Nonsense. Gold would be an excellent material to use for fishing sinkers. Of course you would need fishing line and hooks as well. And gold would be a very poor material for making fishing hooks.
Also, due to gold’s yellow color and shiny luster, you might could construct an awesome lure.
Let’s start with some numbers. I see 3000 or 3500 tonnes of gold in annual production; and 4000 tonnes in annual sales. Does this mean 500 or 1000 tonnes were released from stocks (which are huge)? Gold sales break down as Jewelry 52%, bullion and coin 31%, dentistry and industrial 17%. Bullion stocks approach 100,000 tonnes I think. Aren’t central banks still net buyers?
Anyway this is about $137 billion annual production, with production presumably determined by the price. Other very expensive minerals include platinum: about $4 billion annually, 1/3 of which is for jewelry; and natural diamonds: about $14 billion annually, all of which is for jewelry (or “cash”).
I also don’t see gold being used as a money. In the movies, to move large sums of wealth around, we see diamonds in use. Almost $14 billion in new diamond production annually is one-tenth the gold figure but, unlike with gold, “artificial” diamonds and substitutes are available, so we might agree that diamonds are more “inflated” in value.
What would it cost to buy all the paintings by Amedeo Modigliani in the world? One sold for $170 million recently. Did it have that much “intrinsic worth”? (I don’t mean to “pick on” Modigliani — I’m just suggesting that it isn’t only gold, diamonds and beanie-babies that may be over-priced.)
OK then, to continue this line of thinking, what passes the Desert Island Test that isn’t perishable? Then I’d ask, why hasn’t that a common, commodity basis of exchange in human history, or has it been?
Because most people don’t live on a desert island.
Did you read all my post? It was only two paragraphs long.
This describes the economy most of us live in. One where we buy and sell the goods we want in our life (okay, this week might not be a typical example). And in an economy like that, money works better than gold.
I was going to mention speculum alloy, which used to be the standard material for scientific mirror optics… but on looking it up, it turns out it’s actually two parts copper to one part tin.
One other thing that gold’s good for is that it can be plated in extremely thin layers. The Apollo spacesuit helmets were plated with gold to reduce glare, because it was actually the cheapest material that could be used for that purpose, due to how thin the layer could be.
In the 1960’s (Apollo time) gold was about $300/oz using “current dollars.”
Today, almost 700 tonnes of gold are used annually in applications where it’s the cheapest material! This, despite its $1500/oz price. How many new such applications would arise were its price only $300/oz?
I’d suggest platinum as a comparison point. Very expensive (historically 33% more expensive than gold but not currently), has demand for decorative (jewelry) and industrial uses, but AFAIK has never been used as currency or to back paper currency.
I think it’s actually quite hard to separate gold as jewellery from gold as commodity.
Gold jewellery and decorations have often been a way to flaunt, as well as store, excess wealth.
To imagine gold still being worn or used in this way, sans wealth-flaunting we have to imagine gold losing some of its properties, or something better than gold coming along, or some change in human psychology or society.
In other words, the answer to the hypothetical depends on the precise scenario.
Yes, I did. I get it. I’m not saying gold has special value, I’m asking the opposite. Why wouldn’t we prefer to use something with intrinsic value for currency? IIRC cocoa beans were used as currency in some pre-Columbian Mesoamerican cultures; why move away from that?
The obvious answer is perishability - any other? Is there nothing durable that also happens to have intrinsic value? Wasn’t payment in salt the basis for the term “salary”?
The other is portability - once concentration of very large amounts is A Thing, nobody wants to schlep hundreds of thousands of blocks of salt to buy something expensive. So once a society reaches a level of economic development that Very Large Amounts are necessary to function (a government treasury based on large scale taxation, used to fund long term or large scale expeditures), a common proxy that is portable, non-perishable, and testable (for fakes) is needed.
“Gold as currency” lovers often cite the relatively limited and fixed amount of gold in the world as a reason to use it, to prevent inflation, which they say “destroys wealth” - a dollar becomes less valuable over just 20 years, because the government just keeps making more of it! Outrageous! And Bitcoin proponents, the ones who aren’t speculators or money launderers, say it’s got the same benefit of a finite minable space.
