Investment special: The case for gold

Few assets are more misunderstood than gold. I might even refine that statement — if you’ll pardon the pun — and say that few assets are more misunderstood than money. Gold happens to be both. Technically, of course, we are constrained by government edict to use pounds sterling for the payment of our taxes and debts. My take on this dismal state of affairs, but also my optimism, can best be summarised in the title of Nathan Lewis’s recent book, Gold: The Once and Future Money.

Economists give money three attributes. It should be a unit of account (we can price things in it). It should be a medium of exchange — which avoids the inconvenience of barter. And it should be a store of value, something which enables us to maintain our purchasing power in real terms if we choose to defer spending and save instead. Our current ‘fiat’ paper money does a passable job of the first two, but is disastrous in relation to the third.