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
It’s thought that there are several properties gold had that made it useful as a store of value.
One is its rarity. Gold is a relatively rare substance, and it is hard to inject significantly more of it into the market at any given time. But it’s not so fantastically rare that people will hold onto it at all costs: there is enough of it around that people are comfortable trading it for other things. Gold strikes a delicate balance here: rare, but not *too* rare.
Another is its resistance to decay. Food rots, livestock dies, most metal rusts or at least tarnishes. Gold doesn’t do any of this, and so it doesn’t become worthless over time. Gold is also safe to handle. Uranium is rare, but you don’t want to carry it around in your pocket.
Gold had one more property in the past that no longer holds as strongly today: you couldn’t use it for very much, so people weren’t taking gold out of the market to do other things with it. You couldn’t make most tools with it, for example, because it’s too soft. For centuries its only use was ornamentation, and even in the form of jewelry it was still easy to trade. Nowadays this is no longer true, because its chemical properties are useful for making connectors in electronic parts. But this requires relatively little gold, so most of it is still used as a store of value, much like before.
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