Thursday, June 23, 2016

Random thoughts on Gold

"To listen is an effort, and just to hear is no merit. A duck hears also."
—Igor Stravinsky (Russian, 1882-1971)
Word for the day
Quaff (v)
To drink (a beverage) copiously and heartily, e.g., We spent the whole evening quaffing ale.
Malice towards none
Excess of everything is bad - even if it is Yoga!
First random thought this morning
Ever wondered what's the life expectancy rate in India!
The way people in their late forties and fifties are branded as kids and youth, it feels close to 120yrs!
But my insurance premium calculations are based on a life expectancy of around 70years.
What's amiss here? Is LIC cheating on me or the politicians & Bollywood fraternity?

Random thoughts on Gold

Not long back in the global history, aluminum was thought to be more precious than gold. Most powerful kings were served food in aluminum utensils while the lesser knights had to do with gold flatware. The sudden change in the value of aluminum took place when much cheaper means of refining the ore became available. Suddenly, it was disposable - as in aluminum foil or cola cans. In no time it transformed from most expensive thing in the world to garbage. Similarly, in African continent for long common salt remained a more prominent store of value and medium of exchange than gold.
I have always been crystal clear in my opinion that gold is not an investment product. But unarguably it has had its utility as the store of value for its limited supply and physical traits that make it indestructible.
In past five years, though, I have been expressing rather confusing views about the future of gold. On introspection, I discovered the following reasons for the incoherence in my views about gold.
First and foremost, I strongly believe that when economics fails in providing solution to the problem of livelihood and sustainability, philosophy provides the answer. It is a natural instinct of human being to look up to the skies for guidance when all our efforts fail. (Some even do so without making any effort at all!) Religion has therefore been an inextricable part of human life since beginning of the civilization and has grown with the growth and expansion of the global trade and commerce.
Most ancient cultures, China, Egypt, Mesopotamia, Indus Valley etc. have believed in continuation of life after death. Gold being an indestructible (and therefore sacred) object had always been an important part of their religion, culture, traditions and beliefs.
I therefore feel that a view on gold is not relevant without a view on the socio-religious trends.
In my view, the factors like popularity and spread of technology in common man's life; rising fascist and communist tendencies due to worsening socio-economic disparities; rise in electronic transactions (personal, social and commercial) thus lower risk (less travel, less physical transactions & deliveries); emergence of new articles of luxury to serve the vanity needs of the affluent; stronger and deeper social security programs; demise of monarchy; spread of spiritualism; dissipation of church & temples, etc., all indicates towards potential decline in traditional demand and pre-eminence of gold.
In the modern context, technologically challenging things, e.g., Bitcoins, have more potential to attract peoples' fancy as compared to gold, I feel.
The spread of radical Islamic forces is the only factor that somewhat weakens my conviction in decline of gold. But the way, the global war on radicals is progressing, I am sure that in next decade or so we shall see this concern easing materially and then gold may decline rather precipitously in value.....to continue tomorrow

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