Why do we value Gold?

From the periodic table, it is easy to dismiss the elements that are gaseous or liquid in normal pressure and temperature. They wouldn’t make a good currency anyway. Then comes the alkaline metals in the periodic table. They are too reactive to be considered for everyday use and exchange. And the same applies to radioactive elements. Then comes elements like titanium, zirconium. Very durable and stable. However, it required specialized equipment back in the day (circa. 1000BC) to extract these elements from its ore. Aluminum was hard to extract as well and Iron rusts. Then we are left with a few elements that are known as the noble elements. “Noble” because they don’t easily react with other elements and that means they occur in nature as itself. They are Platinum, Rhodium, Palladium, Iridium, Osmium, Ruthenium, Silver and Gold. A problem with the noble ones except for Silver and Gold is that they are so rare and would be very hard to forge coins out of them. Silver tarnishes over time, but Gold relatively does not. This inertness is one of the main reason why Man has used it over thousands of years as a form of currency.

Back in the day, currencies were tied to Gold. Meaning that each paper note of a currency is backed by and equivalent amount of physical Gold. But during the Great Depression, countries severed this ties so that they can print more money and reflate their economies. More recently, the US stopped using Gold as a backing in 1973. And with a steady supply of Gold and varying demand, it can swing the price quite a bit. The bottom-line is that gold inherently did not have any value. The society during different times in history assigned it value. This could be the reason as to why many still use Gold in their portfolios.

Reference

Gold, BBC

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