> gold can't simply be mined fast enough to reduce its values
No, but people's DESIRE for gold can change quite quickly.
Gold can lose value very very fast if people decide that a given national currency is going to be inflation-free - they would rather have their wealth in a liquid form, and sell the gold for cash, thus driving down the price of gold.
Why did housing prices crash over the last year? Was it because so many houses were created in 12 months? No, it was because people's estimation of the value of houses went down, due to new and better information.
> No, but people's DESIRE for gold can change quite quickly.
Whether or not people's desire for gold and PGMs change or not - they will still desire products that use PGMs (e.g. catalytic converters). Gold has some awesome properties.
Also - the desire for gold is 1000's of years old. Until women will be happy with a plastic engagement ring gold will remain valuable.
> Why did housing prices crash over the last year? Was it because so many houses were created in 12 months? No, it was because people's estimation of the value of houses went down, due to new and better information.
I thought it was because loans were given too easily (i.e. too much money in circulation).
> Gold is certainly not immune to such effects.
The reason why some people prefer gold as a store of value is because the government can't use inflation to rob you of your money. Inflation occurs always when the government prints more money and it serves as a hidden taxation. In the course of history a lot of governments printed money in order to finance its numerous social experiments (Germany, Zimbabwe, etc...)
The problems in Zimbabwe could have been averted if the government was forced to back their currency (partially) by gold.
Whether or not gold should be used as a medium of exchange is up to debate. The bigger question is: What gives you confidence in the value of a dollar?*
* substitute dollar with your local currency of choice (pound, Australian dollar, Euro, Zim dollar, rand, etc...)
No, but people's DESIRE for gold can change quite quickly.
Gold can lose value very very fast if people decide that a given national currency is going to be inflation-free - they would rather have their wealth in a liquid form, and sell the gold for cash, thus driving down the price of gold.
Why did housing prices crash over the last year? Was it because so many houses were created in 12 months? No, it was because people's estimation of the value of houses went down, due to new and better information.
Gold is certainly not immune to such effects.