The jaw-dropping spike in gold prices is a reminder of what primal creatures we humans are — especially the species among us known as active traders. But the surge should also remind us of the importance of calling on the more evolved parts of our brain.
Consider that there is no rational reason for gold, which has risen 50% this year and almost reached $4,000 per ounce on Monday, to be inherently valuable. Its price tends to go up when the world looks uncertain — it is supposedly a (redundancy alert) “safe haven”— as an alternative to the dollar. But why does gold have this status? A dollar can buy things. The stock market offers ownership in profitable companies. A bond promises a stream of payments. What does gold offer?
It has some industrial uses, but a lot of its appeal seems to be that it is both shiny and scarce. When times are uncertain, the most primitive parts of our brain find these qualities compelling.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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