Investment

Why Has Gold Always Been Valuable?

by Siam Sarwar

Gold is an extraterrestrial element meaning that it had come to Earth due to the supernova explosion of dead stars. Gold is one of the precious metals which limited by volume and hard to mine and collect. This rarity and scarcity made the gold a perfect choice to use as the medium of exchange as no one can produce it at free will and affect the market value.

A Brief History of Gold

Gold is found in different areas worldwide, and many civilizations have discovered it at different times. And every civilization took gold as a precious metal because of its unique colour and because it was hard to collect from the ground. Gold was the first widely known metal to humankind. This precious metal was first used to make coins in Asia Minor/ modern Turkey at 700 BCE. The coins were a 63% gold 27% silver mixture and were called electrum. Gold has been mined by miners from as back as 2000 BCE by Egyptians and Romans in the early Roman era. The earliest information about gold value comes from 5100 years old evidence from the ancient Egyptian empire that compared the value of gold with silver. It is mentioned that one part of gold is as valuable as two and a half parts of silver. (onlygold.com)

Some Facts about Gold

  • Gold is the only metal that comes in yellow without any chemical reaction or oxidation.
  • The formation of gold takes place in the core of exploding stars called a supernova
  • All the gold on Earth came from supernovae explosion of a star just like our sun
  • There are over 20 million tons of gold is in dissolved form in our Earth’s oceans
  • All the gold humans have mined out of the ground can fit in 3 Olympic size swimming pool
  • Around 190000 tons of gold have been mined in total
  • There are around 20% or 50000 tons of gold left in reserve underground to be mined 
  • Gold has no taste but is safe to eat; gold does not get absorbed during digestion, making it safe to eat.
  • In the 14th-century drinking, molten gold was used as a treatment for the bubonic plague
  • There is an asteroid called 16 Psyche, which contains 20 billion tons of gold. The value of that gold is 125 times greater than the global GDP

Why has Gold Always been Valuable?

We call a metal valuable when there’s a lack of supply, and the demand is greater besides the uniqueness of metal make it valuable. In the case of gold, It is valuable to the modern world and had been valuable from the ancient civilizations such as Egyptian and the Kingdom of Lydia.   The basic reasons why gold has always been valuable are the following nature, characteristics, and advantages.

Unique Qualities

Gold has some unique qualities that differentiate gold from other metals available. From the very first civilizations, gold was regarded as a valuable metal because of these reasons, and these unique qualities include the following   

  1. It is the only naturally found yellow metal
  2. It does not dissolve or rust, unlike other metals
  3. One of the heaviest metals on Earth
  4. Soft and easy to change shape

Attractiveness in Appearance 

The glowing yellow colour and indestructible nature made gold attractive for the early civilization. Gold was considered a noble metal because of its religious devotion and imperial decoration. Because gold was rare, glowing, easy to reshape and did not rust, it was used to form jewelry for upper-class people. As a metal of ornament, gold lasts longer, and its shiny yellow colour makes gold ornaments attractive.

Rarity

Gold is not the scarcest metal on Earth, but it is also not available enough like steel, silver, or copper. Although there are many gold mines worldwide, it is quite hard to find lots of gold in one place and extract them. Gold is considered a rare metal because it was hard to collect from ancient times to the early middle age. Almost 190000 tons of gold have been mined, and around 50000 tons of gold are left for mining. Out of the total mined gold of 190000 tons, two-third is mined in the last 70 years, and one-third of mining took more than 4000 years. An estimate suggests that by 2050 there will not be any gold reserve left for mining. 

Demand

Currency

The demand for gold has always been constantly growing, although the reason for the gold demand changed over the course of time. In the middle age, gold was regarded as a treasure and used for political stability. In today’s modern world, gold is used to back fiat currencies, make jewelry and use for industrial purposes and also to invest in.

Gold has been in use as currency from an early age; in 700 BCE Lydian Empire of Anatolia/ Asia Minor, which is located in modern-day Turkey, used gold to make minted coins and used gold as currencies. Gold has intrinsic value and rarity; gold was appreciated as currency in all nations and empires of the middle age. Even today, different governments make gold coins and sell them at an appropriate price; one example is American Eagle Gold bullion coins.

A better Tool for Investment

A person can preserve value and make a capital gain from the gold investment. Gold has an inflation hedge meaning that the inflation situation of an economy does not affect the gold price. In a time of inflation, the actual value of paper currencies drops but carrying gold in an economic recession will not reduce the value of gold. Rather than that, the gold price will increase; gold’s value-preserving nature makes it the best choice for precious metal investment. Besides, gold has a stable growth of value. If a person invests in gold in the future, gold’s market value will increase, and the investor will make a profit selling the gold. This nature of gold is called capital gain.

Other Usefulness

Gold has dynamic use in many fields. Other than using gold as currencies and jewelry, gold is used for making electronics items, dentistry, medical use, aerospace, special glass making and Awards making, etc. Only in America, 37% of the total yearly production of gold is used for electronics. 50% of total gold goes in jewelry, and 8% only goes to coins and 5% to all other uses.

Backing Currency

Almost every country in the world uses paper-based currencies, but paper currencies do not have intrinsic value like gold and cannot be relied on. To solve this issue, many governments use gold to support the paper currency. If a government uses the gold standard, printing new paper-based money will require reserving gold with the same amount of value as newly printed paper currencies.

Bottom Line

Gold has served as a hard currency for almost every civilization found it; it had been the most impactful metal humanity have ever seen or used. Battles shaped the history of Earth, and gold is the reason for many battles in history. Because of its uniqueness and rarity, gold has always been valued throughout history and even today. (zmescience.com)

Bibliography

  • Facts.net/gold. (n.d.). Retrieved from https://facts.net/gold-facts/
  • geology.com. (n.d.). Retrieved from https://geology.com/minerals/gold/uses-of-gold.shtml
  • onlygold.com. (n.d.). Retrieved from https://onlygold.com/facts-statistics/history-of-gold/
  • Pheasantenergy.com. (n.d.). Retrieved from https://www.pheasantenergy.com/wp-content/uploads/2020/07/8_Ways_to_invest_in_gold.jpg
  • Theguardian.com. (n.d.). Retrieved from https://www.theguardian.com/notesandqueries/query/0,,-194047,00.html
  • www.bbc.com. (n.d.). Retrieved from https://www.bbc.com/news/business-54230737
  • www.forbes.com. (n.d.). Retrieved from https://www.forbes.com/sites/jamiecartereurope/2021/12/28/nasa-is-set-to-explore-a-massive-metal-asteroid-called-psyche-thats-worth-way-more-than-our-global-economy/?sh=761b261b7ea2
  • zmescience.com. (n.d.). Retrieved from https://www.zmescience.com/science/why-is-gold-valuable-feature/