Why is Gold valuable?

Gold is associated by mankind with security and stability. Gold is the precious metal that people turn to when all other currencies or assets fail. But why is that?

What is Gold?

Gold is a rare yellow shiny metal and is in the 11th group in the periodic table along with copper, silver, roentgenium. The group is also called the copper group or 1st subgroup. The chemical abbreviation is "Au" and comes from the Latin word "Aurum". The melting point of gold is 1064 degrees Celsius.

It is very easy to work mechanically and does not corrode. Because of its physical properties, gold has been used for jewelry for thousands of years and as a means of payment in the form of gold coins since the 6th century BC.

History Gold

Gold is one of the first metals to be processed by humans. In addition, the precious metal has cast a great fascination on mankind for many centuries. Already very early gold symbolized power and prosperity. Gold served for a long time as a means of payment and was considered a symbol of victory in competitions and contests. Also, in ancient times, gold was used for the decoration of churches, temples and tombs.

During the first great depression in the U.S., four states established state-owned banks that issued paper money. The experiment had to be abandoned quickly because people were still too fond of gold, so the paper money fell to insignificant values too quickly. The government quickly realized that citizens would not simply abandon gold. So gold was nationalized except for a few small parts, such as jewelry or industry. The gold was confiscated, so to speak, and banned in the meantime.

Gold is money and nothing else

J.P. Morgan, US banker (1837-1913).

In modern times, gold is often used in medical technology and some other electronic devices, in addition to being a store of value. Also, nowadays gold is taken as a currency reference at the International Monetary Funds and at the World Bank. Central banks usually hold gold as a reserve asset and store of value.

Gold deposits

About 43% of the gold mined in 2017 came from the People's Republic of China, Australia, USA, Russia and Canada. The deepest gold mines in the world are located in South Africa. There gold is mined almost 4000 meters below the earth's surface.

For a long time, most gold was mined in South Africa, but its production volumes have been falling since the 1970s. In 2019 and 2020, China, Australia and Russia were the leading gold mining countries, each producing over 300 tons of gold. In addition to mining, however, recycling also plays a relevant role in gold. In 2020, for example, 92 tons of gold were recovered from scrap metal in the United States alone.

Gold benefits from long history

Its historical reputation confirms gold as a suitable investment, as the price of gold usually rises in times of economic uncertainty. Gold holdings count as part of a country's foreign exchange reserves. Gold is considered the last resort in case a monetary system collapses, making it a preferred store of value for individuals.

In fact, central banks around the world are buying more gold than ever before. This trend continues as economic and political uncertainty increases around the globe.

Gold has worked since the time of Alexander the Great. If anything has lasted over two thousand years, I don't think it's because of prejudice or a false theory.

Bernard Baruch, U.S. financier and stock market speculator (1870-1965)

Properties Gold

It is mainly the combination of scarcity and indestructibility that makes people have such high confidence in gold. Apart from that, its beauty ensures that the precious metal has become a symbol of power and wealth represented in almost every culture.

Gold is rare, unlike many other metals. Currently, the total gold supply is over 200,000 tons. Gold is extremely difficult to find and mine. It takes an extreme amount of resources to mine gold.

Gold also has the unique property of being one of the most durable metals in the world. It does not rust or tarnish. Gold can only corrode under very specific circumstances. The precious metal is chemically inert, which means that it is resistant enough to remain unchanged for thousands of years.

As a result, it does not lose value and can be worn for many years as jewelry or stored as bullion in a vault to be sold later for a profit without any problems.

You have a choice between the natural stability of gold and the honesty and intelligence of government officials. And with all due respect to those gentlemen, I advise you, as long as the capitalist system lasts, choose gold.

George Bernard Shaw, Irish playwright (1856-1950)

Bitcoin is similar to Gold

Bitcoin has similar monetary characteristics to gold. It is not without reason that the cryptocurrency is referred to as digital gold or gold 2.0. These properties, which both assets possess, are discussed in more detail in the article What is a Medium of Exchange?.