I was introduced to this video after reading about it on Gary North‘s site. It's a short documentary on what a village in Zimbabwe is doing as its currency thrashes in hyperinflation. Merchants have stopped accepting the Zimbabwe dollars and will accept only gold.
If you view only about 20 seconds into the video, you'll see the exchange: one loaf of bread for 0.1 grams of gold. So, the villagers pan for gold so that they can eat. Many can't.
Is 0.1 grams of gold expensive for a loaf of bread? In terms of labor, yes: one might need to pan for hours to find this amount of gold. A whole family might need to pan.
If we step away from Zimbabwe for a second and look at the market pricing of gold in (US) dollars, we see that it's been trading between $900 and $1,000 per ounce over the past 30 days. Let's say that it trades at $933. (This makes the math easy. No, really!) Since there are about 31.1 grams in a troy ounce, 0.1 grams is worth about $3. This might be a tad on the high side for bread, but not ridiculously high.
The main point: In the absence of a stable currency, gold holds its purchasing power. We've seen this in the US, and we're seeing it in Zimbabwe. Cash may be king, but kings can go corrupt. Gold isn't corrupted by anything, and it answers to nobody. It has value independent of any decree or proclamation by its physical scarcity.
That's why people with bread to sell in Zimbabwe accept gold.
It will happen here soon enough!
Gold is operating as a de facto currency – it does have intrinsic value/use but primarily it’s worth something because everyone think it is. If we all started thinking that amber was worth something it could take the place of gold very easily.
So, $3 for bread in the UNITED STATES isn’t a big deal. But that doesn’t translate into Zimbabwean currency accurately, and for THEM, $3 a loaf is probably horrifically expensive.
To comment on your main point about gold; Twenty years ago I worked in an office one of the employees I worked with was from Syria. She was in her early twenties. She had this beautiful necklace that she wore, gold with a lot of medallions on it. Something a belly dancer wheres that is what it reminded me of.
She told me in Syria, women (family) invest in gold,instead of what we use to call a hope chest. When daughters marry she has the gold so that if anything happens to her husband the wife has the gold to fold back on to sell so she is able to survive.
Today, economics are a perfect example of that reasoning and makes sense. Currency is based on precious metals since the beginning of time in one way or another.