Gold bug

The term gold bug is a (sometimes pejorative) term used to describe investors who are very bullish on buying the commodity gold (XAU - ISO 4217).

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The term possibly was popularized in the 1896 US Presidential Election, when the supporters of Gold vs Silver money took to wearing lapel pins of small insects to show their position, though the term's original use may been in Edgar Allan Poe's 1843 story "The Gold-Bug,"^[1] about a cryptographic treasure map.^[2]

Today, gold bugs tend to be economically pessimistic, believing that a certain company, sector, or the entire stock market is going to crash and thus gold will be the only reliable store of value during a depression. Gold bugs have a lot of published work and Web articles. They are sometimes among the first people to mention a pending problem, such as a real estate bubble. While they may be right sometimes, critics contend that overall gold bugs preach doom and gloom in an attempt to persuade others to buy gold, driving up the price so they can sell the gold they have for a profit. Proponents may argue that in today's system of fractional reserve banking and centrally managed money supply, gold is among the few investment instruments that maintain their value. This same motivation has been alleged by those who short sell a stock.

Gold bugs are also often associated with attempts to return to the gold standard monetary system and many like to point out what they perceive as the shortcomings of fiat money. Others find it risky to go back to the gold standard because of the large amount of gold in private hands in unknown locations and in unknown quantities. Gold bugs may consider making such views known as a public service or even a public duty. Opponents contend that in the last several decades the price of gold has been far more unstable than developing-world currencies are in terms of each other. Proponents reject the basis of this assertion and counter that instability in the price of a commodity is dependent on the fiat currency. Since the 1990s many currencies have been more stable relative to gold than relative to the US dollar for instance.

Recently, gold bugs have pointed to rapidly rising oil prices and the unwillingness of China to significantly de-couple the value of its own currency (the renminbi) from the US dollar as complementary rationales for purchasing and holding gold. In this view, the relative value relationships between consumable commodities and variations in industrial capacity between markets increase the likelihood of chaotic behavior in the present international economic system because modern hard currencies (or fiat currency) lack full backing by gold reserves and therefore cannot establish empirically rigorous values for goods and services.

Digital gold bugs

The description of, and motivations behind, a "digital gold bug" are different from a traditional gold bug. A digital gold bug uses private digital gold currency, in preference to government issued fiat currency, for reasons such as lack of trust in fractional-reserve banking or government monetary policy. Many digital gold bugs are anarcho-capitalists, "Randians", "Sovereign Individuals", "Perpetual travelers", or some other variety of libertarian or capitalist.

References

See also

• Digital gold currency
• Edgar Allan Poe author of The Gold-Bug
• Gold Anti-Trust Action Committee
• Gold as an investment