Is Gold a Belief or Faith?

Most of us are passionate about investing or saving in gold. We feel good and secure when we accumulate private holding of bars and coins over time as part of our investments or savings.

On the contrary, we are restless and concerned about how much our holding worth in a particular currency, mainly the US Dollar. We spoil our joy of owning gold by watching gold prices day and night. We become alarmed whenever prices drop and hysterical whenever prices skyrocket. We accidentally put ourselves in an unpleasant form of living.

In this article, we will try to analyse our attitudes towards gold, shed some light on reasons behind our actions, and find suitable means to deal with changing markets.

We start our journey with the question “why are you somehow interested in possessing this yellow metal?”

You may say “for ages, gold proved to be the real money, and symbolises the safe heaven investment”, or you may answer “I feel safe and secure when having a private holding of gold”, but what are the real drivers.

In old times and over thousands of years, we had used gold in the form of coins to exchange monetary value for goods and services. Over time, gold had developed faith in our minds that these gold coins will carry same monetary value tomorrow.

However, “what is faith?”. Dictionaries define faith as trust, assurance and confidence in something to give you the reality you are expecting for, and, at the same time, you have evidence from previous experience that you received what you hoped.

Faith in Gold lived in people minds to the time when the development of paper money started as certificates of gold and silver, and US Dollar emerged as a reference currency to others. The success of US Dollar was in its ability to transfer faith from gold into the newly created currency. The two most important aims to obtain such success were to market this currency under the gold standard and ensure its usability as a reference currency.

This realisation of faith transfer was demonstrated when the US government completely abandoned the gold standard in 1971, but the world continued relying heavily on US Dollar as a reference currency.

When US Dollar replaced Gold in people mind as faith, Gold moved to into people heart as belief. Consequently, we became mechanically emotional about gold but not practical about this precious metal.

Thus “what is belief?” Belief is an assumed truth residing in your heart. You create beliefs, and you follow them blindly. Unfortunately, beliefs are open to being challenged, get reframed and changed in one way or another.

When gold converted to a belief in our hearts, we started to experience volatile life with this yellow metal. Our passion towards gold became open to negative as well as positive comments by financial analysts, economists and even market influencers. Our hearts became a target to market movers to command our actions.

We became, unfortunately, emotional when dealing with gold. We take decisions and actions from our hearts but not from our minds. We act because of fear and insecurity. We are very much want to own gold but, at the same time, hesitant to do so.

Remember yourself when you choose to have junk food meal. You acknowledge that this kind of meal is only a filler, but you jump to take it because of low price, fake taste and quick access while knowing the real value of the homemade meal and its benefits to your health.

Similarly, when dealing with the currency, we jump into acquiring more and more because of its low cost, fake feeling and easy access while you agree that the real value is not in possessing papers but in holding gold.

My friends, it is a dilemma of confusion. It is our inability to differentiate between value and price, and our wrong understanding of the difference between money and currency, leading us to a problematic pattern of behaviour.

We define value as the regard to holding something that deserves the importance, worth or usefulness of something else. In our case, we have regard to holding gold that deserves the significance and use of our economic efforts. Whereas we miss the accurate meaning of price being the quantitative figure of something in exchange for something else.

In a similar way, we ignore the fact that currency is the legal tender in the form of coins and banknotes of a particular country to be accepted as payment for debt and as money bearing our economic efforts.

There is no escape from this dilemma other than rationalising your understanding and refining your reasoning. The wrong attitude that most of us follow is throwing a bad name on paper gold and praising physical gold without studying their existence carefully.