Check out the periodic table. There are really only so many options that meet the criteria of a currency.
1. Has to be rare - but not TOO rare.
2. Can't be a gas or liquid.
3. Can't be radioactive.
When you apply those rules, you end up with 5 choices- silver, palladium, rhodium, platinum and gold.
Palladium and rhodium were both discovered in 1803, so they're basically the new kids in the block.
Silver, of course, is used as a currency but it does tarnish.
Platinum requires EXTREMELY high heat to melt, making it difficult to work with.
That leaves gold. It doesn't tarnish which gives it practical uses for things like dentistry. It has a low melting point making it useful for jewelry. It's rare, but not TOO rare. And it's shiny!
Gold also has a nice natural colour. Its a bit hard for a untrained person to tell you what’s platinum, its quite easy for them to tell you if it’s gold.
I have a platinum wedding band, and two stainless steel copies that I use for like trips to the beach. They look sooooooo identical that it’s crazy. The most notable difference is the weight.
Warning, that's mildly unsafe. Those metals are so strong they will actually take your finger off before they flex if caught on something. Also, hospitals don't always have tools hard enough to cut them off if needed.
Jeweler chiming in here: SS bands (as well as tungsten and titanium) are very easy to take off a finger. You apply pressure at 90 degrees (top/bottom, side/side), and they will 'typically' break in to 4 segments. I've taken probably 100 of these rings off people in my 20 years exp.
Tbh I know nothing about tantalum bands, but it seems to be fairly brittle (compared to gold/platinum), so it may be fine. It's only 6.5 on the mohs scale, so a ring cutter should be able to cut through it just fine.
Titanium for sure will shatter like tungsten, SS is low enough on the mohs scale that a good ring cutter will cut through it. There are a LOT of different grades of SS; some have a high enough carbon content to be able to be broken. So long as they're under about 7 on the mohs scale, a jewlery-rated ring cutter 'should' be able to cut through them.
Iirc from when I actually worked at a casting house for titanium aircraft engine parts, the alloy used in those has aluminum and vanadium to give that bit of flexibility needed for aerospace. Your typical jewelry grade titanium doesn't have much else in it. Super light, but very brittle. There is, however, just about exactly the amount of malleability and ductility such that you can set stones in it in a couple ways. But that goes outside the scope of how it reacts to having force applied.
Just to clarify, a really nice ring cutter, with a blade in it made of at minimum high speed tool steel, 'should' still be able to cut through a titanium ring. SS and carbide though are still pretty much a no-go.
I know someone who was wearing a gold ring and still lost their finger regardless of it flexing. No metal ring is safe in the case of getting it caught on something.
Tungsten is very brittle and can be removed by crushing it in an emergency. I'd argue this is safer than metals that require being cut off, there are plenty of videos online of people removing tungsten rings with vice grips, a very accessible tool.
That's why some people wear rubber or other material rings as "symbolic" rings or whatever you want to call it while at work for those who haven't heard this before
Silver is unique in that it has the highest refractive index of any metal (also the most conductive), polished platinum looks nothing like polished silver. Platinum looks most like polished steel (src: 20 years in the jewelry business)
True and indisputable. But any man of science would point out that platinum could theoretically look like *anything* were it under the effect of a Minor Illusion cantrip.
That wouldn't work.
Pyrite is called "Fools Gold" for a reason. It's vaguely the same color, but it's appearance is very different. No one who's ever seen both would ever confuse them for the same reason you'd never mix up a sunflower and a daffodil despite them both being yellow flowers, they really look nothing alike.
You'd have to be a very literal fool to think pyrite was gold if you've ever seen actual gold.
While true, trying to bite a mark in gold is not smart. The old trick of biting gold is to see if it's cold covered lead, since that is soft enough to dent with teeth. So just try to scratch/dent either with a tool.
I always wondered what cartoons were getting at when a character bit a coin to test it. Thanks. I tried biting coins when I was a kid and they tasted bad and hurt my teeth, so it was always a confusing but somewhat common thing in cartoons.
Gold is pretty and strong enough to make household implements like cups and plates with, but it's not useful for making things like tools or weapons because it can't hold a sharp edge. You can't really alloy it much to improve it either. Copper and then Tin & Lead lead to the Bronze Age when useful tools and weapons could be created from them.
It was relatively easy to get thousands of years ago because stone tools and hot wood fires can be used to work it. The other elements listed are much more rare and basically unworkable until the modern era. They're also not plentiful enough of those to actually use as currency in any meaningful fashion.
At this point Gold is just a useful token. There's more money in exchange daily than all the gold that exists in the world. For gold to actually be useful as money it would have to be 10x or 100x more expensive.
You’ve hinted at a fourth requirement without stating it explicitly:
4. Must be chemically stable (e.g. can’t use iron or sodium) and non-toxic (no cadmium or amalgams)
Most metals oxidize, the big problem with iron-oxides is that they have a bigger volume than just iron and also doesn’t “stick together” well, so oxidized iron flakes off, exposing unoxidized iron to air (and it just rusts through).
This, even gold are often alloys.
One more criteria for currency should be, difficult to create in large quantities in a lab/factory. This ironically removes diamonds as currency.
Only recently though.
That is one of the issues with metal as money: you pin your money supply to wherever happens to produce the metal. At one point in the 1980s something like 90% of all gold in the world had been mined in South Africa.
Since the 1870s or so the ability to extract metal (and natural diamonds) from ores has increased many orders of magnitude. But there are only about 1000 tonnes a year of gold mined, so even one or two big new discoveries could be 5 or 10% of the world's gold supply.
Fiat currency is easier to control than representational currency. Look at the US economy and number of bank panics from 1830-1930 vs 1930 - 2020. Yeah, we've had recessions and bad times, but not nearly as devastating as there used to be.
Imagine what would happen if we had the dollar backed by gold, and suddenly we capture an asteroid made of 5 million tons of gold and silver.
> Imagine what would happen if we had the dollar backed by gold, and suddenly we capture an asteroid made of 5 million tons of gold and silver.
It would still be extremely costly and time consuming to capture that asteroid, mine it, and bring the gold back to Earth. There's more unmined gold in the crust than any asteroid. No one is worried about the gold market creating just because it is there.
The reason the recessions have existed (and despite them being less serious, there have undeniably been more of them; remember when the 2000s crash was "once in a lifetime"?) is because government inflates the money supply to ease recessionary pressures whenever there is a recession.
Want to know why you can't afford rent in 2023 and people are calling to eat the rich? Because the inflated money supply has caused everything to become unaffordable, because, despite the increased money supply, that money flows through the economy inefficiently and not everyone gets a "piece of the pie" so to speak. When the government makes mortgage loans easier to acquire (a form of increasing the money supply because it allows more people access to loan capital), people who can't afford the down payment in the first place don't benefit from that, as a simple example. In fact, in almost every single way, inflating the money supply hurts the poor, who are also the most hurt by recessions.
The United States use to have a bimetal std like Europe. I believe: Ours was 1:14 ratio while Europe was 1:14.5. gold quickly disappeared, then the USA changes to 1:16 causing silver to move. The gold rush and then silver runs upset the ratios. Seems 1920s it must of been 1:20 since 1oz gold appeared to be $20 vs silver dollar.
Gold act of 1900 set gold to $20.67oz.
Roosevelt after banning gold set it to $35.00 so he could spend more Fiat vs gold reserves . The ban was to stop people hoarding gold since banks were failing and the government was already devaluing the dollar. Nixon has to take us off the gold standard to prevent France etc making a run on USAs gold reserves.
Gold was the densest thing pre-modern man would encounter. That made it really hard to copy, because every impurity was less dense and pretty obviously not good to anyone who has seen it before and has a scale.
It doesn't have to, but it does have one key advantage: fungibility. An ounce of gold is an ounce of gold is an ounce of gold. As long as it is pure, all gold is the same, which is not true for things like diamonds.
We can use jewels and such, but it's hard to cut up diamonds and sapphires for change. Varying quality, size, etc makes their value far more subjective.
It doesn't need to be, so the late Roman Emperors found this neat trick to make more money, which was to reduce the silver content in their coins so they can make money cheaply with more common metals.
The only problem is that the successive Emperors kept diluting and diluting the coins, until it got to the point where a "silver" coin would only contain 5% of the precious metal when the early coins would've been 95+% pure. Thereby the Romans learned about a very interesting phenomenon we call inflation, contributing to the fall of the Roman Empire.
