In his July 17th Blog, Let's Get Real About Gold, author and Wall Street Journal columnist Jason Zweig likened investor interest in gold with the "Pet Rock" craze of the 1970's, when consumers became convinced that a rock in a box would provide continuous companionship, elevate their social standing, and give them something hip to talk about at parties. Zweig asserts that investor faith in gold, which he argues is just another inert mineral with good marketing, is similarly irrational, and has kept people from putting money in the much more lucrative stock market.

First off, Zweig's comparison of gold to equities as an investment vehicle sets up a false dichotomy. Gold is not an investment. It is, as Zweig indicates, nothing but a rock. But it is a rock that is extremely scarce, with highly desirable physical properties that have resulted in its being used as money for all of recorded human history. As a result, it should not be compared to stocks or real estate, but to other forms of money, such as any one of a number of fiat currencies now in circulation. Ironically, in a world awash in fiat currencies that are created at an ever increasing pace, and whose value is solely derived from faith in the issuing state, gold is the only form of money whose value does not require a leap of faith.