humans are willing to believe in and put their trust in.

But again, such feelings are part and parcel of the study of economics, which makes a great many presumptions about human behavior (many of them wrong, because economics too often presumes that humans make "rational" decisions, and then defines what "rational" is.) Gold may not be the most rational decision. But emotionally, it may seem the safer decision to many in a dire situation, because it is familiar and has a history.

It is true that you can't eat gold, nor live in it, nor farm it. But belief in precious metals as a store of value is still high, especially when paper money looks shakey. Gold and silver were very big in the inflationary 70s, as were swiss francs (100 percent gold backed). And even in a very dire situation where the larger economy has broken down (and I do not expect this), you can't do _everything_ with barter.

There is some talk now of gold becoming the defacto _fourth_ major world currency, after the dollar, euro, and yen. Because while it pays no interest, it may command more trust as a value receptacle than paper money in difficult times. All forms of money, precious-metal-based, paper, or electronic, live on trust alone.

I agree that gold is an odd investment; storage and insurance can cost, although you can buy and sell "securitized" gold on the NYSE through a gold pool that works more or less like a mutual fund. And it is certainly nothing that I would put my long-term faith in. But as short-term insurance, I have turned to it.