For example, gold is a form of wealth and it takes labor and energy to produce gold. But gold is not just a commodity. Gold is money. Gold is not used to any significant degree by industry. It is not consumed. If the world ran out of gold tomorrow, nobody would go hungry. People like to say "you can't eat (or wear or live in) gold". I say "exactly". That's one of the reasons why it is money and not a commodity.
Sure, gold is formed into objects like jewelry, but gold jewelry was originally invented to be money. Gold chains could be shortened by cutting off a few links and using it to pay for things with. Conversely, cotton is turned into clothing which is worn (consumed), wears out, and is discarded. Corn and wheat are consumed to extract the nutrients from them and then remains are discarded. Production and then consumption into nothingness is typicial commodity behavior. Gold however, is not consumed and then discarded. Gold is simply hoarded. Hoarding without consuming is a trait of money. As JP Morgan said, "Gold is money, and nothing else is".
Because people tend to think of gold as a commodity, during normal times gold and commodities can have high corellation in price movements relative to the fiat currency. But we are not in normal times. We are in the ending decade of a long term debt global Ponzi which has been driven by the dual scams of fiat currency and fractional reserve banking. Some might even call it the end days of an 80 year cycle of dishonest money. Because of this, gold is no longer trading in lock step with commodities. The following chart plots gold against a major commodity ETF.
As you can see, gold acted like a commodity until late 2008 and then it took on a new life of its own - a life that hasn't been seen in many decades. Gold started to behave like money again. People are even accepting it as collateral in trading operations. There is no clearer sign that gold is becoming recognized as money again then the use of it on a day to day basis by moneymen.Gold could correct a bit if the dollar breaks out (which it is threatening to do based on troubles in Euroland. Again.). However, the telltale event that I am looking for is when gold does not pull back (or the dip is quickly bought) when the US fiat currency strengthens against the other worthless fiat currencies of the world. The world is not used to that happening. We could be on the verge of seeing that right now. Of course, it could also take a couple more years to occur. Nobody can say for sure when it will happen.
Why do I think this would be important? What would be so special about gold strengthening along with a rising dollar? Well, as I have written many times before, the world expects gold to behave like a commodity even though it is the only true form of money on the planet. When the dollar strengthens relative to other sovereign crap-cash, gold is supposed to respect the rising dollar by taking a big dip. But if a rising dollar doesn't result in falling gold then it is a big sign that the herd is becoming less and less fooled by the annual seesaw act between competing fiat currencies. The truth is that all global fiat currencies are failing albeit at different rates. When gold rises at a time people expect it to be falling, increasing numbers of the herd will begin to see that the leaders of the herd no longer have the same trust in the fiat currency that they once did. When these social signals hit a certain point, the herd will start to react. Small initial reactions will eventually turn into a chain reaction. Trust and confidence are funny things. They can go out the window within a very short time frame (in other words, in about the amount of time it takes to say "Madoff accounts are worthless because he was running a Ponzi").