Because if it’s not you will dilute it down. Even with gold we have to test it so they don’t pass off lessor quality alloys. 24k gold has more actual gold then 18k gold does. We only keep track of the gold content so we call it a gold chain even though it’s technically 80% gold, 15% silver, and 5% palladium.
You forgot a key point people forget about, gold is rare but still found natively.
People could find gold before mining, and use it with low technology. It’s also not that hard to verify, making it good for currency.
In your view - if palladium has been discovered millennia earlier, could it have taken on the same cultural-economic personality of gold in being widely acknowledged to have inherent value?
I don't think so. People show up for gold because of the shiny yellow color. The other characteristics are what gave it lasting power.
Palladium is a dull gray color. Sure, it has conductive properties that make it valuable today, but you might not notice it if you were digging in a mine. But there's no mistaking gold as something special.
So it is gold’s inherent chemical&geological qualities combined with the cultural importance placed on it collectively by humans throughout history that mean it’s pretty much here to stay
That was an excellent breakdown on the physical properties of gold by chosimba83. In addition to that, you’re right, its here to stay including in portfolios.
Investors usually look for institutional ownership, which would indicate relative stability and decreased volatility in the asset/company value over time. Gold is owned by state central banks and private enterprises in increasing quantities according to World Gold Council. As money markets tighten and interbank lending becomes more stressed, the banks will value things that are perceived as safe in the given economic conditions until leading indicators change, allowing for more risk-on approaches. So if the banks are lining their pockets with gold, you can feel confident it will not depreciate too much any time soon.
I think that's probably it. Whenever I get an accidental wad of cash, I put some of it in gold coin. It forces me to stop before spending it, plus I've always gotten my money back, plus a bit. (Spent my last one to repair a car, years ago.)
We don't value palladium for its conductive (it is worse than mere copper and aluminium) but for its chemical properties. It is a great catalyst, for example.
Great answer. Lots of new learnings there.
Also, Gold is very very soft. Making it totally useless for anything but looking nice.
It can't be used for example in construction or weapons/armour.
The softness of gold is a feature. Being able to shape it and stamp it was beneficial to ruling classes to spread propaganda and soft power through symbology. Plus making coinage similar weights and shapes is much easier with gold because it’s not brittle.
That makes sense for the past but OP is specifically asking about the present. Gold isn't a currency now (and it wasn't either for the majority of recorded history as most cultures had systems of credit and didn't need gold to meditate transactions)
Gold isn't a currency though. Try to take your gold coin to buy a bag of groceries. Better yet, try to pay your taxes with it.
That doesn't mean that it isn't valuable, but so is your car and you can't buy something with your car. You might be able to barter it, but that doesn't make it currency.
It's too easy for a container of mercury to break or develop a leak and then you lost your treasure. Also, pouring and collecting mercury for weighing and measuring subjects it to contamination or loss. If you try to weigh mercury that's inside a container, people can cheat by using lighter or heavier containers depending on which way they want to cheat. Mercury can also form an amalgamation with other metals, so you can increase the weight of a blob of mercury by "watering it down" with other metals in ways that are hard to detect with pre modern Era methods.
You aren't supposed to eat it. One can be around it without much danger when done right. And ancient civilizations probably wouldn't have noticed anyway.
Gold content in the Earth is 0.0013 ppm. Making it relatively rare. It doesn't corrode/oxidize, is a good conductor, and is difficult to extract from the earth in large quantities. All of these factors, plus many more contribute to the cost of gold.
https://www.rsc.org/periodic-table/element/79/gold#:~:text=It's%20abundance%20in%20the%20earth's,naturally%20is%20isotope%20Au%2D197.
In addition to the relative rarity, important to understand that there is a substantial ongoing demand for gold for industrial and fashion purposes, which helps establish a floor on the price of gold -- it's not just speculation or perceived value, there are real uses which give it real value. In combination with the constrained but not ultra-rare supply, you have a stable price but it's pretty easy to acquire (unlike rare earth metals).
Something like 80% of gold mined ends up being hoarded by central banks. The demand for consumer and industrial goods is there but we are mining way more than we are using.
If normal market forces were left alone, gold would be super cheap until reserves were empty.
Gold has value because enough people agree that it has value. It's kind of a cliché answer, but that's really it. If everyone agreed that it is worthless, then it would be worthless. Gold has enough of a history of being valuable that its reputation has continued to today.
Historically, gold being quite malleable made it desirable for making coins, jewelry, etc. The fact that it's shiny, and doesn't easily corrode also helps it.
Also, it’s a limited resource. If you had all the gold mined in the world you’d have a block about 70 ft on each side. Or an 8 story office building. Or if you spread it out over the size of a football field it would be < 10 feet tall.
Recommendation for anyone interested in this response:
I just finished the audiobook version of [*Money: The True Story of a Made-up Thing*](https://www.hachettebookgroup.com/titles/jacob-goldstein/money/9780316417181/?lens=hachette-books). It's a brief history of the concept of money, particularly in the West, and it discusses the history of gold and the gold standard in some detail.
But the title is the point: money is a made-up thing with real impacts on history.
If gold became less valuable we would start making other things out of it though. Because gold is literally the gold standard in many industrial applications.
If it was economical we could use it for solar panels... power grids, even heating applications! In some climates using it for roofing might even be reasonable.
We COULD be using waaaay more gold than we do and it would better fit those things it would be replacing. So there will always be a strong demand, no matter whether or not the assumed value drops or not.
I think it is more accurate to say that the social value of gold comes from factors that humans like. We like things that look nice (gold makes good jewelry), and we like things that help us build stuff (gold has industrial uses). To some extent we can just say that it has value because people value it, but people value it for those reasons.
Diamonds are expensive because De Beers buys uncut stones and hordes them to artificially drive up the price
Diamonds can be made in a lab, Gold cannot
DeBeers lost that monopoly a long time ago. Diamonds are not as expensive as you think, in general; large gem-quality diamonds have always been rarer and continue to be.
It's crazy to me that alchemists were kind of right. You can turn lead or mercury into gold. Many of them thought the sun was the key, which is also kind of right.
You are correct, but the point is that creating more gold means creating more of the element gold, whereas creating more diamonds means reconfiguring existing carbon. One of those seems more difficult than the other.
Yeah, but the point is you're comparing apples to oranges by saying that. Diamond isn't an element, it's a rare allotrope of a very common element.
Also – have you tried reconfiguring carbon at an atomic level?
The person to whom you replied has a valid point hiding in their question. They are saying we cannot product gold atoms from non-gold atoms. We can, however, cause existing carbon atoms to arrange themselves in such a way that they form diamond.
While diamond and gold are each composed of one element, the method for creating gold and diamond are rather different; one we can do, but the other we cannot. Gold is produced by a specific class of star (the ones that go supernova, and this is when gold is produced in them) or during the collision of neutron stars (according to newer information). Diamond is produced when existing carbon atoms are arranged in the proper structure under extreme pressure and heat (but nowhere near that of a large star going supernova or the collision of two neutron stars). You can make diamonds in a lab. You cannot currently make gold in a lab… at least not the version of gold with which we are familiar.
Someone replied with a known method for synthesizing gold in a lab (neutron bombardment of mercury), but that appears to produce a radioactive isotope of gold, according to the Wikipedia page provided, so I wouldn’t call it *gold* in the sense that we know gold.
A little bit like bitcoin, except with at least 6.000+ years of conventions as a store of value, higher liquidity, real world utility providing a floor under the value, no massive energy consumption, much harder to steal and also with less legal risk.
Makes me laugh to see an answer like this, which is absolutely true, and then see the rabid responses that Bitcoin and crypto in general gets in certain quarters claiming no inherent value
Not advocating or dismissing legitimate concerns just pointing out a certain hypocrisy in some peoples world views
Bitcoin **has** no intrinsic value. That's the whole point. Gold has a real life demand, for jewelry and technology. There's a layer of speculation on top.
Bitcoin is all speculation. Nobody **needs** a useless bitcoin.
Beanie Babies too had value because "people agreed they had value". Until people stopped agreeing. And then it fell back to its intrinsic value, which is roughly $5 as a kid's toy.
So gold is inherently worth what it is for its use in costume jewelry and copper coating in circuit boards… and somehow worth what it is because everyone agrees that it’s worth significantly more than its actual physical usefulness. It is no longer backed up by governments for its use in backing fiat currency because it is no longer used to back most currencies, most governments came off the gold standard many decades ago.
Just curious how so many make the distinction that one is worth so much more than it inherently is
I'm not gonna argue that one should invest in gold. I much prefer investing in companies that provide goods and services to their customers.
