In Defense Of Gold

David Merkel writes in Seeking Alpha:

Gold does nothing, and that's good. We need some things in this hectic world that do nothing. What is the value of doing nothing?

Quietness. Pause. Repose. Reflection. Measurement Standard.

As he points out in the article, Merkel is no gold bug.  He doesn't even own any, other than a bit of jewelry.  He defends it against Warren Buffet's straw man of 400 million acres of farmland and 16 ExxonMobils (plus $1 trillion).  Merkel points out that the 68 feet cubed of gold in existence today will still be 68 feet cubed of gold tomorrow, next week, 100 years.  The value of gold is in its constancy.

But constancy does not create a store of value.  In a market economy, value is a relative concept. And value will change over time reflecting changing demand preferences, depletion of scarce resources, introduction of new technologies, and shifting demographics.

This does not mean that gold has no value in our economy.  As commenter notes, gold is a hedge against bad economic policies.  In economic terms, bad policies debase the currency, which is reflected in increased prices for unchanging commodities, such as gold.

However, gold is not an investment in the same sense that a holding of a diversified basket of stocks and interests in income producing real estate is.  This second portfolio is exposed to, and thus respondent to, the changing preferences, resources, technologies, and demographics that affect our economy on a daily basis.