2. Gold Is Worth Only What the Next Investor Will Pay for It
This statement is weak from the onset. There are no stocks, bonds, commodities or goods that are worth more than the next person will pay. That being said, gold has something that the others do not. Gold is 100% transparent, in that, unlike other easily traded investments, it is only one thing: a pure and precious rare commodity that requires little space for storing great value.
This commodity has acted as money for thousands of years. In fact, after World War II, the Bretton Woods agreement used gold to bring stability and sanity to the world's currency markets once more. If that history of human use doesn't give intrinsic value to gold, why would you give that title to any other asset?
People had their life savings in Lehman Brothers stock. Other people invested in mortgage-backed securities or were holding Argentine bonds or got sold the claims of Bernard L. Madoff Investment Securities LLC.
Stocks and bonds, though there are many facts available about them, are never 100% transparent. It is much like a hiring a baseball player. You may have his statistics and you may place him in the perfect spot on the best team in the league. Yet he may perform poorly due to an unknown injury or a problem with the change of venue or any other number of unknown reasons. This is the same for stocks and bonds. Though we have their statistics, we never know when some problem may cause some of these instruments to fail.
3. Gold Is Neither a Good Hedge for Stocks, Nor Inflation
Anyone looking at the 1980s and '90s and concluding that gold is a poor inflation hedge misses the point. You didn't need an inflation hedge when cash in the bank paid 5% above and beyond the rate of inflation each year, as it did on average for U.S. and U.K. savers for the last 20 years of the 20th century.
But gold doesn't make a good hedge for stock market investments either, according to a long-running thread of comment. The frequent comparison is usually to the stock market overall, or the Dow Jones industrial average. Never mind that gold and stocks have, over extended periods, gone in opposite directions. That measure is not a just number to use, because the stock indexes frequently change. This is also true of the overall market, where stocks are delisted if they underperform or go bankrupt. If these types of stocks were kept on, how would the indexes and averages have changed? The stock market of 1989 did not have the same listed companies as that of 1996, 2000 or 2013.
In contrast, the gold of 1989 was the same gold of 1996, 2013 and even 2000 BC. Gold does not change, and its supply cannot be expanded (or reduced) at will. This is why gold functions so well as a form of exchange and transfer of value. It holds value due to its permanent unchangeable form. World history has shown us again and again that in the final analysis; only gold, out of all investable assets, holds value in catastrophic situations.
You can lose value owning gold if you buy high and sell lower, but you never lose it all. You could easily pick out a point in any chart of the stock market where an investor could have bought and then another time where you may have sold and lost money. There is no point to this kind of example, because it never speaks to an individual's overall performance with their assets. They may have liquidated their stock at the low price because they needed the cash to invest in a particular business or real estate opportunity. All assets including gold have to be looked upon as part of a strategy for the investor and not as independent pieces of life's asset management puzzle.