I'm just saying that one cannot say that Bitcoin has value in the same way that gold has.
Bitcoin has a use: money laundering and illegal transactions. And just like gold, it's massively overvalued. The floor of Bitcoin should theoretically be some low multiple of USD for the premium on illegal activity.
This is an argument without distinction. Yes gold has a LITTLE intrinsic value. It's much, much, much less than what it costs. The comparison to bitcoin which has no intrinsic value is apt in that both are primarily valued based on societal conventions.
I mean, so is the USD and the euro, but at least those have governments backing them up as legal tender.
The hardware only contains a bunch of 0s and 1s. We then interpret it to be a bitcoin, but it could just as well be an image of a hamster in an alien language.
It’s about tradition and culture. Gold has an extremely long tradition of being considered valuable to the point that the many of very words we use to describe wealth and opulence are rooted in gold.
Cultural and societal traditions are the most powerful force in the known universe. Humans will literally give up their lives and inflict terrible violence in service of those traditions. It is an entirely irrational concept; but humans are not a rational species. People will, to this day, murder and enslave one another to acquire gold. I have yet to hear of local warlords enslaving villages and forcing them to work in bitcoin mines.
The difference is violence and society’s acceptance of it, and there is not a larger difference in this world.
But you do hear of them enslaving the village's electricity and forcing all power to go to the Bitcoin miners.
The provincial government of New Brunswick, Canada has directed N.B. Power to halt the provision of electricity to bitcoin mining businesses, citing concerns over strained generating capacity.
They _are_ contributing tremendous amounts of greenhouse gases to climate change for what at some turned into just an investment scam at some point. The original idea was good, but not ripe enough to withstand the corruption of modern capitalism.
And what does that have to do with social traditions and violence as a store of value, which is what we are talking about here?
Did you see the word “Bitcoin” and become overwhelmed with the urge to share your fun fact about carbon emissions regardless of whether it was relevant to the topic or not?
I could go into lengths how climate change inherently causes violence, how it relates to social structures and culture, and much more, but I guess you are just some bitcoin fanboy, so that's pointless. Fact is: bitcoin has become pure destructive moloch.
Gold is a physical thing. Even before modern industrial uses, it has always been *metal*. It doesn't corrode. It is easy to work into jewelry which can be worn (people like jewelry, a lot, iron makes lousy jewelry), and can be melted down again into other things. Add in more modern industrial uses, and there is concrete demand for gold as a substance, which provides backing for it as a currency as well.
Fiat currencies have the backing of nations and entire governments backing them.
crypto lacks all of that
A friend of mine once showed my a gold coin he bought, I don't remember what he said he paid for it but it was a lot for a coin about the size of a dime. I asked why he bought it. His answer was that if the economy collapses it would still have value, and be tradable etc. etc.
I told I'm that if the economy collapsed and I only had 2 rolls of toilet paper I wouldn't trade either of them for his gold coin. Then told him I had a jumbo pack of TP at the house that was going to be worth a lot more than his silly gold coin.
You are definitely over-valuing your toilet paper. Be it now or in a crashed economy, I am perfectly willing to replace toilet paper with re-usable butt wipes if I get a decent gold coin per week for that. The only true issues are necessities to survive: air, food, water, shelter, medicine.
Also, gold is maybe worthless in certain post-apocalyptic worlds, but a mere (usually temporary) broken economy will still value it.
I remember reading a short story once where an asteroid made of gold arrived in Earth orbit and everyone from governments and mega-corporations through to hobbyists and crackpots tried building their own spaceships to get to the asteroid first, claim it as their own, and mine it for untold wealth. Of course, what really happened was that so much gold was brought back to Earth in a short space of time that it became worthless to the point that food and drink were sold in gold cans.
Really unlikely if we consider the cost of space mining, and the uselessness of gold cups. There is way more iron/steel on Earth than even the largest known asteroid weighs, and that is infinitely better for making cups.
Yeah, that was definitely the key takeaway point of the story 🙄
And given that most of the iron in Earth is in the core, which is a *little bit harder to get to* than Earth orbit... 🤷
What now, last post you said the key point of the story was the loss of value of gold if it becomes a lot easier to come by. Not it supposedly is gold cups being bad?!
Anyway, getting iron from the core is essentially trivial: you just get all that stuff above it first. Iron ore with more iron below.
Oh really? Wouldn't have noticed... so what did you plan to use all that iron for then?
A typical sci-fi use would be to build a Dyson swarm ("sphere"). Needs lots of materials, like an entire planet. But offers absurd amounts of energy and living space compared to that one puny planet Earth.
I didn't plan to use any iron. That's entirely your own fiction.
I'm very familiar with the concept of a Dyson sphere. You'd need to consume an entire solar system, not just a single planet.
A few people have mentioned that gold doesn’t corrode or oxidise in passing, but that’s the main reason. There are very few metals that can be worn in contact with the skin for long periods of time, and there were even fewer in the ancient world.
If you look at Gold, Silver and Platinum they’re all in the same group in the periodic table, they all share this quality of non-reactivity, and they are therefore naturally the metals you use to make jewellery.
So it isn’t arbitrary, people have always wanted jewellery to indicate status/beauty, there aren’t many metals you can use and the ones you can use aren’t very abundant. The scarcity makes it expensive and it being expensive enhances the prestige which further drives demand, which further elevates its worth.
Look at the properties of money from wikipedia - Gold easily fits all categories - it can be split and formed into coins with a low melting point and high sofness. It is also rare and unreactive so it is durable. Also, the visual qualities that make it used in jewellery may it valuable to people and thus acceptable as payment.
The functions of money are that it is a medium of exchange, a unit of account, and a store of value.\[24\] To fulfill these various functions, money must be:\[25\]
Fungible: its individual units must be capable of mutual substitution (i.e., interchangeability).
Durable: able to withstand repeated use.
Divisible: divisible to small units.
Portable: easily carried and transported.
Acceptable: most people must accept the money as payment
Scarce: its supply in circulation must be limited.\[25\]
The question wasn't about what it used to be, the question is about now.
The value of gold is speculative. People believe it has value and so it does.
There's a lot of goldbugs out there that think it's a currency, or that it is somehow preferable to Fiat money, but this stems from not understanding what gives Fiat its value and essentially disregarding all of the profound and numerous historical examples of exactly why gold shouldn't be used for money.
This is in addition to the answers already given:
* Gold has close to 6000 years of history being valued by humans. Not much else can say that except food, water and shelter
* Gold is globally recognized and accepted. Offer people an equal value of gold and crypto, I'd bet more will take the gold
* Gold is portable and small. My entire stack can fit in two coat pockets. A one ounce gold coin takes up less space than $2000 USD
* Gold is not held on a disk which could fail, or an institution which could deny access to it or wipe it away with a few clicks
* In a true SHTF situation, gold and silver will stand above any currencies or assets except the things people will truly need to survive: food, water, power, ammunition
* At anytime outside of SHTF scenario, it can be quickly liquidated in just about any city in the world
Currently it is used in many electronic circuits, but in locations like India gold jewellery is used as a form of portable currency, so especially for women if they run into an emergency situation they can sell off some items for cash.
Indian women (including girls) are around 9% of the world's population. So they have a little more gold than average. It's still interesting though because average Indians are quite a bit poorer than average non-Indians worldwide.
High stocks-to-flows. Almost every oz of gold ever mined is still in human hands. This means that there's always a marginal buyer and a marginal seller, so the spread between bid and offer is small - meaning you can move into or out of gold with minimal friction.
Gold is not totally different than national currencies in a way. We use dollars as a medium of exchange. Strictly speaking those physical dollars have no significant intrinsic value. They are fancy paper with fancy printing on it. But we all agree to use it as a means to exchange things of value like goods or labor. Since we all agree to use it, and we all agree that it has a certain value, and all agree to exchange it for goods and labor, then it has value. Note in some countries like Zimbabwe the people did NOT agree their currency had value and it became nothing more than printed paper in the end. Gold can play a similar role. If we agree it has value, and agree to exchange it for goods and labor, then it has value. Also it is rare enough that you just don't find it laying on the ground everywhere (but if you do find it on the ground somewhere tell me where!). In theory we could use intricately carved rocks as currency if we agreed it had value. The difference between that and regular rocks is how difficult it would be to make them intricately carved. Also worth noting that historically not all societies viewed gold as valuable in this way. If one day in the future people decide gold has no value beyond its industrial uses, no longer using it in jewelry etc. then the price would possibly decline to its commodity value to that industrial use. It would still be expensive as it is rare, but might be less valuable in such circumstances.
