She doesn't include it in the stuff called "investments" which generate cash flow, hopefully at a profit.
She doesn't include shiny in the group of commodities that are consumable, such as corn or oil. Or even with platinum or palladium which as catalysts are not consumed but are nonetheless useful.
No, Izabella seems to think of gold as something you can buy with money, whose price goes up and down based on other people's perceptions, which in turn are colored by their fear and greed.
Like the Beanie Babies market, it's something to trade.
And I agree.
The perpetual gold debate
A quick note to share a few new thoughts on gold following a Bulls vs Bears debate I just participated in.Just so you know, after Barrick bought Homestake I was probably the last person to look at HM's records from the 1930's, I was there as the archivists were boxing the stuff up.
– The Bulls’ argument is now so illogical, one has to suspect they — being mostly vested interests — are just going through the motions on account of perpetuating the emperor has clothes illusion. They basically can’t afford to admit their is no logic to their arguments because they are too invested.
– I keep hearing about how gold is a fantastic form of insurance, but isn’t one of the basic principles of insurance that risk has to be pooled and offset– i.e. spread around? Isn’t the basic thing about insurance that it doesn’t work if everyone claims it at the same time? Gold’s value, however, by definition depends on herding effects. Thus gold only insures you in the event your crisis isn’t the same as everyone else’s crisis. I thus suspect it’s a terrible form of insurance to guard against a system collapse. Furthermore I don’t remember failed states like Zimbabwe turning to gold in an inflationary crisis, but rather to the currencies of more stable countries which can guarantee imports for the holders. Gold’s value in a crisis is thus dependent on its broader international acceptability against imports.
Just think about it, if the dollar failed and lost total purchasing power all holders of gold would attempt to liquidate gold in exchange for valuable assets/goods (probably from abroad) at the same time depreciating the value of that gold just as much as the dollar. All the gold would flow to producer states. Okay, they may in the initial crisis point get something whilst others get nothing, but more than likely if and when the dollar collapsed the inflationary effects would stalk gold as much as the dollar. Gold emanating from a failed state would depreciate in terms of the currency of the exporter providing goods, because you’d first have to exchange it for that country’s currency. The only insurance role gold really serves is on a portfolio diversification basis. But even then chances are the dollar would do even better as a safe haven asset.
3) 2008 proves I think that in a crunch people want liquid assets that are guaranteed by powerful and organized authorities. Indeed, when Lehman went bust gold’s value fell because holding arbitrary bubble value became less of a priority than holding true value. People flocked to the dollar. I would therefore speculate that the only reason we got the gold bubble at all is because the central bank backstopped what would otherwise have been vaporized capital. It’s only once this capital value was guaranteed by government that it could be transferred on a marginal level from failing securities into perceived safe haven assets amongst them gold. Basically this capital had two choices, stay in the failed securities and run the risk of being written down/haircutted or flee and go somewhere else. Government, by providing a synthetically inflated cash-out value, allowed capital to be transferred at a synthetically inflated rate into alternative assets, amongst them gold, sparing the system overt capital destruction....MORE
Here are a couple things that may help make gentle reader think about this area:
The Best Book on Gold
How the Beanie Baby craze was concocted — then crashed
Or ask Izabella about scarcity and abundance.