I hear some economics arguing that currency should be pegged to gold as a way of ensuring that its value isn’t arbitrary / volatile but I don’t understand how this would solve the problem. I understand that gold is a scarce resource that is difficult to mine but is it this alone that gives it intrinsic value ?
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It has certain qualities that other metals don’t have. It doesn’t oxidize, it looks pretty and it’s quite sturdy. That gives it inherent value. The reason why it’s often seen as “stable” is because there’s a finite and steady supply of gold in the world.
Why it serves as an economic standard has lots of reasons. Gold is a tangible thing which you can easily exhange for money in nearly every country, that makes it a very steady investment. It’s similar to real estate in that way because there will always be a demand for gold. In times of economic crises, people turn to gold because it’s generally unaffected by market fluctuations. Also, because investors know this and will buy up more gold, its value rises in bad economic times.
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