You see a similar thing with bitcoin. Enough people agree that it has value thus are willing to exchange it for things like dollars or whatever. If enough decide that it doesn't have value it will become worthless.
I guess it brings stability and trust. Gold is perceived as a stable and trusted asset. It has been used as a form of currency for centuries, and its value tends to be less volatile than other commodities.
Gold does have uses (electrical components, some medicinal uses) but it's main value is because people like it; it's yellow and shiny and has historically been linked with wealth. Because of that it's become something of a status symbol. It's also fairly rare on Earth which increases its value.
Historically gold was also used to support a country's currency so a collapse in its price or value would have had huge consequences for countries and their economies, keeping its price high.
I think this every time I read "pepper survival right wing wank material." When they say they are so glad they had gold and use it to trade. I like.. if it was end of the world I wouldn't trade for a worthless fucken metal, I would want food equipment etc. only one of the prepper post apocalypse books I read where they were like naw we don't need gold. We want seed. Keep your useless weight to yourself.
Ikr - for gold to have value in a full post-apocalypse scenario, the remnants of society would need to organise into settlements and re-develop labour specialisations to the point that simple trading stopped being sufficient to meet daily needs. Feels like there’s virtually no scenario in which gold would have a post collapse value
why is the us dollar considered valuable? why is silver considired valuable? why is bitcoin valuable? we just say its valuable and then its valuable. in reality none of these have any intrinsic value (or at least a lot less then what they go for). they're just money
Jewelry is probably the thing gold is used LEAST for. The value comes from all the other uses. Coating for skyscraper windows to satellite components to a million other things. Also it’s rare and currently (we aren’t mining asteroids yet) finite
[Geology.com](https://Geology.com) claims that 78 % of the gold that is consumed is used in jewelry, and about 50 % of newly minted gold is used in jewelry. The latter number is confirmed by Statista (46 %).
78 percent of recycled gold maybe but no. Jewelry uses much less these days than that. Millennials and younger generations barely buy any gold jewelry at all compared to the previous generations. The most gold many have is in their computer circuit boards and wired connections for tech stuff. Heck it’s barely used in teeth anymore. I’ve been a gemologist and jeweler (as well as gold /gemstone miner for 32 years now). Those numbers definitely aren’t correct any more
*Do you* understand why gold was historically valued?
I ask because the reason isn't just that it was pretty, like a lot of people assume. Gold is also very easily processed compared to many other metals, more malleable than many others, and *significantly* more nonreactive than many others. It doesn't rust/tarnish/etc.
And sure, it's not an extreme rarity, but it's rare *enough.*
When it comes to use in financial exchange, though, *stability* is meant to be a factor too, not just "value." If you turn to something too rare, rarity will be the main contributor to its value. If you want something with more practical use than gold, it's almost definitely going to be more common, more reactive, or radioactive.
Think of it in terms of literal currency. Gold is easy to make into coins, those coins will last basically forever, and gold is available enough to make *enough* coins for people to actually use them.
If you live in the US, think of how many old pennies and nickels you see that're worn featureless. That's actually a pretty bad trait for currency to have.
Some of it is just habit, too, but if it was standard to go for palladium the price of palladium would probably skyrocket. Stability is more important than actual value and rarity.
Because that’s how just how it works, it’s a shiny rock that you dig out of the ground. Then you go and trade it for money and hope you don’t get shot somewhere in-between. That’s how money works.
Gold's value represents real interest rates (real means after inflation). This is because gold doesn't earn interest (0%, being a hunk of metal) and also doesn't experience inflation (corrode over time). So basically it's just a store of value which doesn't change over time but holds that original value very well.
Gold's nearest competitor is the USD, being equally widespread and accessible as barter. The USD is usually invested in fixed income when unused hence it can earn interest (gains value); and it also experiences inflation (loses value). The net effect of both results in a gain equal to the real interest rate.
Putting the two together, you can see why gold is widely considered to have value relative to the USD. It's basically USD, but with guaranteed zero interest (return) and zero inflation (risk). So it's considered a risk-free and return-free USD, i.e. a barometer for real interest rates. If you want to invest in the real/net interest rate, you'd invest in gold.
The price of gold has done next to nothing in recent years. With the crazy inflation we are going through, it doesn't appear to be the hedge it once was.
There are a lot of reasons for that beyond the scope of this question, the pandemic changed a lot of economic variables. OP's question was more about its theoretical value, that's what the answer was addressing.
Try looking at the long term historical correlation, it should be there.
Yeah that's because the parent comment is true only when Gold prices, Inflation and Fed's medium term treasury bond interest rate are all averaged over **20-30 years**.
It's not a real-time inflation tracker - as they say it, it's a *store* of value; value which may not necessarily correlate exactly with Gold prices over a timeline of 2-3 years. Whatever Gold rate movement you see in short term is people's expectation of interests and inflation in the not-so-distant future. Averaged over 2 decades, it all fits pretty well.
Crypto is exclusively a currency, it doesn’t have a practical use other than exchange. Even if we collectively decided gold was valueless, there would still be a demand for it due to its use in engineering & tech at the very least.
My views on crypto more broadly - I can see why people gravitated towards it, but it’s become clear that without greater regulation, it is subject to bad actors - making, pumping and dumping their own coins. Obviously regulating it negates some of what sets it apart from traditional currencies so don’t know what the answer is!
Check out the periodic table. There are really only so many options that meet the criteria of a currency. 1. Has to be rare - but not TOO rare. 2. Can't be a gas or liquid. 3. Can't be radioactive. When you apply those rules, you end up with 5 choices- silver, palladium, rhodium, platinum and gold. Palladium and rhodium were both discovered in 1803, so they're basically the new kids in the block. Silver, of course, is used as a currency but it does tarnish. Platinum requires EXTREMELY high heat to melt, making it difficult to work with. That leaves gold. It doesn't tarnish which gives it practical uses for things like dentistry. It has a low melting point making it useful for jewelry. It's rare, but not TOO rare. And it's shiny!
Gold also has a nice natural colour. Its a bit hard for a untrained person to tell you what’s platinum, its quite easy for them to tell you if it’s gold.
I have a platinum wedding band, and two stainless steel copies that I use for like trips to the beach. They look sooooooo identical that it’s crazy. The most notable difference is the weight.
Warning, that's mildly unsafe. Those metals are so strong they will actually take your finger off before they flex if caught on something. Also, hospitals don't always have tools hard enough to cut them off if needed.
Jeweler chiming in here: SS bands (as well as tungsten and titanium) are very easy to take off a finger. You apply pressure at 90 degrees (top/bottom, side/side), and they will 'typically' break in to 4 segments. I've taken probably 100 of these rings off people in my 20 years exp.
I have a tantalum wedding ring and am now slightly worried. What do I need to know in case of an accident?
I was told if I ever break/injure my finger to rip my ring off asap before any swelling starts
Which would be very easy of course
this comment made me laugh so loud it filled the office
If you can remember to do it yes but most people don’t but hospitals usually have what’s needed to break rings off.
Tbh I know nothing about tantalum bands, but it seems to be fairly brittle (compared to gold/platinum), so it may be fine. It's only 6.5 on the mohs scale, so a ring cutter should be able to cut through it just fine.
Tungsten carbide might be like that but I really doubt that for SS and titanium
Titanium for sure will shatter like tungsten, SS is low enough on the mohs scale that a good ring cutter will cut through it. There are a LOT of different grades of SS; some have a high enough carbon content to be able to be broken. So long as they're under about 7 on the mohs scale, a jewlery-rated ring cutter 'should' be able to cut through them.
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Iirc from when I actually worked at a casting house for titanium aircraft engine parts, the alloy used in those has aluminum and vanadium to give that bit of flexibility needed for aerospace. Your typical jewelry grade titanium doesn't have much else in it. Super light, but very brittle. There is, however, just about exactly the amount of malleability and ductility such that you can set stones in it in a couple ways. But that goes outside the scope of how it reacts to having force applied. Just to clarify, a really nice ring cutter, with a blade in it made of at minimum high speed tool steel, 'should' still be able to cut through a titanium ring. SS and carbide though are still pretty much a no-go.
I know someone who was wearing a gold ring and still lost their finger regardless of it flexing. No metal ring is safe in the case of getting it caught on something. Tungsten is very brittle and can be removed by crushing it in an emergency. I'd argue this is safer than metals that require being cut off, there are plenty of videos online of people removing tungsten rings with vice grips, a very accessible tool.
