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A single ounce of gold currently sells for over £1300*. However, looking at it subjectively, at first glance gold does not seem to have any intrinsic value other than the one that us humans have attached to it.

So, what is it that makes gold so valuable? In this blog we’ll look at the uses and history of the magic metal, and what makes it the ultimate form of wealth.

History

The value of gold has been gradually ingrained in human society for thousands of years, with the yellow metal long being the number one choice for currency.

 Government fiat currencies are a new invention, backed only by trust in the issuing authority – besides, history shows that eventually they all have failed at some point. The same also applies to stocks and bonds – a bond issued 100 years ago would be worthless today. Yet, gold has historically had a purpose of long-term value, and has long been a safe haven against crisis.

Humans have been fascinated with gold since the beginnings of recorded history. Flakes of gold have been found in caves dating back to 40,000 B.C. Gold played a very important role in ancient Egypt – the capstones on the Pyramids of Giza were made from solid gold. The Ancient Egyptians were also known to have produced the first known currency exchange gold and silver ratio - the first recorded measurement of the lower value of silver compared to gold.

The ancient Greeks viewed gold as a status symbol, and often used gold as a sign of wealth as well as a form of currency. Other ancient civilisations such as the Aztecs and Incans also used the yellow metal, including it in religious ceremonies and architecture.

We see a common trend here – gold historically has always been seen as a status symbol. From Kings, to priests, to the upper classes – those who hold gold also tend to hold power, success and admiration.

Since the beginning of the end of the Gold Standard in 1933, reaching its ultimate end in 1971, the gold price has been in a long-term uptrend, and it seems the value of gold has continued to grow since it could be traded freely. Most countries in the world still maintain large gold reserves to defend their currency against possible future emergencies. Gold retains its status of a ‘safe-haven’ still.

Chemical Properties

In the early days of man, bartering was the most common means of trade. However, as humans evolved, the need for another form of money increased. So why did they choose gold over all other metals?

Whatever material mankind chose would need to be pretty tough and durable. Titanium and zirconium fit the bill – yet where are not malleable enough, needing a furnace of around 1,000c to extract them from their ores. Aluminium? Too flimsy. Iron? Rusts and is too common. Lead and copper? Corrode too quickly. Other noble metals such as platinum, palladium, iridium are much too rare and difficult to extract.

This leaves us just two elements to choose from – silver and gold.

Both are scarce, and both have a relatively low melting point and are non-toxic. However, silver tarnishes when exposed to air – and so we have a winner: Gold.

Gold does not rust or tarnish. Gold stands the test of time – a gold statue from ancient Egypt will still look recognisable as gold today. Gold cannot be destroyed by heat; it needs a minimum of 1945 degrees Fahrenheit to melt. Gold is malleable, ductile, rare, and beautiful.

Scarcity

You would probably be surprised by just how little gold there really is in the world! A figure widely used by investors suggests that there may only be around 171,300 tonnes of gold that has ever been mined. That may sound like a lot, but to illustrate this figure: if a person were to gather every single piece of gold on earth and melt it down, they’d be left with approximately only one 20-metre cube.

Obviously, the less there is of something the more valuable that something becomes.

Virtually all the gold that has ever been mined still remains in circulation, whether in the form of gold bars, coins, jewellery, or computer chips.

Timeless Beauty

Of all the elements in the periodic table, gold is the only one that is... well, golden in colour.

All other metals in the periodic table are more of a silvery colour, except for copper which corrodes and turns green when exposed to moist air. Of course, this makes gold very distinctive and so we have seen gold used throughout history to decorate and adorn our bodies, architecture, and art. Gold’s beauty really knows no bounds.

The Bottom Line

So why is gold so prized by humans?

The answer is that there is no single reason why gold is seen as such an exceptional metal. We know that gold is valuable because mankind says it is, and history has proven it. The high value we place on this metal is a combination of the factors listed above, and I’m sure more will be written about humans and their most prized commodity. No matter the political or financial climate, the value of this magic metal has never gone to zero. Does this make gold the ultimate form of money?

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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.

*Price correct as of 08.06.2020

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