Is gold a commodity or is it money?
If it were simply a commodity it's long term chart would be increasing roughly in line with inflation/population/wealth as RE and shares do. It may well be out of sync with other investments but long term MA charts would be similar.
But the POG charts have borne no similarity with any other investment class. So I contend that it isn't a commodity.
That it is treated so can be explained by the fact that 95%+ of all gold ever mined still exists in public or private hands so the "bears" have a field day reminding us that Keynes called it "The Barbaric Relic". Us bulls present the case that if all this gold were collected it would only fill a volume about as big as a football field three stories high. Not a lot, you'll agree, for all those who would like to own a little. Another thing often overlooked is that it is bloody hard to find. And expensive to extract. (the cheap alluvial gold has long gone). To put this in perspective, the average gold miner has to shovel a tonne of ore into a dump truck, haul it up that long road to the top of the pit, crush it and extract the metal worth about a hundred bucks. Rising costs of oil, tyres, steel and cyanide eat the heart out of that $100.
So is it money? Let's describe money. It is a mutually agreed upon standard of exchange. ie It is something I can get in exchange for goods I sell you which I can take across the street/nation/world and exchange it for goods I wish to buy. A couple of thousand years ago gold and silver were perfect. A trader could carry a few ounces of gold from Europe to Asia, buy his silks (knowing his gold was desirable when he got there) and take them back and exchange them, again, for (hopefully, a larger amt of) gold.
So what has changed? Gold is still as beautiful and as desirable, so that hasn't. It is still as rare, that hasn't. It changed in '71 when Nixon closed the gold window. Until then the Bretton Woods agreement established the US$ as the reserve currency of the world. It, and only it, would be backed by gold. All other currencies would be rated against the USD. The French, however, noticed the Yanks were cheating and were printing far more dollars than they had backing it in gold and de Gaulle (was he Pres then?) started demanding gold instead of USD in payment. The Yanks were exposed and Nixon was forced to close the gold window. Thereafter US$1 (it was in fact a "gold certificate") could no longer be exchanged for 1/32 oz of gold.
This is what John Maynard Keynes wanted. He wanted central banks to have unfetted ability to "print money". His justification was that there would have been no Great Depression had the central banks done so. He overlooked the fact that the banks actually did the reverse and exacerbated the problem so, ergo, the right of the Fed to print money would have been ignored.
So where are we now? Nations worldwide are now deeply involved in competitive devaluation. The leaders of all nations are desperately trying to debase their own currency to maintain international competiveness, to mask domestic ineffeciencies. They do this by flooding the market with fiat currency. To me, as a working class Labor voter, this smacks of enslavement. I don't expect silvertails to agree on this tho (that's only the "enslavement" bit).
Today, the USD is rapidly losing value, but not really much against the Euro, Loony, $A, and all other stable currencies. So what could it be losing value against? Remember Gold?
When the traders were plying the silk route 1oz of gold was said to buy a good gentleman's suit. A couple of thousand of years later this is still about right. How about any fiat currency? Again I must believe what I'm told but since the US Fed was formed (in the '30's?) the once US$1 is now worth US0.05c. Clearly fails the Gent's suit test.
So it is still gold the punters are measuring their fiat (means "law") currencies against. This is why Ben Bernanke, and before him Greenspan, are fighting desperately to curtail the price of gold. Put simply, if POG reaches US$1,000 it will prove absolutely that the USD is a fraud. Should this happen we are all embroiled in an economic conflagration so China, Japan and the Arabs (the big holders of USD and vendors to them) are joining the good fight to save it.
WARNING: at this point I'm entering the realm of conspiracy.
All Weatern central banks sold tons of gold to supress the POG. In a stroke of genius the Poms dumped many tons @ abt US$275/oz. We did little better. (Does anyone know if our Res holds ANY gold?) Others, notably Germany and the US "loaned" their bullion the bullion banks @ less than 1% int (more likely 0.25%) who took delivery of metal and on-sold it on the open market. The procedes were then available to be reinvested anywhere in the world at much higher rates. (Remember the "easy" money available here to anyone looking at property?) Talk about free money! Billions of it! It's only rumour but they say Ft Knox gold is all stored in the filing cabinet. It is certain that no audit of actual holdings has been done for decades.
So now we have the reserve banks desperate to shore up their fiat currencies, and the bullion banks desperately trying to cap the POG so that they can buy and repay the Bank of England or the Bundesbank the millions of tons of borrowed gold. This is the biggest short squeeze in histoy. JP Morgan may not survive.
So $1,000 gold is probably more important than $100 oil.