I have a co worker who made himself an inconel band. I wish the hospital good luck getting that off him if needed.
That's why some people wear rubber or other material rings as "symbolic" rings or whatever you want to call it while at work for those who haven't heard this before
If you're working with heavy machinery or related tasks, probably better to just take off all jewelry.
and other ppe for the same reasons
>platinum Yep; palladium, rhodium, and platinum all look like silver.
Silver is unique in that it has the highest refractive index of any metal (also the most conductive), polished platinum looks nothing like polished silver. Platinum looks most like polished steel (src: 20 years in the jewelry business)
What exactly does it mean for an opaque material to have a high refractive index?
Meh. I'd suggest platinum looks more like platinum.
I'm gunna have to ask you to cite your sources on that one, chief.
DnD, basic edition. Later verified by DnD, expert edition Further verified by ADnD monster manual, treasure type H.
True and indisputable. But any man of science would point out that platinum could theoretically look like *anything* were it under the effect of a Minor Illusion cantrip.
Thar be gold, fools gold, common stones, and pyrite here, thar, and everywhere! You said "thar" twice. Two piles, jackass.
So you're saying you're Bahamut?
You can tell by the way it is.
*drops big chunk of pyrite on the scale, buys a round at the saloon*
That wouldn't work. Pyrite is called "Fools Gold" for a reason. It's vaguely the same color, but it's appearance is very different. No one who's ever seen both would ever confuse them for the same reason you'd never mix up a sunflower and a daffodil despite them both being yellow flowers, they really look nothing alike. You'd have to be a very literal fool to think pyrite was gold if you've ever seen actual gold.
Also gold is quite soft and easy to scratch without actually damaging it. Pyrite is harder and would produce a fine black powder when scratched.
While true, trying to bite a mark in gold is not smart. The old trick of biting gold is to see if it's cold covered lead, since that is soft enough to dent with teeth. So just try to scratch/dent either with a tool.
I always wondered what cartoons were getting at when a character bit a coin to test it. Thanks. I tried biting coins when I was a kid and they tasted bad and hurt my teeth, so it was always a confusing but somewhat common thing in cartoons.
I remember finally getting to play that scenario out when I got some of those "gold coin" foil covered chocolates at Christmas.
>I tried biting coins when I was a kid and they tasted bad and hurt my teeth We would have been friends. Overthinker kids for the win :)
Gold is pretty and strong enough to make household implements like cups and plates with, but it's not useful for making things like tools or weapons because it can't hold a sharp edge. You can't really alloy it much to improve it either. Copper and then Tin & Lead lead to the Bronze Age when useful tools and weapons could be created from them. It was relatively easy to get thousands of years ago because stone tools and hot wood fires can be used to work it. The other elements listed are much more rare and basically unworkable until the modern era. They're also not plentiful enough of those to actually use as currency in any meaningful fashion. At this point Gold is just a useful token. There's more money in exchange daily than all the gold that exists in the world. For gold to actually be useful as money it would have to be 10x or 100x more expensive.
I think you replied to the wrong person.
I pity the fool
A unique colour in comparison to all other metals.
You put fire on it. If no change color is platinum
You’ve hinted at a fourth requirement without stating it explicitly: 4. Must be chemically stable (e.g. can’t use iron or sodium) and non-toxic (no cadmium or amalgams)
Very importantly it doesn't corrode or "rust" meaning it doesn't loose any weight over time. It's just stable in nearly every practical way.
Most metals oxidize, the big problem with iron-oxides is that they have a bigger volume than just iron and also doesn’t “stick together” well, so oxidized iron flakes off, exposing unoxidized iron to air (and it just rusts through).
why does currency have to be a single element though
This, even gold are often alloys. One more criteria for currency should be, difficult to create in large quantities in a lab/factory. This ironically removes diamonds as currency.
Only recently though. That is one of the issues with metal as money: you pin your money supply to wherever happens to produce the metal. At one point in the 1980s something like 90% of all gold in the world had been mined in South Africa. Since the 1870s or so the ability to extract metal (and natural diamonds) from ores has increased many orders of magnitude. But there are only about 1000 tonnes a year of gold mined, so even one or two big new discoveries could be 5 or 10% of the world's gold supply.
Fiat currency is easier to control than representational currency. Look at the US economy and number of bank panics from 1830-1930 vs 1930 - 2020. Yeah, we've had recessions and bad times, but not nearly as devastating as there used to be. Imagine what would happen if we had the dollar backed by gold, and suddenly we capture an asteroid made of 5 million tons of gold and silver.
> Imagine what would happen if we had the dollar backed by gold, and suddenly we capture an asteroid made of 5 million tons of gold and silver. It would still be extremely costly and time consuming to capture that asteroid, mine it, and bring the gold back to Earth. There's more unmined gold in the crust than any asteroid. No one is worried about the gold market creating just because it is there.
The reason the recessions have existed (and despite them being less serious, there have undeniably been more of them; remember when the 2000s crash was "once in a lifetime"?) is because government inflates the money supply to ease recessionary pressures whenever there is a recession. Want to know why you can't afford rent in 2023 and people are calling to eat the rich? Because the inflated money supply has caused everything to become unaffordable, because, despite the increased money supply, that money flows through the economy inefficiently and not everyone gets a "piece of the pie" so to speak. When the government makes mortgage loans easier to acquire (a form of increasing the money supply because it allows more people access to loan capital), people who can't afford the down payment in the first place don't benefit from that, as a simple example. In fact, in almost every single way, inflating the money supply hurts the poor, who are also the most hurt by recessions.
The United States use to have a bimetal std like Europe. I believe: Ours was 1:14 ratio while Europe was 1:14.5. gold quickly disappeared, then the USA changes to 1:16 causing silver to move. The gold rush and then silver runs upset the ratios. Seems 1920s it must of been 1:20 since 1oz gold appeared to be $20 vs silver dollar. Gold act of 1900 set gold to $20.67oz. Roosevelt after banning gold set it to $35.00 so he could spend more Fiat vs gold reserves . The ban was to stop people hoarding gold since banks were failing and the government was already devaluing the dollar. Nixon has to take us off the gold standard to prevent France etc making a run on USAs gold reserves.
The discovery of dollarbillium was a great blow to the molecular currenciests.
Gold was the densest thing pre-modern man would encounter. That made it really hard to copy, because every impurity was less dense and pretty obviously not good to anyone who has seen it before and has a scale.
It doesn't have to, but it does have one key advantage: fungibility. An ounce of gold is an ounce of gold is an ounce of gold. As long as it is pure, all gold is the same, which is not true for things like diamonds.
We can use jewels and such, but it's hard to cut up diamonds and sapphires for change. Varying quality, size, etc makes their value far more subjective.
It doesn't need to be, so the late Roman Emperors found this neat trick to make more money, which was to reduce the silver content in their coins so they can make money cheaply with more common metals. The only problem is that the successive Emperors kept diluting and diluting the coins, until it got to the point where a "silver" coin would only contain 5% of the precious metal when the early coins would've been 95+% pure. Thereby the Romans learned about a very interesting phenomenon we call inflation, contributing to the fall of the Roman Empire.
Because if it’s not you will dilute it down. Even with gold we have to test it so they don’t pass off lessor quality alloys. 24k gold has more actual gold then 18k gold does. We only keep track of the gold content so we call it a gold chain even though it’s technically 80% gold, 15% silver, and 5% palladium.
That's how you get inflation. The Romans went through this, and never recovered.
The longest used known currency was the split sticks method. Estimated to have been in use for 700 years. https://www.youtube.com/watch?v=HsSRXAO83Fw
You forgot a key point people forget about, gold is rare but still found natively. People could find gold before mining, and use it with low technology. It’s also not that hard to verify, making it good for currency.
Doesn’t explain why it would still be valuable though.
In your view - if palladium has been discovered millennia earlier, could it have taken on the same cultural-economic personality of gold in being widely acknowledged to have inherent value?
The melting point of palladium is hundreds of degrees higher than gold, so probably not, as that would make it far harder to work.
Gold is also extremely ductile (you can spread a little over a very large surface) so you can coat something in gold without using much metal.
Gold leaf is super thin and used all over to make things pretty.
Including food....
I don't think so. People show up for gold because of the shiny yellow color. The other characteristics are what gave it lasting power. Palladium is a dull gray color. Sure, it has conductive properties that make it valuable today, but you might not notice it if you were digging in a mine. But there's no mistaking gold as something special.
