You can't eat it. You can't wear it. You can't use it as shelter from the storm. You can't even use it to fertilize your garden. But if someone offered to give you a bag of it, you'd be more than delighted; you'd probably be very elated.

What is it? Why of course, it's gold! Fact is that for over six thousand years, people have sought after gold simply because other people would accept varying amounts of it in trade for things that could be eaten, that could be worn, and that could be used as shelter from the storm. Simply put, gold has been an accepted store of wealth throughout most of human history.

When one considers gold in this context, it does seem a little odd that this substance which has little utilitarian value is prized as highly as it is. Actually, gold is valuable because it provides a basis for people trading with each other. In other words, for most of human history, gold, as well as other precious metals, has been used as a medium of exchange; that is, gold has been used as money. That's because it is somewhat unique and is in limited supply, is recognized by most people as a store of wealth and is difficult to counterfeit.

Presently, most people use government issued currency as money. This is generally more convenient than gold. Such officially issued currency typically has the qualities of money and is backed by the full faith and credit of the issuing agency. However, currency is valuable as long as it is limited supply, so currency valuation is dependent upon whether its issuance is indeed closely controlled. Gold has no such dependence because it is inherently in limited supply. That may be the basis for gold's increasing popularity.

And gold is popular. About eight years ago (November 1999), an ounce of gold could be purchased for slightly less than $300. Presently (November 2007), an ounce of gold is priced at $800 per ounce.

Going back in time, to the early 1930s, gold was priced at $20.65/ounce, as it had been for most of the 19th century. Then it was increased to $35/ounce, but that price increase was somewhat an abstraction because the US government administration in 1933 confiscate gold from individuals and made holding gold illegal for those living in the USA. The $35/ounce held through 1971; then in 1975 it became legal for Americans to again own gold. The price of gold increased from the 1971 price so that when gold was available to individuals, the price had risen to $160/ounce. For comparison, it took $67 in 1975 to equal the purchasing power of $20.65 in 1931, so gold valuation in 1975 included about a $93 premium ($160 - $67).

Apprehension regarding inflationary factors during the late 1970s and into 1980 caused gold prices to spike as high as $850/ounce in 1980, averaging out that year at near $610/ounce. Strong action by the US Federal Reserve in raising interest rates into double digits brought gold prices down into the $300 to $400 per ounce range until 2002, when gold started its present rise into the $800/ounce level. This rise has been fueled by the perception that a US dollar with no significant backing could readily usher in high inflation. Also, the weakening US dollar, in comparisons to other national currencies, and an increasingly negative balance of trade emphasized that possibility. Hence gold was being considered as somewhat of a safe harbor in what might become a major financial storm.

The question now is whether a safe harbor is appropriate. For those who are familiar with monetary history, the answer is an unequivocal "yes". That is because there is no fiat currency (currency which has no backing other than faith in an issuing agency) that has maintained its purchasing power for even a decade. In fact, there is no fiat currency that has ever in history had a life expectancy of an average person (77.6 years for a USA citizen). Based on such a historical perspective, purchasing gold as an "insurance" against very possible currency depreciation seems prudent.

There are various ways to purchase gold. One of the best is to purchase gold bullion coins such as the US Gold Eagle, the US Gold Buffalo, the Canadian Gold Maple Leaf, the South African Gold Krugerrand, etc. These coins are recognized because they are certified to be a specific purity and a specific weight by their issuing agency. Other ways include purchasing gold held in reputable warehouses, such as that held by the Central Fund of Canada and by the Perth Mint of Australia. Also, an individual can purchase gold bars from numismatic stores or direct from precious metal companies, such as Kitco, Inc.

At this point in time, one is well advised to consider such a purchase. The USA's fiat currency "adventure" effectively started in 1971 when the dollar was decoupled from any and all convertibility to gold. Since then, the purchasing power of the US dollar has depreciated to one fifth of its 1971 power. Further, based upon the fact that no fiat currency has lasted longer than an average person's life span, it could be estimated that the US dollar may have disappeared by mid century (2050). In the meantime, the probability is very high that the purchasing power of the US dollar will continue to decline, sometimes slowly and sometime quickly. Accordingly, it may be time to consider "going for the gold".