If you are being objective, you can’t really explain the price of gold by looking at its uses. Sure it looks good in jewellery but most of the gold doesn’t end up in jewellery, it sits in locked vaults gathering dust. There is now enough stored gold above ground to keep the jewellery market supplied for hundreds of years without needing to mine any more. So logically the price should crash and nobody should bother mining it any more. In fact people predict this all the time but it never happens.

This is partly because nobody trusts governments, not even the governments themselves. Governments can simply print money when they feel like it to manage the liquidity of a currency, however this undermines the value of the currency and hence the real value of people’s homes and monetary assets.

Gold has historically held its value through changes in currency supply. Because there is a limited supply of gold, it can’t be manipulated in the same way as currencies and tends to appreciate through periods of uncertainty as other assets fluctuate in value.  In the end, I’m happy to dig the stuff up so long as someone is buying it.