Ive never been able to understand the concept of gold. Why is it so valuable? How do countries know that the amount of gold being held by other countries? Who audits these gold reserves to make sure the gold isn’t fake? In the event of a major war would you trade food for gold? feel like people would trade goods for different goods in such a dramatic event. I have potatoes and trade them for fruit type stuff. Is gold the same scam as diamonds? Or how is gold any different than Bitcoin?
In: Economics
A few years back, long before this question became a recurring topic on this sub, Planet Money did a [podcast](https://www.npr.org/sections/money/2011/02/07/131363098/the-tuesday-podcast-why-gold) about this very topic. Namely, why gold?
To answer the question, the started with the Periodic Table. Figure … if anything is going to be “dig it out of the ground” and useful as “money” (“a medium, a measure, a standard , a store”) , it’s probably going to be one of those elements. One can quickly eliminate the elements which aren’t solids in their natural state (e.g., helium), those that are poisonous (e.g., arsenic) and those that are just too abundant (e.g., silicon). What you’re left with are … maybe surprisingly … the precious metals: copper, nickel, silver, gold and platinum. Rhodium should also be on that list, but it’s simply *too* rare.
Of those precious metals, gold has some unique characteristics. One is a relatively low melting temperature, making it easy to be molded and shaped into precious artifacts and jewelry, even by prehistoric cultures. The other is that it just does not tarnish: put it outside in the bright sun on top of your temple and it shines on for decades. And finally, it’s surprisingly easy to tell its purity. Pure gold not only has a sweet “ring” sound to it when struck, a simple “touchstone” test with aqua regia can tell the purity quite accurately.
Finally, when you consider that gold is naturally created in our universe only by supernovas, making it “universally rare” in a literal sense, an interesting fact emerges .. if there’s an economy *anywhere in the universe*, they probably take gold as a currency.
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