Key Post Why Bitcoin has value

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tecate

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The jewelry market accounts for over 50% of gold demand, bullion and coin production account for 25%, central bank purchases, ~5%, with the remainder going to electronics and other industry.
"The investment is valued by supply and demand — mainly speculative demand.
However, unlike other commodities, the value of gold is less affected by consumption and largely influenced by the status of the economy."
LINK

I doubt anyone on here buys jewelry as an asset.
In 1st world countries, no - elsewhere, probably - yes.
 

Leo

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"The investment is valued by supply and demand — mainly speculative demand.
So they're talking purely on investment and commodity terms. As above, that only represent ~30% of overall gold demand, they seem to ignore the rest for some reason. Only in two quarters of the decade so far has investment demand exceeded that of the jewelry industry. The World Gold Council publish more comprehensive data.

In 2018, overall gold supply increased by only 1%, the lowest level of the previous decade, overall demand for gold was up 4%, but investment demand was down 7% on the previous year. So the non-speculative portion of overall demand grew even more significant.
 

tecate

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You seem to have ignored this part =>
"the value of gold is less affected by consumption and largely influenced by the status of the economy."

And we can go round the houses but lets short circuit the need to do so. Bottom line is that speculative value of gold is highly significant. Markets have been bullish so demand for gold may not have been as keen over the last few years - but (if what's coming is coming down the tracks) then those stats you quote will be turned upside down.

Additionally, you mentioned that gold jewelry is not seen as an investment here - but it is in the 2nd world. You can factor that into those stats above.
 

Leo

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You seem to have ignored this part =>
"the value of gold is less affected by consumption and largely influenced by the status of the economy."
Speculation obviously has an influence over the price of gold, but it's not consistent. Typically it only accounts for 30% of demand, so to claim that 30% of the market has a more significant influence than all other factors just doesn't add up. Where the demand charts clearly show a more significant influence is when there are significant US market moves that result in a drop in the dollar, resulting in significant jumps in demand in other countries.

In the 2nd world, jewelry is still a bad investment. In India, gold bars and coins are common wedding gifts. India accounts for more the 25% of global demand for gold now, in a year with a higher number of favourable wedding dates in the Hindu calendar, the increase in demand for jewelry (as a display of status, not an investment) affects the price globally.
 

AileenWalsh

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The point I was trying to make is that gold does have demands for it other than being an investment, such as jewelry, etc and as such the price is supported by this demand and as such bitcoins do not have other demands for it such as Jewelry. Equally, if you want to protect your money this can be achieved with a balanced portfolio and or an investment in physical assets such as property.
 

Andrew365

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Gold only has a value because the collective people believe it has a value. If tomorrow the world decided gold was worthless then all the jewelry in the world would be worthless.
 

AileenWalsh

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Absolutely and similarly with bitcoins. But try asking your girlfriend or wife to give up her jewelry! Gold has had a historic value throughout history.
 

Andrew365

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Absolutely and similarly with bitcoins. But try asking your girlfriend or wife to give up her jewelry! Gold has had a historic value throughout history.
Gold has had a value for about 2,000 years of our history not throughout all of our history. At one point people used shells as forms of currency. Bitcoin is in the early stages of adoption, for example if Gold had not been discovered until 10 years ago, do you think it would have the same value as today?
 

Brendan Burgess

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Gold has had a value for about 2,000 years of our history not throughout all of our history.
What?

Tell Tutankhamun and his ancestors that.

When people compare bitcoin to gold, I wonder if they have ever seen gold? Have they ever seen gold jewellery? Have they ever seen a painting with gold leaf? Have they ever picked it up?

It's comments like these which show how completely deluded Bitcoin fanatics are.

Brendan
 

tecate

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Typically it only accounts for 30% of demand, so to claim that 30% of the market has a more significant influence than all other factors just doesn't add up. Where the demand charts clearly show a more significant influence is when there are significant US market moves that result in a drop in the dollar, resulting in significant jumps in demand in other countries.

