Investing in Gold - the ultimate Ponzi scheme?

Two very interesting articles today should have all "investors" in Gold thinking hard about their strategy.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8116117/New-commodity-funds-may-be-next-financial-bubble-FSA-warned.html

http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipulation-2010-10-27

The first article is a timely warning that the current desperate search for any investment that is better than holding cash is potentially leading to bubbles in some very unlikely places. The second is a great illustration of the risks of playing with the big boys.

There is something about Gold and Silver - just live with the fact that 10,000 years of acknowledged fascination with these metals is an incontrovertible fact. My personal disclaimer or health warning is that I fail to understand why this should still be the case.

To my mind Gold is a text-book example of a Ponzi scheme - There is a limited and definable supply, the "investment" has little or no intrinsic value (albeit that the electronics industry is a reasonably significant consumer), the "investment" is never consumed but can be recyled infinitely and - the real clincher - holders can only get out at a profit if new mugs are hooked on the scam.

I hear all the arguments about the third world, particularly China and India, where the rising tide of their respective economies are enabling the quasi-mystic regard in which Gold and Silver are held to be turned into real buying as opposed to aspiration - but the gold is still there, doing nothing and earning nothing. That is another element to the ticking time-bomb. They are not involved in some gollum-like love affair with this gold - they don't take it to bed and make love to it!!! When the time is right (or historically when the time is wrong) it will be sold to the next lucky player at this particular casino.

I give especial weight to the current desperate search for absolute return. Precious metals are diametrically in opposition to this objective. As inflation (which Uncle Ben and his cronies seek so enthusiastically) picks up "investments" without yield will be the first to go.

The "survivalist" argument actually makes me angry. In the post-apocalyptic world the anthropogenic changes would make holding a few sovereigns or krugers a great idea for a while. The most probable apocalypse, however, is a financial one and nearly all "investment" precious metals are held as paper issued by or in the vaults of the very institutions likely to collapse.

Sorry gold-bugs, but I am off to buy some tulip bulbs instead.

Dum Spiro Spero