Grandich gets closest to explaining the true value of gold. It's a portable hedge against destitution, for the ultra-rich. That's all it is.

Point being, currency is nothing but a contract with the government. We're normally happy to trade those contracts. But when chaos comes to our country, we all of a sudden find that these contracts have extreme counterparty risk that we never took into account before. The government can break that contract, at will, unilaterally, and then your currency is worthless.

THIS DOESN'T NECESSARILY WORK THE WAY THE GOLDBUGS EXPLAIN IT. Peasants like you and me don't care about the value of currency, because we can survive without it. We can walk away from everything and start a new life. But the ultra-rich can't, or at least don't want to... and who can blame them?

For example, if you're a Polish multi-millionaire in 1939, and your wealth is stored in Zlotys (of whatever their currency was then), your wealth essentially disappears the moment the Nazis and Soviets invade your country - because the Zloty "contract" is broken by the new powers.

If you're a Jewish multi-millionaire living in mid-30s Germany, your Reichsmark "contract" gets repeatedly broken: first your property and businesses are confiscated from you, then you're forced to abandon your paper wealth when you flee the country. (The Jews who legally escaped 30s Germany with the help of collaborating rabbis basically had to turn over their Reichsmarks in very one-sided Government-controlled currency exchange transactions.)

If you're a multi-millionaire from the Confederate states in the US civil war, your contract with the North is broken, but your contract with the South is worthless also - Confederate currency was worthless very quickly.

If you're a multi-millionaire in Romania after the end of WWII, your contract with the government gets broken as the Communists walk in and order the confiscation of all your property. Money, buildings, livestock, all of it, gone.

If you're a multi-millionaire in Chile during its hyperinflationary period, your peso contract with the government gets broken: in hyperinflation, most "rich man's assets" actually lose all their value. Houses are worth nothing, local currency is worth nothing, luxury goods are worth nothing. Only consumables hyperinflate in price - eggs, petrol, so on. If you happen to own some cows or an orchard, you're still wealthy - until the hyperinflation ends, when you become just another property owner, but this time with no pesos in the bank.

Poor peasants like you and me don't have a rich man's worries about chaos, insurgency, war, hyperinflation, and the like. We form lines of refugees fleeing for the border, we live under bridges, we eat tulip bulbs, we dig ditches, we volunteer to be slave labour. The few of us with valuable skills survive and prosper during periods of chaos. But we essentially don't have any wealth worth protecting.

But if you're a billionaire, and you KNOW that you could lose everything, that's really frickin' scary to you. You probably don't know how to do productive work, you have no skills, you have a family that you're expected to pass your estate to, and you certainly don't want to lose your status as a rich person. So, you keep 1% of your portfolio in physical gold, in a safe in your house. That way, when the Nazis come for you, or hyperinflation hits, or civil war happens, or you're invaded, you have at least a LITTLE wealth that you can carry with you in your private boat or plane as you flee the country. The billionaire uses gold as a hedge against complete destitution.

This is why, when war happens, gold spikes in price.

Example: imagine the US declares war against Iran. We know that gold will go up in price at that announcement. Why will gold go up in price? What's driving the price up? Believe it or not, it's boring old supply and demand.

Americans probably won't buy much gold at this war announcement - they have no reason to, they have nothing to fear from Iranians. Iran can't attack the continental US. They can attack the US army, they may even win the war handily, but they are no threat to US civilians.

There's no gold supply disruption in a US-Iran war - because there's essentially no gold coming from the middle east. There's a few gold mines up in Uzbekistan and Kazakhstan, but that's very far away.

If there's a US-Iran war, gold goes up in price BECAUSE IRANIAN BILLIONAIRES WILL BUY LOTS OF IT. Similarly, Qatari and Bahraini and Saudi and Iraqi and Israeli billionaires will also buy lots of gold upon a declaration of US-Iran war. They do this because they see the possibility of absolute destruction of their money by war (e.g. nuclear fallout or stray bombs), civil unrest (Qatari billionaires, for example, will be very worried that any problems in Iran could spill over to an Islamic revolution in their own country), absolute loss of rights (your government ALWAYS takes away all your rights during a war on domestic soil), and so on.

The gold these rich people buy is not a GOOD store of value. They know that and they don't care. It's a SUFFICIENT store of value for the purpose it serves. Thier gold is still just a contract (because it's acting like a currency) - but it's convertible across borders, portable, and (best of all) has value to people other than governments - or at least it has value to people that the rich person will need to deal with.

So, as long as the rich have a bit of physical gold, they can hop on a plane with the shirt on their back and 300 lbs of Kruggerands, and start a new life somewhere else free from fear, with a decent fraction of their former wealth. At least they're still millionaires.

This is how it works for the ultra-rich.

For peasants like us, it's always more important to have close friends to rely on, marketable skills, good boots, good health, and a couple spare packages of spaghetti in the fruit cellar.