In the 2nd world, jewelry is still a bad investment. In India, gold bars and coins are common wedding gifts. India accounts for more the 25% of global demand for gold now, in a year with a higher number of favourable wedding dates in the Hindu calendar, the increase in demand for jewelry (as a display of status, not an investment) affects the price globally.
If that's the case, why do they say "the value of gold is less affected by consumption and largely influenced by the status of the economy" as per that link cited in my previous post above? According to the World Gold Council, use of gold for investment purposes has increased by 240% over the past three decades.
As regards gold jewelry being a 'bad investment' - it's neither here nor there for the purposes of this discussion whether it is or not - but what is significant is that it is used as a store of value in that format and in that context. Yes, people in 2nd world countries (particularly India) like gold as a physical thing - but my understanding is that they use it as a means of storing wealth also. So within that tranche of use as jewelry is a seemingly significant 'store of value' use case.
The point I was trying to make is that gold does have demands for it other than being an investment, such as jewelry, etc and as such the price is supported by this demand and as such bitcoins do not have other demands for it such as Jewelry. Equally, if you want to protect your money this can be achieved with a balanced portfolio and or an investment in physical assets such as property.
Store of value is increasingly significant when it comes to gold. Bitcoin too has it's own set of attributes. It can be transmitted at will around the world. It doesn't recognize borders. Turn up at a border crossing with gold and you may have it confiscated. The same issue doesn't exist with Bitcoin. Both are scarce assets but Bitcoin is about to become scarcer following the next halving.
There are various ways to balance a portfolio but dismissing Bitcoin as part of that mix is becoming increasingly questionable. I outlined the uplift that gold had in the 70's. Whilst we cant fully determine the outcome with Bitcoin, the risk relative to the upside potential of this non-correlated digital asset suggests that to hold a few % of overall portfolio in it is worthwhile. It's still very early but there will come a time when speculative interest in Bitcoin will abate and it will be mundane in that respect.
Absolutely and similarly with bitcoins. But try asking your girlfriend or wife to give up her jewelry! Gold has had a historic value throughout history.
Yes, it's got a much longer track record - no question. However, you have to balance consideration of that (and that we can't say with complete certainty how things will pan out with Bitcoin) with the upside potential.
 
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tecate

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When people compare bitcoin to gold, I wonder if they have ever seen gold? Have they ever seen gold jewellery? Have they ever seen a painting with gold leaf? Have they ever picked it up?

It's comments like these which show how completely deluded Bitcoin fanatics are.
And perhaps the delusion is demonstrated on your side of the fence also, Brendan. It seems to me that some here have a difficulty in getting their heads around digital assets yet digital assets are here to stay.
See above. The use case for gold has largely been (and increasingly so in more recent times) a store of value use case. Furthermore, Bitcoin has it's own attributes that go beyond that of gold (as outlined above).
 

Leo

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If that's the case, why do they say "the value of gold is less affected by consumption and largely influenced by the status of the economy" as per that link cited in my previous post above?
Because they're a little too focused on the US economy, which accounts for a portion of the global gold market. The US market probably has a disproportionate share of investment demand for gold though.

Yes, people in 2nd world countries (particularly India) like gold as a physical thing - but my understanding is that they use it as a means of storing wealth also. So within that tranche of use as jewelry is a seemingly significant 'store of value' use case.
The Indian people I work with laughed at that idea, though one did suggest there may be some utility as a means of tax evasion. Back in 2016 India scrapped the 500 & 1,000INR notes to tackle widespread tax evasion, those who didn't want the government taking a share bought jewelry and other items of value.
 

tecate

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Because they're a little too focused on the US economy, which accounts for a portion of the global gold market. The US market probably has a disproportionate share of investment demand for gold though.
They're focused on the U.S. economy? Where is that evident?

This puts gold jewelry at 50% and direct gold investment at 40%. That's before we consider gold futures, etf's and other derivatives. Then there's the consideration that much gold jewelry demand is driven by the developing world where it has been a traditional store of value (see below).

The Indian people I work with laughed at that idea
I didn't know we were now straw polling Indians to get to the bottom of this. Seems like a hap-hazard way of establishing a basis to a claim or vice versa but I will do the same the next time I bump in to an Indian work colleague. :-D

In the meantime, here's this => https://www.bbc.com/news/business-13947541
and this => https://www.forbes.com/sites/karlkaufman/2019/02/28/picassos-gold-the-art-of-investing-in-gold-jewelry/
and this => https://timesofindia.indiatimes.com/business/faqs/gold-faqs/is-buying-gold-jewellery-as-investment-a-good-option/articleshow/63201449.cms

All establish a rationale of buying gold jewelry as an investment.
 
