Why Do Gold and Silver Have Intrinsic Value?
The list of the world’s commodities is endless. So why, out of a huge range of options, do Gold and Silver have intrinsic value?
What has gained gold and silver their ‘precious’ metals title?
Here we will explore the history behind gold and silver and the reasons why intrinsic value is attached to precious metals.
What Puts the ‘Precious’ in Precious Metals?
Gold and silver’s value may not be immediately obvious when compared to other commodities such as grains, that have nutritional value and provide energy that we need to survive, or oil which can be used in industry and for fuel.
People can be forgiven for questioning the value of precious metals and it is easy to jump to the conclusion that their shiny appearance give them value purely because they can be used for jewellery. However, this is not the main reason precious metals have value. Historically, alchemists mixed powdered gold into medicinal drinks to ‘cure’ pain and fever. And in silver’s case, we know that it is an excellent conductor of electricity - but the world has not always had access to electricity, yet silver has historically been assigned value.
So, why do gold and silver have intrinsic value?
Gold and silver’s value derives from their ability to be exchanged. Simply put, they are a great form of money.
Historically, many commodities have been used as a form of exchange, yet physical gold and silver have remained favoured due to specific properties making them perfect for monetary use:
Gold is a soft metal, meaning it is easily melted into small, easy to transport and store, coin shapes. It never rots like food, it is easy to combine with other materials, and it can be made consistently, meaning that the purity or fineness is the same.
Gold’s benefits do not end there. It does not rust or corrode like other metals (iron, lead and copper). But, best of all, gold is scarce, meaning that unlike other commodities like water, plastic and corn, there isn’t an infinite supply, thus claiming that it is ‘valuable’ seems plausible and fair.
Like gold, silver has been shown to have the same desirable attributes, except silver is lesser in value, as there is more silver available in the world than gold.
Both gold and silver are durable, malleable, non-corrosive and pretty much indestructible, which means they can be great for storing value over time.
Because gold and silver have been assigned intrinsic value, they are often used as a hedge against rising inflation. Other commodities are not able to do this, and most will rise in price as inflation rises.
Unlike paper ‘money’ (fiat currency), precious metals tend to hold value, meaning that what they are worth in the beginning, will remain in the future. An ounce of gold will always be an ounce of gold in relative terms. Due to its endurance, gold and silver are often seen as a safer bet for investment purposes during unstable situations.
Physical gold and silver have been recognised as money for many hundreds of years, longer than any other form of currency, and people have long used gold and/or silver to protect wealth for their future.
Gold and silver cannot simply be destroyed by fire or water and do not take any upkeep or maintenance. Physical bullion is more than some 1’s & 0’s in a computer, or a paper symbol with a promise of value – it is real, actual, physical wealth, just like our ancestors used.
In a world of economic uncertainty and mounting global debt, precious metals are often seen as a safe haven offering many advantages that other investments cannot. Physical gold and silver are a way to preserve wealth for the future and are often passed on from one generation to the next, and that is what makes them so very valuable.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.