I can understand why is is so sought after today, but in olden times when they used it as a currency i cannot understand why. Salt was used by the Romans as currency which makes sense because it has a useful purpose. As a metal gold is really not that usable, its to soft to do anything useful with it. I know that ancient peoples knew that it was rare, but was this the only reason it was so sought after? I tried doing a search but could not find any threads on this. It seems like a question that was probably asked at one point.
Some reasons off the top of my head: it’s extremely malleable so it is perfect for making jewelery out of, it doesn’t tarnish easily, it’s rare, so the “market” won’t be flooded easily, and generally looks nice - put a piece of iron pyrite next to a piece of gold - the pyrite doesn’t have anything on the real gold.
There’s also probably some sort of feedback loop going on - once people recognised gold as being valuable, everybody else coveted it, too, and so on.
It’s rare and beautiful.
The scarcity is the key element. Simple supply and demand: if it’s hard to get, it’s valuable.
It’s also a fabulous conductor of electricity, which makes it useful in wiring, such as a few connections in computers and whatnot.
Gold is what they call a native metal, that is, a metal seen and found in nature, as opposed to iron and aluminum which has to be extracted/smelted out.
Gold was simply a valuable pretty metal. Other early forms of money were things like cowrie shells, which aren’t any more useful than gold. They could be made into jewelry, but that’s it. Gold is exactly the same way.
So why do we have the idea that gold is money? Money is a special kind of good. Some goods have properties that make them useful as money, these are called key goods. Cigarettes in prisons are an example of a key good. They are useful to smoke, but people will take payment in cigarettes even if they don’t smoke, because those cigarettes can be used to trade for other goods. Cigarettes become used for money because they are portable, divisible, interchangeable, storable, and so forth.
Gold was used as a key good for the same reasons. You could carry around gold ingots and trade them to people for other goods. And even if the people you traded with didn’t want gold to make into jewelry, they knew that other people did, and so they readily accepted payment in gold. Then the second person takes that gold and trades it to a third person, and that third person trades it to a fourth person. None of them want the gold for itself, it’s just a useful way to facilitate barter. Eventually you get governments who produce little standardized ingots of gold or silver so you don’t have to weigh and assay each lump, you can just count them. And so we have the first coins.
But it’s rarely used as the principal conductor. Instead, it’s used to plate other (cheaper) conductors, to make them highly corrosion resistant. This can be done rather inexpensively, as it requires very small amounts of gold
In fact, copper and silver are both slightly better electrical conductors than gold. Silver has the highest conductivity of any metal. Gold is used where the resistance to corrosion is important, as noted.
It doesn’t corrode, it doesn’t dissolve, it’s rare, can be used for multiple purposes, will combine with other metals, looks nice and is more malleable than just about anything. Tell me of something else that fits that description. Gold is the default unless you can find something better.
Diamonds are the default gem because of their properties.
Something has to fit the bill.
Yeah, but the OP means way back when. Electrical characteristics and most useful, multiple purposes only make sense in today’s context. Lemur866’s explanation makes sense on the surface, but I have this feeling it’s a little more complicated than that – or is it really that simple? Did Spain conquer the new world so that someone could make jewelry as the end of this big, huge, monstrous zero-sum game? People wanted enough bling to finance the invasion of an entire continent???
Gold is not that good a conductor. Silver is best then copper followed by gold. Gold has about 1.37 times the resistance of silver and about 1.3 times the resistance of copper. The advantage of gold is that it is relatively inert, doesn’t form oxides or sufides and so when used in contacts gives a uniform performance over long periods of time.
Gold is pretty, and stays pretty because it doesn’t react easily, easily worked, and as was mentioned above is found as a metal and so is available without processing.
It’s shiny. Seriously. (plus what they said)
No, by that time gold had become valuable simply as a store of value in and of itself. Just like with paper money, the paper money has no value, except that others will accept it in return for goods and services. After gold had been used as a key good long enough, people began to think that gold WAS money and money was gold. That meant gold became valuable simply because other people thought it was valuable. Sure, gold still retained value as a raw material for pretty jewelry and such, but by then the primary value of gold was that other people thought it was valuable. Most gold wasn’t transformed into jewelry and gewgaws, it was kept in ingot or coin form to be used as money or a store of value.
The other posts have pretty much taken care of gold - it was rare, looked good, and so could easily be appropriated by rulers for themselves, forming a feedback loop in which it became even more valuable - but nobody has commented on the bit about salt.
There are huge doubts that salt was ever used as a currency. At most, Roman soldiers were given a special allowance to buy salt, but that’s hardly the same thing.
What is the historical evidence people were paid in salt? is the best thread on this, but it’s been covered in a few others.
Is there any truth to the claim that there is actually more Gold in the world than Silver? (Someone recently told me this, claiming that the markets artificially keep gold’s prices high.)
No. This meme has been misinterpreted by many investment newsletters pushing silver as an investment over gold. They are talking about how few ounces of silver exist as available reserves in vaults and warehouses. But the actual number of ounces that exist is much larger for silver than gold.
Keynes called it “the barbarous relic”; Partly because gold is found in its native state or nearly so. It must have been a thrill to find boulders laying around in streambeds. It is practically inert, almost completely free from corrosion, so finding a sunken galleon or pirate ship or roman hoard on the bottom of the sea from hundreds of years ago becomes profitable. It is practically indestructible. So objects made thousands of years ago are sometimes found.
By a factor of over 20 according to the data at http://www.webelements.com . Silver is cheap and plentiful enough for some commercial uses, such as silver solder. I do find it somewhat curious that the price has risen in the last few years, although traditional photography is being phased out on almost all fronts (the largest industrial use for silver has been the manufacture of photographic emulsions). Back in the 1990s, when silver prices were bottoming out at around $5/oz, I seem to remember the “experts” opining that the stuff shouldn’t actually be considered a “precious metal” at all. I don’t hear that today, but at about $13/oz, it’s still historically cheap, particularly in inflation adjusted dollars.
(thwacking the horse a few more times…) A couple more reasons why gold was such a good form of money:
- All (pure) gold is identical to all other (pure) gold, unlike say salt , diamonds or horses (and possibly cowrie shells, if you’re discerning). Saves a lot of time in transactions if you don’t have to rehaggle every time how much this particular ounce of gold is worth.
- Gold is dividable with almost no loss of value. Unlike cowrie shells, diamonds or cattle. Not necessary, but makes it a lot more useful.
- Opal likes it! (But opals are poor items for money; far too variable, far too fragile, and not very divisible).
- As a lesser point, many of the uses of golf are reversible (jewelry, gold cups, solid gold calfs, etc.). I think this created some synergy between gold as ‘useful’ item and gold as currency: gold is more valuable than say cigarettes, because you can save your gold and use it at the same time.