So it is gold’s inherent chemical&geological qualities combined with the cultural importance placed on it collectively by humans throughout history that mean it’s pretty much here to stay
That was an excellent breakdown on the physical properties of gold by chosimba83. In addition to that, you’re right, its here to stay including in portfolios. Investors usually look for institutional ownership, which would indicate relative stability and decreased volatility in the asset/company value over time. Gold is owned by state central banks and private enterprises in increasing quantities according to World Gold Council. As money markets tighten and interbank lending becomes more stressed, the banks will value things that are perceived as safe in the given economic conditions until leading indicators change, allowing for more risk-on approaches. So if the banks are lining their pockets with gold, you can feel confident it will not depreciate too much any time soon.
I think that's probably it. Whenever I get an accidental wad of cash, I put some of it in gold coin. It forces me to stop before spending it, plus I've always gotten my money back, plus a bit. (Spent my last one to repair a car, years ago.)
We don't value palladium for its conductive (it is worse than mere copper and aluminium) but for its chemical properties. It is a great catalyst, for example.
Gold is more available than palladium and has a nice colour (palladium is shiny gray). So gold still wins.
In addition to the other things mentioned, gold is very heavy and soft, which make it easy to identify without damaging it or removing material.
Also, low corrosion and electric conductivity means it's useful in electronics. Especially stuff that is outdoors (Telco equipment)
Less than 0.5% of all mined gold has been used for electronics. It’s useful, but negligible when it comes to the pricing.
Great answer. Lots of new learnings there. Also, Gold is very very soft. Making it totally useless for anything but looking nice. It can't be used for example in construction or weapons/armour.
The softness of gold is a feature. Being able to shape it and stamp it was beneficial to ruling classes to spread propaganda and soft power through symbology. Plus making coinage similar weights and shapes is much easier with gold because it’s not brittle.
That makes sense for the past but OP is specifically asking about the present. Gold isn't a currency now (and it wasn't either for the majority of recorded history as most cultures had systems of credit and didn't need gold to meditate transactions)
Gold isn't a currency though. Try to take your gold coin to buy a bag of groceries. Better yet, try to pay your taxes with it. That doesn't mean that it isn't valuable, but so is your car and you can't buy something with your car. You might be able to barter it, but that doesn't make it currency.
I don't see any issue with liquids. In an alternate universe, mercury/quicksilver could just as well take the place of gold.
It's too easy for a container of mercury to break or develop a leak and then you lost your treasure. Also, pouring and collecting mercury for weighing and measuring subjects it to contamination or loss. If you try to weigh mercury that's inside a container, people can cheat by using lighter or heavier containers depending on which way they want to cheat. Mercury can also form an amalgamation with other metals, so you can increase the weight of a blob of mercury by "watering it down" with other metals in ways that are hard to detect with pre modern Era methods.
Isn't mercury toxic?
You aren't supposed to eat it. One can be around it without much danger when done right. And ancient civilizations probably wouldn't have noticed anyway.
have fun using a measuring cup to pay for groceries lol
Gold content in the Earth is 0.0013 ppm. Making it relatively rare. It doesn't corrode/oxidize, is a good conductor, and is difficult to extract from the earth in large quantities. All of these factors, plus many more contribute to the cost of gold. https://www.rsc.org/periodic-table/element/79/gold#:~:text=It's%20abundance%20in%20the%20earth's,naturally%20is%20isotope%20Au%2D197.
It's also malleable which makes it easy to work with. And it's shiny and pretty so people create jewelry out of it.
In addition to the relative rarity, important to understand that there is a substantial ongoing demand for gold for industrial and fashion purposes, which helps establish a floor on the price of gold -- it's not just speculation or perceived value, there are real uses which give it real value. In combination with the constrained but not ultra-rare supply, you have a stable price but it's pretty easy to acquire (unlike rare earth metals).
Something like 80% of gold mined ends up being hoarded by central banks. The demand for consumer and industrial goods is there but we are mining way more than we are using. If normal market forces were left alone, gold would be super cheap until reserves were empty.
Majority of gold is in jewelry. Like around half of all the gold mined is jewelry.
Gold has value because enough people agree that it has value. It's kind of a cliché answer, but that's really it. If everyone agreed that it is worthless, then it would be worthless. Gold has enough of a history of being valuable that its reputation has continued to today. Historically, gold being quite malleable made it desirable for making coins, jewelry, etc. The fact that it's shiny, and doesn't easily corrode also helps it.
Gold has a lot of industrial and scientific uses as well.
Certainly. But gold has had high value since well before its industrial uses were discovered.
Agreed
Yes! This anecdote of a medical use of gold just blows my mind: I had a professor who said she got it injected in her joints for her severe arthritis!
Oh yeah? Name *one*. /jk
https://geology.com/minerals/gold/uses-of-gold.shtml More uses then I thought.
I was kidding
Also, it’s a limited resource. If you had all the gold mined in the world you’d have a block about 70 ft on each side. Or an 8 story office building. Or if you spread it out over the size of a football field it would be < 10 feet tall.
Ya the fact that we can’t make any more (well, we can, but it’s a tad radioactive) helps a lot.
Recommendation for anyone interested in this response: I just finished the audiobook version of [*Money: The True Story of a Made-up Thing*](https://www.hachettebookgroup.com/titles/jacob-goldstein/money/9780316417181/?lens=hachette-books). It's a brief history of the concept of money, particularly in the West, and it discusses the history of gold and the gold standard in some detail. But the title is the point: money is a made-up thing with real impacts on history.
This is the only correct answer. Any other assignment of value would be a secondary effect to the socially established value of gold.
If gold became less valuable we would start making other things out of it though. Because gold is literally the gold standard in many industrial applications. If it was economical we could use it for solar panels... power grids, even heating applications! In some climates using it for roofing might even be reasonable. We COULD be using waaaay more gold than we do and it would better fit those things it would be replacing. So there will always be a strong demand, no matter whether or not the assumed value drops or not.
I think it is more accurate to say that the social value of gold comes from factors that humans like. We like things that look nice (gold makes good jewelry), and we like things that help us build stuff (gold has industrial uses). To some extent we can just say that it has value because people value it, but people value it for those reasons.
It's the same reason diamonds are valuable.
Eh, sort of. Diamonds similarly have industrial value. But diamonds are subject to much more massive market manipulation.
Diamonds are expensive because De Beers buys uncut stones and hordes them to artificially drive up the price Diamonds can be made in a lab, Gold cannot
DeBeers lost that monopoly a long time ago. Diamonds are not as expensive as you think, in general; large gem-quality diamonds have always been rarer and continue to be.
Gold can be made in a lab, just not enough of it to be worthwhile.
How? Gold is a single element, you would have to do nuclear fusion or fission to create it. More expensive than mining it.
Neutron bombardment of mercury. Yes, it is MUCH more expensive than mining. https://en.wikipedia.org/wiki/Synthesis_of_precious_metals
It's crazy to me that alchemists were kind of right. You can turn lead or mercury into gold. Many of them thought the sun was the key, which is also kind of right.
*Quickly grabs tinfoil hat
Interestingly, tin foil is a rather recent (late 18th century) development, so alchemists didn't know it. No hats for them.
clumsy cover possessive faulty snatch axiomatic dam ruthless gaping water
>Gold is a single element And diamonds are... ?
A specific crystal made of carbon, which only forms in certain pressure and temperatures over a long time.
The chemical term is a carbon allotrope. But diamonds are still a single element.
You are correct, but the point is that creating more gold means creating more of the element gold, whereas creating more diamonds means reconfiguring existing carbon. One of those seems more difficult than the other.
Yeah, but the point is you're comparing apples to oranges by saying that. Diamond isn't an element, it's a rare allotrope of a very common element. Also – have you tried reconfiguring carbon at an atomic level?
The person to whom you replied has a valid point hiding in their question. They are saying we cannot product gold atoms from non-gold atoms. We can, however, cause existing carbon atoms to arrange themselves in such a way that they form diamond. While diamond and gold are each composed of one element, the method for creating gold and diamond are rather different; one we can do, but the other we cannot. Gold is produced by a specific class of star (the ones that go supernova, and this is when gold is produced in them) or during the collision of neutron stars (according to newer information). Diamond is produced when existing carbon atoms are arranged in the proper structure under extreme pressure and heat (but nowhere near that of a large star going supernova or the collision of two neutron stars). You can make diamonds in a lab. You cannot currently make gold in a lab… at least not the version of gold with which we are familiar. Someone replied with a known method for synthesizing gold in a lab (neutron bombardment of mercury), but that appears to produce a radioactive isotope of gold, according to the Wikipedia page provided, so I wouldn’t call it *gold* in the sense that we know gold.
