Gold or money?why?

Obviously, there are people who are clueless about history. For instance, you've got LongArm saying that since 1980, gold hasn't made anything. Then answer this LongArm, what was the stock market doing between 1971 to 1980 when gold went from $35/oz. to $850/oz? The stock market was in one of the worst bear markets in history (actually from 1966 to 1982). During the 70's, a $1000 investment in gold would have returned $24,285.70. True, from 1980 to 2002, gold was in a secular bear market, but you seem to forget that from 1966 to 1982, equities were in a secular bear market. If you actually studied history, you'd know that, and any investor with 2 brains cells to rub together would know that you shift your investments to where the money is being made during the time. In the 70's it was in gold. In the 80's to 2000, it was in equities.

And Karmen, gold isn't needed in this topsy-turvy world, it's just pretty and glitters? Then tell me why just prior to the crash of '29, why people like J.P. Morgan, Andrew Carnegie, Rockafellar, Harriman, Paul Warburg (the wealthiest people in the U.S. at the time) bought up gold like crazy? During the German hyperinflation of the Post WW1 Wiemar Republic, people would not accept Reichmarks, but they accepted gold and silver as payment. How many currencies have come and gone, but yet gold has be considered money for over 4000 years. If gold is "just pretty", why then is China looking to diversify some of it's $700 billion in dollar reserves into gold. During economic hard times, the smart money horde's gold, like I mentioned above, Morgan, Harriman, Rockafellar and Carnegie (an FYI, Carneige's net worth was estimated to be in excess of $160 billion). So, let's see, do I take the advice of Karmen L. or look at what the billionaires of the past did? I'll take the billionaires.

And then you've got ACE with his comparison to the stock market. First of all ACE, any comparison of gold to equities or any other asset class prior to 1971 is useless because prior to Nixon closing the gold window, gold was fixed at $35/oz., it was not allowed to float. So, how then can you compare equities, which were allowed to grow, to gold which was not allowed to until just 36 years ago. So, let's take a closer look at the stock market. Yes, from 1982 to today, the Dow is up 11,882 points (taking the bottom of the bear in Aug. 1982 at 772 points to the end of trading today at 12,654) and equities were the place to be. That's a 1,539% increase in 24 years. But that pales in comparison to the surge in gold prices after Nixon closed the gold window in 1971. Remember, prior to that, gold was fixed at $35/oz. After the gold window was closed, gold shot up to a high of $850/oz. -- a 2,328% return IN ONLY 9 YEARS. From 1980 to 2002, gold was in a 22 year secular bear market. But, from 1966 to 1982, equities were in a 16 year secular bear market.

Okay, let's come to present day. If we look at the stock market from 2000 to today, the Dow is up a whopping 8% in 6 years - or 1.33% per year. Big sh*t. Yet, from 2000 to today, gold is up 138% - or 23% per year. If we take the stock market bottom in 2002 to today, the Dow is up 76%, yet during that same time frame, gold is up 115%.

So, ACE, where is your precious stock market returns when you look at the hard data? Gold has been beating the snot out of equities.

Gee whiz people, stop watching Desperate Housewives and read a book once in a while.

To answer your question, gold has an instrinsic value, but all money is is just a piece of paper that people accept as having value. I mean, take out a $1 bill and look at it. All it is is a cotton fiber with ink on it and the only reason we accept it as having value is because 1) the government says it is and 2) we accept it. All money is is a median of exchange that people have accepted as having value and the only reason it has value is because we have faith in it. If a people lose faith in a currency, it becomes worthless. That's why the Deutschemark replaced the Reichmark because the currency had become so worthless, that people didn't want it.

Take a look at it this way, since 1913, the dollar has lost over 90% of it's purchasing power. For example, in 1913 if it took $1 to buy a widget, it would take $19.11 in 2005 to buy the same widget - that's a 95% loss in purchasing power. Let's take another example; in 1970 (while gold was fixed at $35/oz.) the average median home price in the U.S. was $24,000, which means it took 685 oz. of gold to buy a home. In 2006, the average median home price in the U.S. was around $240,000 and the average price of gold in 2006 was $603, which means it took 398 oz. of gold to buy a home. While the the dollar was losing purchasing power, gold gained in purchasing power.

What one must realize is that inflation is not an increase in prices, but a decrease in the value of the currency, thus you need more currency to buy the same thing. Let's see if I can explain. You've heard people say that the dollar is now worth 3 cents? What that means is that $1 has the purchasing power of 3 cents. So, let says we go back in time to when $1 was worth $1. If you wanted to buy a widget and the price was $1 and a dollar was worth a dollar, then you'd just need $1 to buy that widget. Now, let's come back to today with the dollar being worth 3 cents. You want to buy that widget, which is worth $1, but the dollar is only worth 3 cents, so in order to get a dollars worth of purchasing power, you'd need $33 to have $1 in purchasing power. Do you see what just happened? The widget is still worth $1, but since the dollar is only worth 3 cents, you needed 33 of them to get the purchasing power of 1 full dollar.

In the past 6 years, the dollar has dropped over 30% against the Euro. In the beginning of this millenium, the U.S. dollar index was at 120, today, it's just above 84. The 80 levels is considered the Maginot Line for the dollar and if the dollar breaks below that level, it's going to trigger a dollar crisis and people will dump dollars. Right now, the current pattern forming in the dollar index projects a downside target of 40 as a major bottom. At that level, the dollar will cease to be the world's reserve currency.

Voltaire said, "Paper money eventually returns to its intrinsic value -- zero". The only reason paper money is accepted is because people believe it has value. I mean think about it, if the gov't took toilet paper, put ink on it and said it was money, what's the difference between that and what we have now?

Think about it, for a period of over 700 years, England used Tally Sticks as currency - a piece of carved wood. And the people accepted it as money because the government said it would accept tally sticks as payment for taxes.

Yet, gold for thousands of years has endured. It is rare and precious. In the last 4,000 years, all the gold mined in the world would fit into an area of 55 cubic feet.

Gold or money? Answer this question - how many currencies have come and gone in history? Yet, gold is been around and survived and been store of value and been money since the dawn of human civilization.

The other posters need to really go back to school and get re-educated. They must have been sleeping during those years.