Gold as currency historically


My question is how did gold become seemingly standardized as currency? It seems like a ton of cultures knew about gold and were willing to trade for or with it, so what made it appealing or worthy of trade globally?

Is it the rarity that gave it value? Was it desired as a social status, to have gold jewelry, or have some use beyond that which I’m not aware of?

In: Economics

Even though bartering makes sense (exchange one good/service for another), it’s inconvenient as hell. So people wanted something to use as currency. Gold isn’t the only thing, but it has a lot of things going for it:

-It’s stable and you won’t worry about money rusting away
-It’s rare enough that its price is rather stable
-It’s not too rare to be infeasible to use
-It’s pretty enough in jewelry to have some intrinsic value

It is a combination of a few reasons. One of them is scarcity. Gold is a rare metal in Earth when compared to other metals such as iron and tin. Another reason is that chemicals speaking it is incredibly stable. Gold does not corrode when left exposed too air. That makes it great for coinage and jewellery especially before things like air conditioners and weather sealed rooms became a thing. You can leave a gold coin out in the rain for years and it will still be relatively the same. Gold is also a very soft metal. Which makes it easy to work with and mold to whatever shape you want it to be. And last but not least, it’s shiny and a different color than most of the other shiny metals so easily recognizable as gold.

Edit: stupid auto correct

The properties of gold: rare but not too rare, very malleable so it’s easy to work with, and shiny, meant that a lot of cultures naturally adapted to use gold as a medium of exchange.

Since many of the largest cultures were already using gold, and smaller cultures were aware of it, gold becoming the standard medium of exchange was just the most efficient way for humanity to start using currency exchange on a global level.

An aside: The notion that currency needs to have intrinsic value is clearly bunk. Gold really has no intrinsic value, and our paper money today has almost zero intrinsic value. All currency really needs is widespread usage. I will accept US dollars from you because I am almost certain that a lot of people all over the place will accept them from me, and their value will not plummet before I get a chance to spend them. Bitcoins are not as widespread, but they DO have an intrinsic value that US dollars and gold do not: they can be traded electronically anonymously.

The historical standardization of currency being only gold is mostly a myth.

Do you know what a British Pound was originally? It’s short for the Pound Sterling, and it was originally just a troy pound of silver. Or how about the Dollar? Originally it was a Spanish silver coin.

The standard Roman unit of account was the silver denarius. They also used bronze as a currency as well.

Gold was always a very important currency, but the period of it being the fairly exclusive currency peg was fairly short. For example, the US officially demonetized silver in 1873, with real domestic gold convertibility ending in 1933, and official parity ending in 1971. Yet somehow, when gold as currency is discussed it always seems to be presented as if gold was the only currency ever used.

The late 18th century saw a widening silver/gold exchange ratio driven by silver mining improvements exacerbated by US paper currency during the Civil War, which put pressure on the dual-metallic system which then prevailed. Once some nations started to switch to exclusively gold valuations, this further decreased the use of silver and increased the pressure on silver prices, encouraging the rest to switch over. This was by this point being done by gold-linked paper currencies, which avoided the shortage problem noted below.

Positive aspects for use as a currency are that it is easily identifiable (by softness and malleability in addition to by color), does not oxidize, so it it can be left alone for decades without changing, and and is rare enough to transfer large sums efficiently. No utility is ever required by an exchange medium, beyond the belief that the commodity is readily identifiable, and can be traded away for items of value.

The primary reason that it was mostly used less than silver is that it is just *too* rare. Most common transactions just can’t be done with gold at a reasonable exchange ratio without a risk of the grain-sized gold “coin” getting lost. It was impossible to create enough coins out of gold for efficient everyday commerce.