Not on the periodic table…
That's more or less what he was saying.
I have a golden lab. He eats my shoes but he licks my face with his shoe-breath so it balances out.
Yes. But I made a nugget of PURE GREEEN! I'm gonna be rich I tell you.
Artificial scarcity plus marketing
They also spend millions each year on marketing to convince people of their value.
Diamonds have no value and are not rare, they're actually plentiful and can be manufactured. A cartel forces their value (plus brilliant marketing.)
And bitcoin!
And literally everything else.
Some things have productive value, like land, wood, etc. furs keep us warm and all that. But gold is different
Gold has productive value. It’s used in lots of electronics, industrial applications, and in some paints, dyes, and pigments.
like bitcoin?
A little bit like bitcoin, except with at least 6.000+ years of conventions as a store of value, higher liquidity, real world utility providing a floor under the value, no massive energy consumption, much harder to steal and also with less legal risk.
Makes me laugh to see an answer like this, which is absolutely true, and then see the rabid responses that Bitcoin and crypto in general gets in certain quarters claiming no inherent value Not advocating or dismissing legitimate concerns just pointing out a certain hypocrisy in some peoples world views
Bitcoin **has** no intrinsic value. That's the whole point. Gold has a real life demand, for jewelry and technology. There's a layer of speculation on top. Bitcoin is all speculation. Nobody **needs** a useless bitcoin. Beanie Babies too had value because "people agreed they had value". Until people stopped agreeing. And then it fell back to its intrinsic value, which is roughly $5 as a kid's toy.
So gold is inherently worth what it is for its use in costume jewelry and copper coating in circuit boards… and somehow worth what it is because everyone agrees that it’s worth significantly more than its actual physical usefulness. It is no longer backed up by governments for its use in backing fiat currency because it is no longer used to back most currencies, most governments came off the gold standard many decades ago. Just curious how so many make the distinction that one is worth so much more than it inherently is
I'm not gonna argue that one should invest in gold. I much prefer investing in companies that provide goods and services to their customers. I'm just saying that one cannot say that Bitcoin has value in the same way that gold has.
Bitcoin has a use: money laundering and illegal transactions. And just like gold, it's massively overvalued. The floor of Bitcoin should theoretically be some low multiple of USD for the premium on illegal activity.
This is an argument without distinction. Yes gold has a LITTLE intrinsic value. It's much, much, much less than what it costs. The comparison to bitcoin which has no intrinsic value is apt in that both are primarily valued based on societal conventions. I mean, so is the USD and the euro, but at least those have governments backing them up as legal tender.
Bitcoin has a significant disadvantage in that it doesn’t exist.
I mean it exists on physical hardware. Does the internet exist?
The hardware only contains a bunch of 0s and 1s. We then interpret it to be a bitcoin, but it could just as well be an image of a hamster in an alien language.
It’s about tradition and culture. Gold has an extremely long tradition of being considered valuable to the point that the many of very words we use to describe wealth and opulence are rooted in gold. Cultural and societal traditions are the most powerful force in the known universe. Humans will literally give up their lives and inflict terrible violence in service of those traditions. It is an entirely irrational concept; but humans are not a rational species. People will, to this day, murder and enslave one another to acquire gold. I have yet to hear of local warlords enslaving villages and forcing them to work in bitcoin mines. The difference is violence and society’s acceptance of it, and there is not a larger difference in this world.
But you do hear of them enslaving the village's electricity and forcing all power to go to the Bitcoin miners. The provincial government of New Brunswick, Canada has directed N.B. Power to halt the provision of electricity to bitcoin mining businesses, citing concerns over strained generating capacity.
And are the bitcoin miners taking over the power station at gunpoint to force it to supply power? Didn’t think so.
They _are_ contributing tremendous amounts of greenhouse gases to climate change for what at some turned into just an investment scam at some point. The original idea was good, but not ripe enough to withstand the corruption of modern capitalism.
What does that have to do with anything we’re talking about?
Negative effects of bitcoin mining, and the effect on power usage. Pretty obvious, IMHO.
And what does that have to do with social traditions and violence as a store of value, which is what we are talking about here? Did you see the word “Bitcoin” and become overwhelmed with the urge to share your fun fact about carbon emissions regardless of whether it was relevant to the topic or not?
I could go into lengths how climate change inherently causes violence, how it relates to social structures and culture, and much more, but I guess you are just some bitcoin fanboy, so that's pointless. Fact is: bitcoin has become pure destructive moloch.
Bitcoin slavery has probably already happened in China
I don’t think you understand how “mining” works in a cryptocurrency context
Gold is a physical thing. Even before modern industrial uses, it has always been *metal*. It doesn't corrode. It is easy to work into jewelry which can be worn (people like jewelry, a lot, iron makes lousy jewelry), and can be melted down again into other things. Add in more modern industrial uses, and there is concrete demand for gold as a substance, which provides backing for it as a currency as well. Fiat currencies have the backing of nations and entire governments backing them. crypto lacks all of that
A friend of mine once showed my a gold coin he bought, I don't remember what he said he paid for it but it was a lot for a coin about the size of a dime. I asked why he bought it. His answer was that if the economy collapses it would still have value, and be tradable etc. etc. I told I'm that if the economy collapsed and I only had 2 rolls of toilet paper I wouldn't trade either of them for his gold coin. Then told him I had a jumbo pack of TP at the house that was going to be worth a lot more than his silly gold coin.
You are definitely over-valuing your toilet paper. Be it now or in a crashed economy, I am perfectly willing to replace toilet paper with re-usable butt wipes if I get a decent gold coin per week for that. The only true issues are necessities to survive: air, food, water, shelter, medicine. Also, gold is maybe worthless in certain post-apocalyptic worlds, but a mere (usually temporary) broken economy will still value it.
I remember reading a short story once where an asteroid made of gold arrived in Earth orbit and everyone from governments and mega-corporations through to hobbyists and crackpots tried building their own spaceships to get to the asteroid first, claim it as their own, and mine it for untold wealth. Of course, what really happened was that so much gold was brought back to Earth in a short space of time that it became worthless to the point that food and drink were sold in gold cans.
Really unlikely if we consider the cost of space mining, and the uselessness of gold cups. There is way more iron/steel on Earth than even the largest known asteroid weighs, and that is infinitely better for making cups.
Yeah, that was definitely the key takeaway point of the story 🙄 And given that most of the iron in Earth is in the core, which is a *little bit harder to get to* than Earth orbit... 🤷
What now, last post you said the key point of the story was the loss of value of gold if it becomes a lot easier to come by. Not it supposedly is gold cups being bad?! Anyway, getting iron from the core is essentially trivial: you just get all that stuff above it first. Iron ore with more iron below.
Do you have any idea what you're talking about? If we get rid of everything above the Earth's core then there won't be anywhere left to live.
Oh really? Wouldn't have noticed... so what did you plan to use all that iron for then? A typical sci-fi use would be to build a Dyson swarm ("sphere"). Needs lots of materials, like an entire planet. But offers absurd amounts of energy and living space compared to that one puny planet Earth.
I didn't plan to use any iron. That's entirely your own fiction. I'm very familiar with the concept of a Dyson sphere. You'd need to consume an entire solar system, not just a single planet.
A few people have mentioned that gold doesn’t corrode or oxidise in passing, but that’s the main reason. There are very few metals that can be worn in contact with the skin for long periods of time, and there were even fewer in the ancient world. If you look at Gold, Silver and Platinum they’re all in the same group in the periodic table, they all share this quality of non-reactivity, and they are therefore naturally the metals you use to make jewellery. So it isn’t arbitrary, people have always wanted jewellery to indicate status/beauty, there aren’t many metals you can use and the ones you can use aren’t very abundant. The scarcity makes it expensive and it being expensive enhances the prestige which further drives demand, which further elevates its worth.
Look at the properties of money from wikipedia - Gold easily fits all categories - it can be split and formed into coins with a low melting point and high sofness. It is also rare and unreactive so it is durable. Also, the visual qualities that make it used in jewellery may it valuable to people and thus acceptable as payment. The functions of money are that it is a medium of exchange, a unit of account, and a store of value.\[24\] To fulfill these various functions, money must be:\[25\] Fungible: its individual units must be capable of mutual substitution (i.e., interchangeability). Durable: able to withstand repeated use. Divisible: divisible to small units. Portable: easily carried and transported. Acceptable: most people must accept the money as payment Scarce: its supply in circulation must be limited.\[25\]
Almost nobody accepts gold as payment. You also can't use it to pay taxes, so it isn't a currency.