But the societal value of money isn’t to preserve the buying power of stashes, right?
Gold is not money, even in theory.
Nobody’s money is based on gold anymore, even in theory.
Gold and money are two entirely different things.
Thank you.
I’ve seen it suggested that it’s actually counterproductive for a currency, or a currency standard, to be too useful. Apparently, if people are using it too much for what it’s good for, there isn’t enough left to use as currency.
Derleth: I am not saying you are wrong. But after thousands of years, a great number of people still think of gold as money. And I believe that it is that kind of thinking that gives gold an artificially high price.
Not so much. Western countries hate the idea of wasting money on storing gold. So, Germany, for example, has indicated it will sell off its gold reserves. The US gold reserves peaked in the 40s and 50s, some was slowly sold off since the late 50s to late 70s and has been unchanged since the late 70s. (The US would sell it all off except that would upset the nonsensical gold bugs.)
Here’s a chart showing recent reserves history. Note that the scale is logarithmic. So the top few (with the US in the lead) account for most of the total and they are either steady or declining.
Russia and China have been adding to their reserves, esp. the former. Russia is a major producer so adding to its reserves is fairly easy. Both countries have less-than-respectable currencies.
No country with a stable economic system gives a fig about gold.
Gold is considered an exchange metal because people think it’s an exchange metal. I.e., it’s a fiat metal.
The Swiss are fairly stable but their central bank still has a whopping 1040 tonnes, unchanged since 2009.
Your cite has some flaws, notably that it stops in 2014. Since then, Russia has added over 1000 tonnes to its stock; China 900 tonnes to its. Better yet, though it doesn’t show when trades were made, this chart summarizes changes from 2009 to 2019. The only big declines over this period were Germany (sold 37 tonnes, 1% of its stock) and Venezuela (sold 200 tonnes!).
The U.S. central bank holds much more gold than it does foreign currency; this ratio is higher than that of other central banks.
It will be amusing to see your cite for “The US would sell it all off except that would upset the nonsensical gold bugs.” 
(Of course, replace “nonsensical gold bugs” with “those who think the bullion may instill confidence” and it becomes tautologous.)
septimus, I saw the chart had some issues, esp. readability. Which is why I explicity mentioned Germany, Russia and China.
Your chart definitely proves that virtually no countries are increasing their gold reserves. Esp. ones whose currencies are important in international trade. (Clicking on columns helps see that.)
Some notes: New Zealand and Canada are examples of countries with healthy economies and zero gold reserves. Canada having gotten rid of their last tiny bit.
There’s a lot of 0% change rows there.
Some of the countries that have sold off some reserves are in trouble in one way or another: war, economic crisis, etc. But not all of them. E.g., Czech Republic and Australia have less but are stable. (I imagine there’s a lot of pressure to maintain some gold reserve down under due to mining interests.)
That argument demonstrates why gold supporters shouldn’t be in charge of financial policy. A fixed economy is a bad thing. You want an economy that grows; at least as fast as your population is growing but ideally at a faster rate than population. A healthy economy should have a money supply that’s proportionate to the size of the economy. A fixed finite money supply will handicap an economy and prevent it from growing beyond a certain size.
Central Banks use it as a storage of wealth. Not exactly the same thing I know but I believe countries still use it to exchange wealth.
This is essentially why William Jennings Bryan and co. championed a “silver standard” over a gold standard in the 19th Century; silver was being mined at a far higher rate than gold, meaning using silver as a currency basis would continually inject more into the economy than gold would allow. More of the have-nots, or havent-as-muches, would then be able to improve their economic share of the pie.
Having a government controlled currency allowed for better managing the economy’s growth, but at a certain point it seems like we’re back to a problem of leverage when we talk about “intrinsic value” versus “growing the wealth of a shared and sophisticated economy”. Sure everybody has more money, but if everybody tries to spend their money on the same stuff that has only so much of it to go around, that stuff starts by becoming more expensive, then possibly moves to replace the money as a medium of trade (e.g., bartering for foodstuffs in wartime).
Gold would still be pretty and used for jewelry, so I suppose several times the value os silver.
Say $300 or $400 per oz.