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Andrew365

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What?

Tell Tutankhamun and his ancestors that.

When people compare bitcoin to gold, I wonder if they have ever seen gold? Have they ever seen gold jewellery? Have they ever seen a painting with gold leaf? Have they ever picked it up?

It's comments like these which show how completely deluded Bitcoin fanatics are.

Brendan
I am not a bitcoin fanatic and I stand corrected, the first use of Gold as a currency was 700 BC so 2719 years ago.

I was not comparing Bitcoin to gold, I was responding to a poster, it is generally those who can't wrap their head around the concept of Bitcoin and new technology that continue to detract it by using classical valuable asset such as gold.

The simple fact is valuation is defined based on the collective thought of the people, if the collective believe a digital currency has value then it does. The world is a vastly different place to 2000 years ago.

You'll never be able to understand the value in bitcoin if you can't break the concept of an asset having to be physical to have value.
 

AileenWalsh

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I would take issue with Jewelry being a bad investment. Yes if you pop into your high street and buy a diamond ring you would lose money heavily due to the heavy markups in Jewelry shops in Europe, in the Middle East gold jewelry is sold by weight, and workmanship and a lot of thought go into its resale value. If you want to invest in Jewelry you could look at second-hand Rolex or Cartier.
 

Leo

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They're focused on the U.S. economy? Where is that evident?
When a US publication talks about 'the economy', I find it's very rare they are referring to any market other than the US.

This puts gold jewelry at 50% and direct gold investment at 40%. That's before we consider gold futures, etf's and other derivatives.
They provide no source for that. It's strange that they quote the Gold Council as a source to back up other stats, but don't explain why their numbers differ significantly from those of the Gold Council. Is it perhaps because they too are focused on the US market? That's more likely given their discussion of gold price moves versus the market or interest rates only reflects the US.
 

Leo

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it is generally those who can't wrap their head around the concept of Bitcoin and new technology that continue to detract it
I see that line trotted out quite a bit, but I have a fairly decent grasp of how Bitcoin works, and my understanding of the technological limitations shapes my opinion that it is a flawed concept. Covered extensively in other posts here.
 

tecate

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When a US publication talks about 'the economy', I find it's very rare they are referring to any market other than the US.
I don't think you can assume that. I don't see any of their content being deliberately US centric . Have a look at their section on accuracy / editorial principles.
They provide no source for that. It's strange that they quote the Gold Council as a source to back up other stats, but don't explain why their numbers differ significantly from those of the Gold Council. Is it perhaps because they too are focused on the US market? That's more likely given their discussion of gold price moves versus the market or interest rates only reflects the US.
And what earthly incentive do they have to distort the figures? What does it bring for them? I'd also suggest that two separate publications are likely to be more accurate than a data sampling of asking your Indian work buddies.
Other than that, we both accept that a large chunk falls under the gold jewelry subset. As per the other links I provided above, within this, there is a definite store of value use case. To top that off, Aileen also confirms as much =>
I would take issue with Jewelry being a bad investment....in the Middle East gold jewelry is sold by weight, and workmanship and a lot of thought go into its resale value. If you want to invest in Jewelry you could look at second-hand Rolex or Cartier.
I see that line trotted out quite a bit, but I have a fairly decent grasp of how Bitcoin works, and my understanding of the technological limitations shapes my opinion that it is a flawed concept. Covered extensively in other posts here.
A better understanding from a technical point of view - yes, you've shown that. Others here, not so much. One pretty infamous naysayer here seems to have formed his views on Bitcoin due to his dislike of the grouping that it came up with.
The vast majority have a difficulty in getting their heads round something that is virtual and made up of 1's and 0's. That's not unique to this group - there are thousands struggling with seeing value in something that isn't physical.
 

Andrew365

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I see that line trotted out quite a bit, but I have a fairly decent grasp of how Bitcoin works, and my understanding of the technological limitations shapes my opinion that it is a flawed concept. Covered extensively in other posts here.
and with that I end my participation in this thread
 
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