Saw this video about gold, it’s chemical structure and malleability. I still don’t understand why gold is worth anything at all……
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You could ask the same about lithium and cobalt.
Why are they worth anything? Because we have practical applications for them in batteries.
The challenge is that we can’t dig up lithium or cobalt faster than we use them in industrial applications.
So if you were of a speculative mind, you would pay to buy some lithium and cobalt ore and store it while demand goes up. The price would go up and you would be able to sell it with a profit.
After a while, everyone would be keen on investing in lithium or cobalt, even if it meant storing them on shelves and not using them in industrial applications. Because everyone would agree that they are a good form of investment.
Countries would start stockpiling lithium and cobalt, and would use them in stead of cash to close transactions with other countries.
This is what happened with gold. It does have practical industrial applications, which we use 28% of the gold available for. But everyone agrees that gold is a good investment, so there is speculation on it and 29% sit on shelves in the shape of ingots and coins.
The remaining 43% are used in jewellery, because gold also offers practical applications there:
* It doesn’t tarnish
* It does not cause skin irritation
* It is easy to work on
* It can be recycled and re-sold
[Here’s how the world uses gold](https://finance.yahoo.com/amphtml/news/heres-world-uses-gold-165800968.html)
It’s a shiny, pretty metal which doesn’t corrode. That makes it good for making jewelry. It’s also a good conductor, and that, combined with its immunity to corrosion makes it useful in electronics.
But the main reason it’s valuable is beacuse of *convention*. For a very, very long time, gold quite literally *was* money, so, when we’re in times when our current fiat currency is looking shaky, people start hedging back to gold. If you time your purchase right, you can exploit this tendency to buy gold when it’s cheap and sell it when it’s dear, and make a lot of money.
You could ask the same about lithium and cobalt.
Why are they worth anything? Because we have practical applications for them in batteries.
The challenge is that we can’t dig up lithium or cobalt faster than we use them in industrial applications.
So if you were of a speculative mind, you would pay to buy some lithium and cobalt ore and store it while demand goes up. The price would go up and you would be able to sell it with a profit.
After a while, everyone would be keen on investing in lithium or cobalt, even if it meant storing them on shelves and not using them in industrial applications. Because everyone would agree that they are a good form of investment.
Countries would start stockpiling lithium and cobalt, and would use them in stead of cash to close transactions with other countries.
This is what happened with gold. It does have practical industrial applications, which we use 28% of the gold available for. But everyone agrees that gold is a good investment, so there is speculation on it and 29% sit on shelves in the shape of ingots and coins.
The remaining 43% are used in jewellery, because gold also offers practical applications there:
* It doesn’t tarnish
* It does not cause skin irritation
* It is easy to work on
* It can be recycled and re-sold
[Here’s how the world uses gold](https://finance.yahoo.com/amphtml/news/heres-world-uses-gold-165800968.html)
It’s a shiny, pretty metal which doesn’t corrode. That makes it good for making jewelry. It’s also a good conductor, and that, combined with its immunity to corrosion makes it useful in electronics.
But the main reason it’s valuable is beacuse of *convention*. For a very, very long time, gold quite literally *was* money, so, when we’re in times when our current fiat currency is looking shaky, people start hedging back to gold. If you time your purchase right, you can exploit this tendency to buy gold when it’s cheap and sell it when it’s dear, and make a lot of money.
Why does anything have value? Because people believe it does, gold does have rarity, malleability, ductility, unique color, relative rarity, and the fact it doesn’t tarnish though so it certainly gets the ball rolling on it’s value
Why does anything have value? Because people believe it does, gold does have rarity, malleability, ductility, unique color, relative rarity, and the fact it doesn’t tarnish though so it certainly gets the ball rolling on it’s value
Imagine you’re an ancient king, and you’re trying to figure out how to feed your army without just beating up the citizens and stealing their food, or asking for charity.
You are fortunate enough to own the only gold mine (or silver mine), in your country.
A clever trick you could use is to require that people pay you taxes in gold (or silver). Then you pay your soldiers in little circles of gold (or silver). You’re not a sophisticated society that can create paper money, but gold is hard to fake.
Now people will sell food to your soldiers for gold, so they can pay their taxes, and trade among one another with the same coins. Soon everyone just thinks gold = wealth.
It would be hard to do this with other substances. Gems are too rare and too varied in quality. Other metals are too common for you to get a monopoly on, or too useful to industry to waste on coinage.
This isn’t how everyone did it. Gold wasn’t really a currency among the Aztecs, for example, but it was treated as a sacred metal, probably because it was pretty and it never rusted.
Pretty simple really. Same as any anything else in the world, it’s worth something because we said it is. It’s as simple as that.
Imagine you’re an ancient king, and you’re trying to figure out how to feed your army without just beating up the citizens and stealing their food, or asking for charity.
You are fortunate enough to own the only gold mine (or silver mine), in your country.
A clever trick you could use is to require that people pay you taxes in gold (or silver). Then you pay your soldiers in little circles of gold (or silver). You’re not a sophisticated society that can create paper money, but gold is hard to fake.
Now people will sell food to your soldiers for gold, so they can pay their taxes, and trade among one another with the same coins. Soon everyone just thinks gold = wealth.
It would be hard to do this with other substances. Gems are too rare and too varied in quality. Other metals are too common for you to get a monopoly on, or too useful to industry to waste on coinage.
This isn’t how everyone did it. Gold wasn’t really a currency among the Aztecs, for example, but it was treated as a sacred metal, probably because it was pretty and it never rusted.
Pretty simple really. Same as any anything else in the world, it’s worth something because we said it is. It’s as simple as that.
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