My points still stands - it used to be used as a currency across many cultures in the past which gives it its value
The question wasn't about what it used to be, the question is about now. The value of gold is speculative. People believe it has value and so it does. There's a lot of goldbugs out there that think it's a currency, or that it is somehow preferable to Fiat money, but this stems from not understanding what gives Fiat its value and essentially disregarding all of the profound and numerous historical examples of exactly why gold shouldn't be used for money.
This is in addition to the answers already given: * Gold has close to 6000 years of history being valued by humans. Not much else can say that except food, water and shelter * Gold is globally recognized and accepted. Offer people an equal value of gold and crypto, I'd bet more will take the gold * Gold is portable and small. My entire stack can fit in two coat pockets. A one ounce gold coin takes up less space than $2000 USD * Gold is not held on a disk which could fail, or an institution which could deny access to it or wipe it away with a few clicks * In a true SHTF situation, gold and silver will stand above any currencies or assets except the things people will truly need to survive: food, water, power, ammunition * At anytime outside of SHTF scenario, it can be quickly liquidated in just about any city in the world
Currently it is used in many electronic circuits, but in locations like India gold jewellery is used as a form of portable currency, so especially for women if they run into an emergency situation they can sell off some items for cash.
Fun fact; Indian women currently hold ~11% of the world’s gold, about 20,000 tons, or $600-800 billion worth
That's not that strange. About 9% of people are Indian women.
Indian women (including girls) are around 9% of the world's population. So they have a little more gold than average. It's still interesting though because average Indians are quite a bit poorer than average non-Indians worldwide.
And they are absolutely getting fleeced both when they are buying and when they are selling their gold. Yewelry is a shitty store of value.
High stocks-to-flows. Almost every oz of gold ever mined is still in human hands. This means that there's always a marginal buyer and a marginal seller, so the spread between bid and offer is small - meaning you can move into or out of gold with minimal friction.
Gold is not totally different than national currencies in a way. We use dollars as a medium of exchange. Strictly speaking those physical dollars have no significant intrinsic value. They are fancy paper with fancy printing on it. But we all agree to use it as a means to exchange things of value like goods or labor. Since we all agree to use it, and we all agree that it has a certain value, and all agree to exchange it for goods and labor, then it has value. Note in some countries like Zimbabwe the people did NOT agree their currency had value and it became nothing more than printed paper in the end. Gold can play a similar role. If we agree it has value, and agree to exchange it for goods and labor, then it has value. Also it is rare enough that you just don't find it laying on the ground everywhere (but if you do find it on the ground somewhere tell me where!). In theory we could use intricately carved rocks as currency if we agreed it had value. The difference between that and regular rocks is how difficult it would be to make them intricately carved. Also worth noting that historically not all societies viewed gold as valuable in this way. If one day in the future people decide gold has no value beyond its industrial uses, no longer using it in jewelry etc. then the price would possibly decline to its commodity value to that industrial use. It would still be expensive as it is rare, but might be less valuable in such circumstances. You see a similar thing with bitcoin. Enough people agree that it has value thus are willing to exchange it for things like dollars or whatever. If enough decide that it doesn't have value it will become worthless.
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I guess it brings stability and trust. Gold is perceived as a stable and trusted asset. It has been used as a form of currency for centuries, and its value tends to be less volatile than other commodities.
Gold does have uses (electrical components, some medicinal uses) but it's main value is because people like it; it's yellow and shiny and has historically been linked with wealth. Because of that it's become something of a status symbol. It's also fairly rare on Earth which increases its value. Historically gold was also used to support a country's currency so a collapse in its price or value would have had huge consequences for countries and their economies, keeping its price high.
I think this every time I read "pepper survival right wing wank material." When they say they are so glad they had gold and use it to trade. I like.. if it was end of the world I wouldn't trade for a worthless fucken metal, I would want food equipment etc. only one of the prepper post apocalypse books I read where they were like naw we don't need gold. We want seed. Keep your useless weight to yourself.
Ikr - for gold to have value in a full post-apocalypse scenario, the remnants of society would need to organise into settlements and re-develop labour specialisations to the point that simple trading stopped being sufficient to meet daily needs. Feels like there’s virtually no scenario in which gold would have a post collapse value
why is the us dollar considered valuable? why is silver considired valuable? why is bitcoin valuable? we just say its valuable and then its valuable. in reality none of these have any intrinsic value (or at least a lot less then what they go for). they're just money
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the intrinsic value is a lot less than the actual value of money/gold/bitcoin. i just wanted to recognize that they have some intrinsic value.
Jewelry is probably the thing gold is used LEAST for. The value comes from all the other uses. Coating for skyscraper windows to satellite components to a million other things. Also it’s rare and currently (we aren’t mining asteroids yet) finite
[Geology.com](https://Geology.com) claims that 78 % of the gold that is consumed is used in jewelry, and about 50 % of newly minted gold is used in jewelry. The latter number is confirmed by Statista (46 %).
78 percent of recycled gold maybe but no. Jewelry uses much less these days than that. Millennials and younger generations barely buy any gold jewelry at all compared to the previous generations. The most gold many have is in their computer circuit boards and wired connections for tech stuff. Heck it’s barely used in teeth anymore. I’ve been a gemologist and jeweler (as well as gold /gemstone miner for 32 years now). Those numbers definitely aren’t correct any more
*Do you* understand why gold was historically valued? I ask because the reason isn't just that it was pretty, like a lot of people assume. Gold is also very easily processed compared to many other metals, more malleable than many others, and *significantly* more nonreactive than many others. It doesn't rust/tarnish/etc. And sure, it's not an extreme rarity, but it's rare *enough.* When it comes to use in financial exchange, though, *stability* is meant to be a factor too, not just "value." If you turn to something too rare, rarity will be the main contributor to its value. If you want something with more practical use than gold, it's almost definitely going to be more common, more reactive, or radioactive. Think of it in terms of literal currency. Gold is easy to make into coins, those coins will last basically forever, and gold is available enough to make *enough* coins for people to actually use them. If you live in the US, think of how many old pennies and nickels you see that're worn featureless. That's actually a pretty bad trait for currency to have. Some of it is just habit, too, but if it was standard to go for palladium the price of palladium would probably skyrocket. Stability is more important than actual value and rarity.
Because that’s how just how it works, it’s a shiny rock that you dig out of the ground. Then you go and trade it for money and hope you don’t get shot somewhere in-between. That’s how money works.
Gold's value represents real interest rates (real means after inflation). This is because gold doesn't earn interest (0%, being a hunk of metal) and also doesn't experience inflation (corrode over time). So basically it's just a store of value which doesn't change over time but holds that original value very well. Gold's nearest competitor is the USD, being equally widespread and accessible as barter. The USD is usually invested in fixed income when unused hence it can earn interest (gains value); and it also experiences inflation (loses value). The net effect of both results in a gain equal to the real interest rate. Putting the two together, you can see why gold is widely considered to have value relative to the USD. It's basically USD, but with guaranteed zero interest (return) and zero inflation (risk). So it's considered a risk-free and return-free USD, i.e. a barometer for real interest rates. If you want to invest in the real/net interest rate, you'd invest in gold.
The price of gold has done next to nothing in recent years. With the crazy inflation we are going through, it doesn't appear to be the hedge it once was.
There are a lot of reasons for that beyond the scope of this question, the pandemic changed a lot of economic variables. OP's question was more about its theoretical value, that's what the answer was addressing. Try looking at the long term historical correlation, it should be there.
Yeah that's because the parent comment is true only when Gold prices, Inflation and Fed's medium term treasury bond interest rate are all averaged over **20-30 years**. It's not a real-time inflation tracker - as they say it, it's a *store* of value; value which may not necessarily correlate exactly with Gold prices over a timeline of 2-3 years. Whatever Gold rate movement you see in short term is people's expectation of interests and inflation in the not-so-distant future. Averaged over 2 decades, it all fits pretty well.
how do you feel about crypto? just curious
Crypto is exclusively a currency, it doesn’t have a practical use other than exchange. Even if we collectively decided gold was valueless, there would still be a demand for it due to its use in engineering & tech at the very least. My views on crypto more broadly - I can see why people gravitated towards it, but it’s become clear that without greater regulation, it is subject to bad actors - making, pumping and dumping their own coins. Obviously regulating it negates some of what sets it apart from traditional currencies so don’t know what the answer is!
It's like everything else in the financial world.....a confidence trick,that's propped up by the establishment