Gold: The Ultimate Asset or Pet Rock? – Part II
The 12 Temptations blog is an ongoing series examining how markets behave under stress. We deliberately avoid prediction and advocacy, focusing instead on structure, incentives, and behavioural dynamics.
Calling gold, a “pet rock” is not really about uselessness. It’s about something more specific, and more revealing. It is a way of saying that gold cannot be used to do anything else. It doesn’t build factories, fund research, pay dividends, or generate interest. It just sits there. And in a culture that equates value with productivity, that stillness looks suspicious. If something isn’t working for you, it must be wasting space.
But the discomfort isn’t really about inactivity. It’s about utility. Modern finance has trained us to think of assets as tools. Capital is meant to be put to work. It should grow, compound, optimise, respond. Even conservative holdings are usually justified by what they enable somewhere else. The assumption runs quietly in the background: an asset earns its place by contributing to a process.
Gold doesn’t cooperate with that logic. It doesn’t produce more gold. It doesn’t promise expansion. It cannot be made more efficient. And once you try to make it do something else you are already moving away from the very quality that makes it distinct. Gold’s appeal has always been tied to the fact that it stands on its own. It doesn’t serve a business plan. It doesn’t depend on a management team. It doesn’t need to justify itself with a forecast. That refusal can look primitive in a system built around progress. An asset that doesn’t promise improvement feels out of step with everything else on the balance sheet.
Instruments and Anchors
Most financial assets behave like instruments. They are designed to move. Interest rates change; bonds adjust. Earnings rise or fall; equities reprice. Currencies strengthen or weaken; capital flows react to incentives. Movement becomes evidence of relevance. If something is active, it must be useful, but gold behaves differently. It is less of an instrument and more of an anchor.
Anchors are not meant to generate motion. They are meant to resist it. Their value isn’t measured by how much they accelerate a system, but by how well they prevent drift when pressure builds. That role is difficult to quantify in calm conditions. It rarely shines during periods of smooth growth. In fact, it can feel like a drag.
A financial culture built around instruments tends to view anchors as inefficiencies. They don’t enhance returns in benign environments. They complicate tidy models. They interrupt the narrative that capital, properly deployed, should always be doing something productive. So, the anchor gets sidelined. Or mocked.
Calling gold a pet rock is, in part, a way of reinforcing that hierarchy. It suggests that only assets that “work” deserve serious attention. Anything that simply exists outside that framework must be ornamental at best, outdated at worst. Yet instruments often rely on the same set of assumptions. They respond to the same incentives. When those assumptions hold, everything looks orderly. When they don’t, assets that seemed diversified can move together in uncomfortable ways. Anchors look unnecessary until the conditions that made them seem redundant begin to shift.
The Problem of Fitting In
There is another reason gold makes people uneasy. It refuses to stay in one category.
Finance relies heavily on classification. Asset classes help make a complicated world manageable. If something is a commodity, it should respond to supply and demand. If it is a currency, it should move relative to policy and trade flows. If it is an investment, it should perform according to identifiable drivers over time. Categories create expectations. Expectations create comfort.
Gold never quite settles. In one period it behaves like a commodity. In another it looks more like money. At times it appears sensitive to interest rates; at others it ignores them. It can rally during crisis and sometimes during calm. Each framework explains part of the story, but none captures it completely.
The usual reaction to that ambiguity is simplification. If it doesn’t fit neatly, it must lack real function. The label replaces the question. Calling it a rock closes the conversation and preserves the model, but perhaps resistance to categorisation tells you something about the limits of the categories themselves.
Gold has persisted across monetary regimes, political systems, and cultural settings in a way few financial assets have. It intersects with economics, certainly, but also with trust, history, and human behaviour. It doesn’t belong entirely to any one box.
That makes it awkward. It complicates portfolio discussions. It resists tidy explanations. It doesn’t reward short-term benchmarking. And so, it is easier, and socially safer, to shrug and say it does nothing.
Yet rocks endure. They outlast the structures built around them. They do not promise growth, and they do not apologise for that. In a system that measures value by visible activity, that kind of endurance can be mistaken for stagnation.
Gold has been doing this for a very long time. Long before central banks, long before equity markets, long before modern portfolio theory, gold was being weighed, traded, stored, and trusted. Empires have risen and fallen around it. Currencies have come and gone. Entire financial architectures have been built with great confidence and dismantled just as confidently. Gold has quietly witnessed it all.
That does not make gold magical. It does not make it infallible. It does however suggest that dismissing it as a novelty says more about the present moment than about the metal itself.
A joke can close a conversation, but it can’t erase five thousand years of history.
Other Parts in this Inquiry