Why is Gold Valued? Gold plays an important role in our life. It is a precious metal with a history dating back to the millennials.
Dive in with us to see the multifaceted reasons why gold is valuable.
1. Why Is Gold Valuable?
The valuability of gold is a fact and belief that implanted itself in people’s minds for thousands of years. This belief may stem from the fact that gold is one of the materials used to create the first coins in the 7th century BCE.
Due to this, gold has been the backbone of the world’s currency market for a long time.
Back in the day, traders exchanged precious metals and merchants as a system of currency. This means that there was an acceptance of gold as a face value for products and services without the need for immediate delivery.
2. What Characteristics Make Gold So Valuable?
Gold is one of the nine noble metals, which means that it has high corrosion resistance even at high temperatures. It possesses several key characteristics that make it worthy of being the most valued metal.
Some points that further enhance the value of these characteristics include:
2.1. Rarity
Gold is one of the rarest elements on Earth.
Companies extracting them mined gold from areas where gold has already been found. But even in that case, there is a need for deep digging to get good-quality gold.
Gold is even rarer than diamond. Gold makes up only four parts per billion in the Earth’s crust. This means that if you dig for a bar of gold, the residue will be five times the gold that you may end up extracting.
So we can say the high value of gold is a result of its rarity and makes it more valuable than it already is.
2.2. Gold Jewelry
Gold is a valuable metal to make jewellery. This system dates back to the development of civilisation. There is a belief that gold was the first material used to create jewellery.
Gold is also a valuable metal because it has a low melting point. It also has a bright yellow colour that makes it look more prominent.
Another common metal used for jewellery is silver. Both gold and silver metals are easy to form into jewellery. They are the most famous metals for crafting jewellery.
2.3 Value of Pure Gold
Pure Gold refers to what we call 24 Karat gold, with 99.9% gold. It is the purest form of gold with no trace of other elements.
The price of 24K gold fluctuates every day but it is the higher form of gold. Therefore, it is more expensive than the other forms of gold.
Gold in its pure form is soft and is not suitable as a raw material. Therefore, people usually use it for investment purposes.
Some people invest in physical gold like gold bullion, jewellery, etc. The investment may not only be because of its value but because they are drawn to its beauty.
For a safer storage and insurance cost, people may invest in investment vehicles like gold exchange-traded funds (ETFs). They also hold shares in gold mining companies.
2.4.1930s, Governments Seize Gold’s Value For Themselves
During the Great Depression back in the 1930s, people around the world decided to exchange their paper money in the bank with legal gold coins.
This sudden surge of gold withdrawal from the bank reduced the money supply and caused deflation. This situation made the Great Depression worse.
To regain control of the monetary system, Governments worldwide forced the cessation of gold circulation. This was done so that gold would not disappear in people’s hands.
The government then melted these coins into public reserve causing the citizens to rely on paper money. This allowed the government to print as much paper money as it wanted which devalued currencies around the globe.
2.4.1. Ceasing of gold
Gold coin production and circulation were ceased by the US government in 1933, depreciating the value of the US Dollar to approximately 95%.
This has increased the price of Gold as it maintains its intrinsic value even with the change in currency. This also proves its hedge against overspending by the government.
2.5. Gold Both Rides The Good Times, And Lessens The Pain Of The Bad
With the emerging market currencies, using Gold as a hedge can have a positive effect for multiple reasons. Gold provides a head against currency risk all while offering benefits like simplicity, diversification and efficiency.
2.6. Iron, Lead, Copper, and Aluminum
People commonly use these metals as substitutes for gold for the creation of gold coins and other things. The downside of these materials is that they corrode easily and cannot withstand the passing of time as much as gold does.
This is an important characteristic as taking care of these metals is a labour-intensive and time-consuming task.
Due to this reason, People usually prefer gold over these metals because of its ability to withstand the test of time.
2.7. Gold As An Investment
In addition, Gold has an unparalleled combination of gold’s yellow lustre and historical significance. This intrinsic value continues to make it a sought-after choice for jewellery, currency, and investments.
These features of gold further solidify gold’s prominence, setting it apart from other metals. It also reinforces its standing as a symbol of wealth and economic stability.
3. Why Is Gold Valued Over Silver And Copper?
Gold is rarer than both silver and copper. This contributes to its intrinsic value and is more sought after as compared to the two.
In terms of the durability and corrosiveness of the three, gold has a higher resistance to oxidation and change in state. It does not react to air or moisture.
Gold also has a long history of being a symbol of wealth and a store of value. This stems from its durability and its lustrous yellow colour.
As mentioned previously, Gold serves as a form of currency for many central banks around the world. It also survives the devaluation of currency that happens globally. This makes Gold valued over silver and copper.
4. Uses of Gold
4.1. Gold’s Special Properties Have Many Industrial Applications
As much as Gold finds use in jewellery, it also has many industrial applications which can be traced back in history.
