Gold Debate: 4-5% Spreads and Wheat Comparisons

Gold Debate: 4-5% Spreads and Wheat Comparisons

Buying gold for protection is an old idea. So old that, according to one debater, in Jesus Christ's time a high-quality tunic and good shoes cost one ounce of gold. Today, a good suit and quality shoes still cost one ounce. This anecdote, repeated in precious metals discussions, summarizes the core argument for gold as a store of value: its ability to maintain purchasing power across centuries. But the detail often omitted is that this ounce isn't bought or sold at the same price. That is where the problem begins.

The discussion on gold's advantage starts with a specific complaint: the spread between buying and selling prices is so wide it makes you want to run away. The response trinc quickly: no, not always. Gold is bought not to speculate, but as a medium-to-long-term safe haven, an investment where money is secured because gold has been humanity's true money for thousands of years, regardless of country, government, or current fiat currency.

Why isn't gold a safe haven for everyone?

The safe-haven mantra has detractors. One critical view argues gold is no refuge: it has suffered brutal deflation considering it is a quasi-limited resource, and the price per capita has fallen and continues to fall. Wheat, by contrast, keeps rising in the same comparison, and it is not a limited element. If it were a safe haven, it would at least maintain the value sheltered per person, which it does not.

The answer to this argument comes as a question: if there are many more people on earth now, should gold be worth more? And if out of three billion new inhabitants none have bought even a single coin, the reasoning collapses. Another intervention points out the advantage is being your own central bank. Does anyone really think they store wheat in high-security vaults? The habit of confusing money with food is recurrent.

The real problem: 4-5% spreads and spot price

The practical point weighing most heavily in the conversation is the entry cost. The spreads are huge. Not speculating is one thing; getting robbed upon arrival is another. The repeated recommendation: any numismatic shop for circulating coins charges lower commissions than large platforms. In Madrid, several places sell at spot plus 4% or 5%. On certain channels, items sometimes appear at spot, but they fly off the shelves.

The advice is concrete: from experience, any shop on Calle Mayor (Madrid's main street) is always stocked with 20-franc coins by weight or close to it. Previously, numismatic conventions existed, and any merchant was viable. Now, with everyone confined, that is not possible. The conclusion is clear: you must know what you want to buy and what price you consider fair. Online is convenient, and convenient is rarely cheap.

Gold vs. Bitcoin: liquidity, energy, and barter

The comparison with Bitcoin appears early. No one knows how BTC will function under strong selling pressure. There are doubts about the system's liquidity capacity during mass sales. Gold has already been tested countless times. Bitcoin behaves like speculation, is illiquid, and depends on third parties and infrastructure extremely dependent on energy. When needed to survive because everything has gone to hell, those abstract tokens will be unredeemable.

Gold, however, has maximum acceptability in barter. That maximum, if not universal, acceptability in exchanges is what makes gold money, not wheat, iPhones, or orange juice. Avoiding losses is refuge. Gaining and losing is risk, speculation. It matters little for the asset with the highest marginal utility: that 1% never considers they have enough gold. The same does not happen with water, wheat, or any other product.

Mad Max, toilet paper, and women's stockings

The extreme crisis scenario unleashes imagination. The best investment before a Mad Max situation is a safe shelter, health (clothes, water, food, energy, heat, medicine), skills (survival, hunting, fishing, self-defense), and above all weapons, and knowing how to use them to protect the former. In wartime, we don't know if an ounce of gold is worth more than a pack of tobacco, a bottle of whiskey, or a lighter.

History offers clues. During World War II, Germany tried to destroy the Allies' economy by dropping blatantly fake pounds and dollars from planes onto Allied populations, achieving the opposite effect: the fake pound and dollar became the most common transactional currency, worth exactly half of an authentic one, boosting their universality. From being worth zero in normal times, a fake bill came to be worth 50% of the original due to lack of available cash.

Women's stockings were also worth more than a chocolate bar. Those with a seam down the back were used, and women who couldn't buy them painted the seam line to fake having stockings. What is most valuable in war are the instruments that allow access to food. In this case, it was the stockings that allowed reaching the officers' ration cupboards. Female ingenuity in the face of scarcity.

Blood gold and legal security in hard times

The most uncomfortable objection arrives with history. Ask Jews where all the gold stolen by Germans went, whose amusement was gassing them and pulling their teeth as a systematic anecdote. The blood gold of the Nancy illustrates the security that owning gold can provide in difficult times. Sometimes reality differs greatly from what one imagines, usually innocently believing that in a Mad Max scenario, legal guarantees are the same as in normal times.

Against this, the Venezuelan counterexample: holding physical gold and silver has allowed many to survive and even escape the Chavista paradise with their savings intact. The response is skeptical: the case is unknown, more cases are known of relatives who sent tickets. Can you provide sources? The discussion remains open.

The generation that doesn't want gold

The world is increasingly digital. Young people, under 50, want everything now and from their sofa. This life philosophy won't change but will advance, and is incompatible with gold as an investment. It is like thinking horseback riding will return because humans have done it for the last 5,000 years. Rethink and look at what Bitcoin is about; you are missing out on something very big.

The underlying accusation: metalheads promote gold's virtues to try to generate a buying boom that raises the price and, consequently, reverse the erroneous value of their positions and try to profit from low positions to invest in bullish ones. They know more than enough what is happening, like everyone else. They are not innocent. It cost them a fortune to learn it.

Dow/Gold ratio and ten-year CPI

The acid test: do the math over 10 years, since 2011. Not even for CPI. The Dow/Gold ratio, anything more than a simple ratio? The answer is that gold behaves like any other asset. The comparison with wheat returns: I buy more wheat than in 1971 and 2000 with the same gold, I don't have to divide it among the world population, there isn't gold for everyone. The argument closes with a "next".

The rebuttal is a platitude: everything has value, wheat, gold, river stones. Moreover, the same thing has more value for some than others. And thus the market discovered gold as the commodity with the greatest acceptability in barter. Pending homework: discover why gold has maximum acceptability.

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The advantage of buying gold, if it exists, is not in the entry price. It is in the exit: in being able to sell it when no one wants your fiat currency. With spreads of 4% to 5% in the best-case scenario, profitability starts downhill. Data from the last ten years do not support it. And yet, the ounce still buys the same suit and shoes as two thousand years ago. Whether that is refuge or a sentence to paralysis is a question the market has not finished answering.