Gold

1. Definition

Gold is a precious metal that has served as a reliable store of value and medium of exchange for thousands of years. * Unlike fiat currency or financial assets, it carries no counterparty risk (it is nobody's liability).

2. Key Characteristics

1. Safe Haven: During times of geopolitical turmoil, war, or financial crises, capital flees to gold ("Flight to Safety").
2. Inverse to Dollar: Gold is priced in USD. Typically, when the Dollar weakens, Gold rises, and vice versa.
3. Inflation Hedge: It maintains its purchasing power over the long term, protecting wealth against currency devaluation.

3. Yield Issue

• The Criticism: Warren Buffett famously dislikes gold because "it doesn't do anything." It pays no interest and no dividends.
• Implication: Gold performs best in low or negative real interest rate environments, where the opportunity cost of holding non-yielding assets is low.