In the ancient days, Gilt domes were made from gold to protect the underlying roof from the elements. Gold leaf covered the ceilings to protect them from soots of fireplaces.
Developers also use gold in the development of solar panels. The gold nanoparticles used in solar cell increases the efficiency of photovoltaic and hydrogen fuel cells.
4.2. Application of Gold in Technology
Copper and silver are more efficient in conducting electricity than gold.
So why is Gold used for plating connectors?
While it is true that copper and silver have better efficiency, the downside is that they wear out and corrode easily. This makes it impractical to use these materials in the development of inaccessible circuits.
On the other hand, gold does not tarnish or corrode. This property of gold makes it the perfect material for plating connectors.
The use of Gold platings in inaccessible circuitries and the aerospace sector makes it more convenient and economical.
4.3. Gold Helps Make Aeronautics Possible
Space has no atmosphere to carry heat away from a surface. This means that spacecraft and satellites require a protective layer to reflect heat and radiation.
Gold foil regulates temperature and protects these instruments from damage.
NASA covers their Mars Rovers with gold to protect the sensitive instruments and power batteries from heat.
The developers of spacesuits also use gold to coat the visor of the spacesuit helmet to reflect harmful infrared radiation.
This coating on the visor not only protects it from radiation but regulates the temperature inside the suit as well.
4.4. Usage of gold in the Medical field
Gold also has many uses and purposes in the medical field as a medical tool. This includes creating a prosthetic from the alloy of gold and titanium.
A gold-titanium alloy produced at high temperatures exhibits greater strength. This helps retain friction than a typical aluminium prosthetic.
The usage of gold nanoparticles in the medical field seems to have risen over the centuries. Researchers use gold nanoparticles to identify malaria, which are more cost-effective than the previous instruments.
Another rapid growth of usage of Gold nanoparticles is in cancer treatment. The particles used to deliver Genetic Payloads into the body suppress the growth of tumours.
4.5. Golds as a Material for Art
Back in the day, people used gold not only for jewellery but for the creation of art.
Golds are a symbol of wealth, the Gods and the afterlife in many cultures. Therefore, people then and now used gold to craft many religious items.
These items also include the Pharaoh’s masks, golden Buddha statues, chalices and crosses made in the ancient days.
Gold leaves hammered into thin microns were used to accent and beautify a variety of manuscripts, religious icons, etc.
Not only that, People also use gold leaves in the decoration of certain sorts of food.
5. What Is The Gold Standard?
The Gold Standard is a system in which a fixed quantity of gold underlies the standard economic unit of account.
In this system, a country sets a fixed price for gold while employing it to sell and buy gold. The country uses this fixed value to determine the currency’s worth.
By the end of the 19th century, many countries implemented the gold standard as a monetary system. This is because the growth and complexity of the economy have made it challenging to support gold as a currency.
With the fixed exchange rate of the gold standard, countries can exchange currency with gold whenever they want to. This provides stability and confidence to the currency of that country.
5.1. Advantages of the Gold Standard
The gold standard has many advantages including price stability. The stability of money halts inflation that comes from the money supply.
With the gold standard, the chances of hyperinflation were also reduced. This is because hyperinflation may only happen with an increase in the supply of gold reserves.
Also, countries can use gold as a fixed price for international trade between two countries using the standard. This will reduce the chances of uncertainty with the fixed international rates set for gold.
5.2. Disadvantages of the Gold Standard
Gold Standards can be the cause of an imbalance between two countries trading with gold. This stems from the idea that a country that produces gold will have more gold reserved than a country that purchases the gold.
According to some economists, the Gold Standard may cause a rift in the economy. For example, during a recession, the government cannot increase its money supply.
5.3. Do Countries Hold Stores Of Gold?
Countries around the globe have gold reserves, whether it is in their home country or abroad in a foreign nation. For example, India stores its gold reserves in Canada and Great Britain.
The “gold reserve of a country” can be defined as its security against the effect of an economic crash that might happen in the future.
The main purpose of a gold reserve by a country is for financial stability, financial hedge and international trade. It is also because of its diversification and historical significance of gold.
The country with the highest gold reserve is the United States, which has more than 8,000 metric tons of gold. This amount is almost as many as the next three largest gold holding companies combined.
Conclusion
From this article, we can conclude that gold is a timeless asset that transcends borders and currencies. This makes gold a reliable symbol and a store of wealth.
Gold is deeply rooted in human history and that of the world, and it also proves itself to be worth the investment.
Gold also solidifies its status as it is not only used as a financial asset but as material in the development of infrastructure needed by humans.
To get more valuable insights into gold, the World Gold Council provides information about gold in the modern economy.
Click here to read more related articles.
Last Updated on November 13, 2024 by LALHRIATPUII
