Why is gold so valuable?

[TaintedAndDelish]

I have a dumb, but with some implications.

On the surface, my question is, "Why is gold so valuable?"

In itself, its just a physical material with limited uses. It's rare, and it's supply can be controlled by those who possess it, I get that. It has been used as currency in the past, perhaps because of this rarity, and currency has been based on it, but being rare and having a supply that can be controlled can't be all there is to it, right?

If the value of gold is more of a mind game, ie. "It's valuable because I say it is", then couldn't that same game be played with other marginally useful materials or goods? Is is possible to then "create value" with other materials that are rare, controlled, or cannot be reproduced legally? ( ie. copyrighted works )

[gaggedLouise]

It's sometimes cited that gold (and the other noble metals, silver and platinum) does not get contaminated or grimy over thousands of years; they are very durable and once they have been smelted and worked into objects, sheets or ornaments they won't oxidize or rust. Even copper goes green, shady or uneven over time. Also, they can be treated and shaped into much thinner and more detailed shapes - threads, fine leaves, jewellery - than any other metals. Those properties were really crucial in the days when gold was used in clothing, in exclusive home artifacts of rich people and so on, but today we have plastic which can be made to show much the same properties or even outstrip gold for pliability and ease of use. I haven't checked but I suppose a gram of lycra could be spun out to a longer thread than a gram of gold...  ;)

I figure the value and mystique of gold has something to do, historically, with the idea of empires literally lasting for many hundreds of years, aiming to last forever. If there's an expectation that one's country (in the shape it has at present) shall remain till the end of time or almost, and gold is very rare and precious, then the notion of gathering your wealth in gold and passing it on for ever makes sense. You could sort of expect that your descendants eight hundred years into the future would still be able to pay with the gold coins you've gathered in a sack or would be able to read your handwritten scrolls of paper, your property deeds or your memories, without any assistance. People in, like, the Roman empire really did expect that their empire might last forever and some of them (of the educated people) were a bit obsessed with the idea of having one's name and family live forever, really forever. I guess that's waned in the modern age, or it's changed its tack. Most of us know, if you'd think about it a moment, that extremely few people are getting remembered and widely talked or written about two hundred years or a thousand years after they left the present life, so it's not really a sensible first-hand goal to strive for, not if everything else is gojng to be subordinated to it. And actually, when somebody finds a hoard of gold coins or gold statuettes many hundred years old, the find doesn't get used for buying a house or a new car. It's valuable because it's antique and recognized as valuable, rather than simply because it is in gold - you don't treat Roman or old Spanish coins as currency and try to buy anything for them in a store, do you?

[Torterrable]

I really like gaggedLouise's answer, so let mine be just a small supplement to that.

Firstly, understand that gold is almost forever. It does not tarnish, reacts with every few things, and is extracted much more easily by platinum, this allowing previous civilizations to use it.

Honestly? Gold's worth is, actually, partially because "we say it is", but, in that, it lends itself well to being said. To be more clear, gold's terribly limited quantity allows people to more easily measure value against it, because we can understand that, if we have gold, it will always have value. Gold's appearance allows it to be easily identified compared to the other rare earth metals that otherwise satisfy the "limited quantity" criteria.

If interested, search up "fiat currency", the criteria of which gold partially can satisfy which thus allows it to act as a universal currency.

Although "we say it is" may seem to be a weak reason, think about the fact that gold's value developed separately on each continent. Even before the Europeans had heard of the City of Gold or of how Aztecs valued gold so much, gold was at the top of their list of things to find and have.

So basically, gold satisfies some universal criteria of being a good currency. The reason we do not use it anymore is because it lacks some other criteria, namely, the ability to be controlled. A truly good currency can be adjusted by the government which issues it, and while that was possible in the past, it is not possible anymore.

[gaggedLouise]

Incidentally, the most abundant place to look for gold (or other heavy metals, such as iron, silver and uranium) would be in the core of the earth and other planets. If we had the gear to dig down into the planetary cores and haul up the hot, compressed and pure metals from there, it would outdo any kind of supply there's ever been from mining on land. The core of Saturn is estimated to be between 9 and 22 times the mass of the earth and it consists almost entirely of heavy metals. The main problem is, the temperature is calculated to reach beyond 11.000 Kelvin/Centigrade.  8-)

[Torterrable]

Additionally, there is gold in the ocean, a predicted 20 million tons of it. However, despite its high price, gold is nearly impossible to extract economically from the waters of our planet; it is so dilute that it is in parts per billion in our ocean water, making a purification plant highly costly and useless for profit. And, although nodes of gold and other valuable metals such as manganese have been discovered at the ocean floor, perhaps due to the vents there, again, diving down that deep to mine is far too difficult for it to be considered useful just yet.

FUN FAX

[Inkidu]

As others have said there's the deal:

It's rare. Rarity is a large factor. The more common something is the less value it has. Remember, until the figured out the bauxite smelting process aluminum used to be considered the rarest metal on earth. The cap on the Washington Memorial capstone and the Library of Congress's leafing are both aluminum. Once the bauxite processes were figured out it's now used to wrap fried chicken and tuna casserole.

It does not corrode and is shiny. Humans like shiny stuff. One of the standing theories for this is we've evolved to like the glint of sunlight off clear water. So things that emulate that are nice. As previously stated, gold doesn't oxidize (rust, corrode). This makes it long lasting as well as rare and shiny. So it's desirable.

