Gold: A Valuable Thing to Store ??

        Gold is a valuable thing to store. However, it is not a store of value. Gold has intrinsic properties that make it valuable. However, it does not have intrinsic value. I mention this, because, at some point, you will read about gold as a store of value. You will read of gold's intrinsic value. Every time you read either of these phrases, you will know that the author does not understand economic theory.

Consider this. The price of gold has moved above $1400 an ounce in recent days, up from the low $1300's. Presumably, this has been in response to the turmoil in Libya, which has reduced the immediate supply of oil. The rising price of gold indicates the possibility of continuing turmoil in the Arab world. These fluctuations in the price of gold indicate that immediate changes in external circumstances can affect the price of gold. There has been an unexpected increase in the demand for gold.

According to all schools of economics except for the Marxists, the prices of goods and services rise and fall in terms of changes in the markets, which include consumers' tastes, monetary changes, changes in supply, changes in the price of alternatives, and changes in the public's expectations of future prices. There is therefore no fixed measure of value.

Economic value is subjective. It is imputed. Buyers compete against buyers; sellers compete against sellers; and people's assessments of future conditions are always changing.

These changes drive prices up or down. People have subjective assessments of the objective future. They also have expectations regarding other people's subjective assessments of the future. Through competitive bidding, people establish objective prices in various markets.

The important fact to understand here is that objective prices are the result of competitive bids by people with subjective assessments of the future: immediate and more distant assessments.

source : http://www.lewrockwell.com/north/north952.html