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Gold is the only commodity in the world whose rising price can be so quickly self-defeating. Indians, who usually buy lots of it, have turned into sellers because it's more enticing to sell at $1,220 (U.S.) an ounce than to buy. So the local markets are awash in bangles and other jewellery. Fortunately for gold lovers, investment demand is soaring so the price stays high, for now anyway.

But what are investors overlooking when they fixate on gold as a store of value? It's better than real estate right now, most likely. Maybe better than government bonds too, given the state of the public balance sheet. But there are alternatives to gold as a store of value. What about oil for example?

Unlike gold, oil's value comes from its scarcity. You find it, you produce it, and then you burn it. Scrap gold makes up 40 per cent of the world's gold supply (mining and central bank sales contribute the rest). There is no scrap oil. It's gone after we use it.

And we still use a lot of it. Despite the great recession, oil consumption has remained pretty strong.

In 1999, the world consumed 76 million barrels a day. In 2009, it was 84 million barrels, which wasn't even 2 per cent less than the year before. U.S. consumption, which is about a fifth of the total, was down 5 per cent and may have peaked there and in the developed world by and large. But the developing world is making up most of the difference, and will keep growing.

Oil consumption in China and India on a per capita basis is still a small fraction of what it is in our world - roughly one-fifteenth - and it's still rising briskly.

And while it's true that reserves are still growing - there are 30 per cent more proven barrels today than there were 20 years ago, according to the BP Statistical Review - it should be clear to any informed person that these new barrels are not like old barrels. The new stuff is in the Gulf of Mexico, for example, where there was another explosion yesterday. Or they're in places where people or governments or mobsters just take them from you without so much as a thank you very much.

Our oil sands are not without their baggage of course but nothing is going to stop their development. Oil is a filthy business but technology will solve some of the problems in northern Alberta. And nothing will replace oil for a long, long time. Electric cars are a novelty that will never take serious market share from gasoline varieties. Besides which, they run on coal.

A colleague reports that Fort Mac is starting to boom again. So why isn't oil, and the oil sands in particular, viewed as a store of value? In May of last year, this space said Canadian Oil Sands Trust looked interesting for the long haul. It's the only pure oils sands play that is producing and it has decades of reserves and potential reserves. The units are worth a little less today, but does that really matter? In 20 years, you won't care much that you paid $27 (Canadian) or $25 for them. A store of value should be something you can buy and hold. With many gold producers trading for more than the value of their reserves, I'm not sure they qualify, although the metal might.

Maybe a better, more direct way to make the case is this: When oil was at its all-time high, gold was $950 an ounce and anyone who bought then is up very nicely. Investors should have bought gold when oil was hot. With gold at $1,220 (U.S.), they might do well to buy oil.

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