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.
Money is valuable because you need it to pay taxes.
Gold – really silver historically – is useful to make into money because it is rare, easy to make into shapes and valuable on its own.
Precious metals are valuable because they are pretty and make good jewelry and art
Gold shiny. People like shiny. Not enough gold for each person who like shiny.
Some people who don’t have shiny want shiny, go to people with shiny and say “I will do things for you to get shiny.”
Boom. Civilization.
Simply because of history (royalty) and it being the talk of the town. Essentially advertising…
Similarly the same way that diamond engagement rings became popular… Advertising by a diamond company : De Beers …. It’s where the idea comes from that a “good” engagement ring should cost 2 to 3 months of salary. It’s all a scam…
[De Beers ad scam ](https://theeyeofjewelry.com/de-beers/de-beers-jewelry/de-beers-most-famous-ad-campaign-marked-the-entire-diamond-industry/)
https://theeyeofjewelry.com/de-beers/de-beers-jewelry/de-beers-most-famous-ad-campaign-marked-the-entire-diamond-industry/
We all agree to follow a made up system: a specific metal is worth a certain amount of ”money” at that weight.
Gold is nowhere near the worth of other metals. It’s been used historically because we could mine it and we decided we like shiny things. 10,000 years later it’s US dollars and grams of gold for the “money” and metal.
Check out this podcast. It does a great job of explaining “why gold.”
There is an indescribable attraction humans have towards gold. That shiny yellow metal creatures a fever within oneself that harkens to Gollum’s attraction to the ring.
There is a [Planet Money episode](https://www.npr.org/2024/05/15/1197959089/-price-of-gold-periodic-table-elements) that addresses this. It’s very informative.
Its pretty rare, but common enough to be useful. It’s also very widely distributed, you can find gold pretty much everywhere on earth.
It’s soft enough that it can be worked with very basic tools.
It is insanely resistant to corrosion, rusting, or any other blemishing or rot. You could bury a lump under a bunch of mud, in the bottom of a river, with bugs and fish pooping all over it … and that lump will be in perfect condition thousands of years later.
That resiliency also makes it somewhat easy to find along rivers. All of the “normal” rocks will get broken down and eroded over time, but the gold stays shiny.
Oh, plus it’s shiny. We do like shiny things.
Gold originates from cosmic events, primarily supernovae and neutron star collisions, which produce intense conditions necessary for the creation of heavy elements like gold. These cosmic explosions scattered gold particles throughout the universe, eventually embedding them in the formation of Earth over 4.5 billion years ago.
On Earth, most gold formed deep within the planet’s crust and mantle, rising to the surface through geological processes such as volcanic activity. Humans have been mining gold for thousands of years, valuing it for its rarity, malleability, and beauty.
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