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Intrinsic value #FinanceFriday

We have been in a recession since last March but imagine for a moment if things were even worse and paper money was no longer of any value. In a worst-case scenario, you would need things of intrinsic value. In such a scenario, a warehouse full of food would be most useful. Even an empty warehouse where food could be stored would have some intrinsic value. If you had food to sell, what would take the place of paper money? The general consensus among investors is that gold would be the new trading currency because it has intrinsic value.

intrinsic value

Gold

In some cultures, they carry their gold as jewelry and even in our culture the wearing of gold jewelry still confers an air of wealth and success on the wearer. Gold jewelry is also popular with dealers in scrap metal. They are more aware of the intrinsic value of metals. Other metals are valuable and so are precious stones but none so sought after as gold in a crisis. Throughout the pandemic, gold has been in demand and the price has climbed. Now that sentiment has changed as vaccines are rolled out, gold prices are falling. For those who thought the pandemic was all a hoax or caused by 5G, you were in the minority. Investors the world over thought that the pandemic could kill hundreds of millions and so did governments. Investors bought gold, governments invested in science to produce vaccines.

Food

Gold is a good investment if you worry about the worst-case scenario actually happening one day. A warehouse full of food is an even better bet. If you can’t afford a warehouse full of food, you might consider keeping your food cupboard stocked up. There are people who worry about such a disaster and they grow their own food. Many allotment owners pride themselves on a degree of self-sufficiency.

Fuel

The other thing that might be in short supply in a worst-case scenario is fuel and I must admit I filled up my car with petrol last March and kept it topped up just in case supplies were interrupted. I’ve also been a bit careful with petrol, I’ve used very little over the past year.

Share prices

The value of Britain’s companies fell dramatically last March as investors sold shares and bought gold. It was almost inevitable that science would find an answer to the pandemic and so share prices are rising and gold is falling. Not all companies are recovering though, some have gone out of business so you need to invest carefully as the economy recovers. The roads will become busy again when everyone is vaccinated and the skies will fill with aircraft. So oil will be in demand and the oil price has already started climbing. As the economy picks up, the banks will be busy. My investments this year? Barclay’s, Lloyd’s, BP and Shell. I think it will be a while before pubs are open and maybe next year before people take overseas holidays.

Hope for the best, prepare for the worst!

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