Gold Is More Than Just A Metal

From fighting the fear of uncertainty in the economy or high inflation to creating a legacy to using it for adornment, the timeless allure of gold lies in your story and point of reference

- LARISSA FERNAND

The one investment that draws immense controversy is gold. In 2012, I came across two views on gold in the media that gave me a fresh perspective on the yellow metal as an investment.

The First: Gold Is A Non-Productive Asset

Warren Buffett explained his stance in a Fortune article in 2012 (reproduced below), by categorising investments into three classes:

• Currency based

• Productive assets (businesses, farms, real estate)

• Non-productive assets (art, gold)

Non-productive assets are purchased with the buyer's hope that someone else will pay more for them in the future. Owners are not inspired by what the asset itself can produce—it will remain lifeless forever—but rather by the belief that others will desire it even more avidly in the future.

Gold has some industrial and decorative utilities, but the demand for these purposes is both limited and incapable of soaking up new production.

Cube A: Today (2012) the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. At $1,750 per ounce (2012 price of gold), its value would be about $9.6 trillion.

Pile B: At $9.6 trillion, we could buy all US cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobil shares (the most profitable company earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money.