Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. "What's that in real money?" is a familiar demand by tourists in foreign nations. According to a lot of people these days, real money means gold.

Fear of inflation and the worldwide competition by each country to devalue currencies has people looking for someplace "real" to put their money. South of the border, U.S. gold eagles are flying out the door so fast that the U.S. mint has announced it will stop selling them this month.

The Royal Canadian Mint will keep selling its Maple Leaf gold coins. With the eagle's wings clipped, that makes the Maple Leaf the world's best-selling bullion coin. According to mint spokesman Alexandre Reeves, the Canadian mint has never had to suspend sales. And although he can't give exact numbers, "the U.S. mint announcement has had a positive effect on business."

But what is real? Is money real, or just a concept? And is gold really real?

"Real" has several different, but related, meanings in economics. Here is a true story to help explain one of them.

Two weeks ago my son found a 1940 quarter amongst his pocket change. It had an image of King George VI that was worn soft by the hands of people now dead. Unlike shiny modern coins, it had the dull flat colour of real silver — Canadian coins of that era are 80 per cent silver, the rest copper.

When the Royal Canadian Mint stamped that 25-cent coin in 1940, the roughly five grams of silver it contained was worth about a penny a gram. Not any more.

My son and I took great pleasure in calculating that the 1940 coin he received as 25 cents change is now worth 11 times its face value in pure silver.

Why hold gold?

Alex Reeves from the mint was careful to explain that it is illegal to melt down Canadian legal tender. But there is no prohibition against keeping it as a silver hoard, or selling it on for the same purpose.

And this is the reason for the perennial fascination with precious metals. Rather than slipping away in inflation like the nominal 25 cents of 1940, backed by government fiat, gold and silver have an actual value.

Holding something real, like real estate or gold, protects you against inflation. Real estate has the disadvantage of being hard to sell quickly and hard to carry around. Gold, now hitting $1,200 US for one Troy ounce — about 31 grams — is more convenient than silver."

For the truly fearful, holding bullion protects against a catastrophic currency collapse. It is easy to scoff, but for people who have lived through any number cataclysmic events of the past century, holding "real" and easily tradable goods has meant the difference between life or death, food or starvation, escape or subjugation.

The real value of gold is its embodiment of the effort needed to find, dig and refine it.

The real value of gold is its embodiment of the effort needed to find, dig and refine it.

I remember reading journalist and historian Pierre Berton's tale of working in a gold mine during the Dirty Thirties. He commented on the irrationality, that when people were going hungry, the only job he and his gang of men could find was extracting inert metal from the ground for the sole purpose of storing it in vaults.

When everything else is uncertain, companies and ordinary people like to store the value of their current efforts so they can use it when they need it. The higher the price of gold, the more money mining companies can pay to people like the teenage Berton to find and extract new deposits.

No guarantees

But just because it is called something of "real" value, it does not mean the value of gold is guaranteed. I remember a colleague in Yellowknife waving around a $1,000 chunk of gold in 1980 shortly before it began its price plunge from $850 per Troy ounce to less than $300.

Gold is the ultimate speculative commodity. It doesn't pay interest. It actually costs money to buy, to sell, and to store where other people can't steal it. When people are fearful, especially fearful that currencies are about to fall, gold increases in value. When the economy starts ticking along safely, gold is a very costly place to keep your money. At that point it tumbles to its other "real" value, its value in use as a pretty metal, as an electronic component. When it starts to fall, people rush to sell so they can put their money into productive investments.

So when it comes right down to it, gold isn't really real.

Real is what you can eat. It is happiness, health, friends and family. It's a warm place to sleep and a useful life. Real is a beautiful world, a healthy community, well-fed children, self respect, good memories.

There are also ways to invest in those things. Insulating your house. Replacing an old car with a more fuel efficient model. Giving to the food bank. Having good times with friends and family. Taking a memorable trip. Spending time with children and grandchildren. Making sure they are well educated. Making the world a better place.

Those investments are pure gold that will never lose their value.