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A letter from Paul Tustain, CEO of BullionVault, to The Economist, explaining exactly why people invest in gold...
In your 'Wacky world of gold' (June 4th) you echo the letter you printed three weeks before, which presented a common but weak argument on the Gold Price – that it is far too high for something with few industrial uses. Both pieces show writers blaming everyone else's stupidity for the fact that their preferred theory has never worked; not once in 4,000 years.
You wrote : "If investors ever wake up and notice that the yellow metal is little more useful than tulips, the gold bugs will be burned". But industrial usefulness does not define value, and here's a simple demonstration:- Take one £20 note and consider the paper's industrial applications. Now burn it. See what I mean?
Gold investors understand that gold's geological rarity and industrial uselessness combine to produce an incredibly stable stock quantity – the exact utility savers demand from sound money, and something they'll not be getting any time soon from a major currency; or tulips.
The Economist would do better to wake itself up, and try to understand why it has been consistently wrong about gold, instead of being condescending to investors who have been right.
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