Something some people don't consider is that gold is easy! Humans like convenience. Gold is a pure metal which likes to form naturally and almost completely pure in nature. That means getting it out the ground is as simple as finding it and digging it out. Additionally gold is extremely malleable and ductile, which means when we do get the nuggets gold is very easy to work with making stuff.

However, gold is actually becoming a functional metal as of the late 20th and 21st Century. Not only is it a great computer component, but it's used in numerous space-based applications. In fact, until we figure out how to print diamonds on chips gold is probably the most cost-effective material in computer components.   

[Rick345]

Why is gold so valuable? Because it attracts women...
While I say that tongue in cheek I think there's some truth to that.

Now I'm sitting here trying to think of something that is rare but, not worth a great deal of money...

[Cthonig]

It was rare and while less rare now, the other qualities (people have mentioned above) haven't changed. Gold always stays lustrous. It is very malleable; it is one of the easiest metals to work. It takes aqua regia to get it to react. It is a very dense metal giving some serious weight to a coin. And because of these things it makes an excellent base for money because you can't counterfeit it.

Any counterfeit coin will: be harder or softer; tarnish; react with weaker reagents; be lighter. (There are only a few heavier metals and they are either rarer and/or more valuable.) It's not like counterfeiting is a recent idea so that has long been a significant feature about gold.

Another thing that's got an artificially inflated value that we accept as very valuable: diamonds. Gold isn't unique. But yeah, there are still moments when you go "Why?"

[Ontan]

A few extra points:

- Gold is easily divisible, very portable, and (as noted) non-perishable. These are the main reasons that cultures develop currency over a barter system. If you’re a horse breeder, you can’t really trade 1/187th of a horse for a loaf of bread. As for why they don't use other metals...

- Gold has limited uses. In modern times it’s started being useful (eg circuitry), but historically there wasn’t a whole lot you could actually do with a big pile of gold. This is actually extremely important for currency, as it’s harmful to remove useful resources from circulation. If a region’s treasury decided to horde, say, iron instead of gold, it’d be very detrimental because said iron isn’t being used: for every bar that’s being saved up, there’s one less plough, or sword, or whatever else that iron might've been used for. Having something nice and useless (like gold) means you can save up money without causing scarcity.

Lastly, it pays to note that gold itself wasn't inherently valuable, and was only used as a means of representing something else, such as productive labour or other resources. Contrary to expectations, Spain didn’t become rich when they started shipping over hordes of gold from the New World. They actually became poorer because of mass inflation (which, in fairness, was an undocumented phenomenon before then).

[Zakharra]

  I thought the Spanish pulled more silver out of the ground than gold in the New World.

[alextaylor]

Yup it's valuable because people put a value to it.

Nobody seems to have brought up the problem of paper money. Paper money is only as good as the financial institutes that control it. Back in ye olde days, governments flipped all the time. King George's paper money might have been valuable as long as King George was the king, but when King Bob conquered him, all of a sudden King George's currency had no value. This kind of thing happened quite a bit during the major modern wars.

Or you could have hyperinflation making your money useless, as in the case with Zimbabwe or Indonesia.

Gold and other precious resources were great in this case. No matter who your ruler is, gold's value remains the same.

This is also why I think most people should be holding jewelry or some other kind of portable money, in case of war or financial collapse.

[Oniya]

Gold and other precious resources were great in this case. No matter who your ruler is, gold's value remains the same.

Give or take a couple hundred dollars an ounce

[Ephiral]

This is also why I think most people should be holding jewelry or some other kind of portable money, in case of war or financial collapse.

This strikes me as a mistake not entirely dissimilar to the one the Spanish made. If you really think war hitting home or total collapse of our finance systems are likely enough risks to devote resources to, wouldn't you be better off hoarding wealth than money?

[Caehlim]

If the value of gold is more of a mind game, ie. "It's valuable because I say it is", then couldn't that same game be played with other marginally useful materials or goods? Is is possible to then "create value" with other materials that are rare, controlled, or cannot be reproduced legally? ( ie. copyrighted works )

Yes. This postage stamp is worth more than $3.14 million, although the exact price it set at auction is a secret.

[TaintedAndDelish]

You see this with fine art too. It amazes me how much much high-end art is auctioned off for - we're talking millions and millions in some cases. In such a case, the art is just a canvas that's hard to reproduce - or of which there is only one authentic, identifiable copy.  To me, it looks as if it is being effectively turned into a currency - one who's worth can be manipulated in the future by those who play the game.

ie.
Pay 10 million in an auction for a rare painting and write it off as a business expense.
Sit on it.
Years later, sell it at a loss and take a take write off, or sell it at a profit and pocket the difference.

I don't know how tax laws come into play in this case, but to me, it looks as if the rich are creating their own currency.

I didn't read the article below, it refers to one such auction where art is auctioned by the "elite" at staggering prices.
http://www.nytimes.com/2014/10/08/arts/international/auction-houses-gear-up-for-frieze-week.html?_r=0

[Ephiral]

As a general principle, the answer to "Why is X valuable?" is "Because a sufficient number of people are convinced that it is." You can actually extend that past marginally-useful things and into the realm of negative utility - Bitcoin would be a strong example here.

[Vekseid]

In the event of a financial collapse I picture starving goldbugs running around begging for food from farmers who basically look at it and say "I can't even wipe my ass with that."

[gaggedLouise]

I remember this catalogue from a museum show about the Incas, where the introduction kept harping the line "the Incas were eager to venerate their gods with gifts and sculptures that had to be of gold - massive gold". In bold type, to boot. In fact gold didn't have any special sacred status to the Incas, they just happened to have ample resources of it.  ;)

[alextaylor]

This strikes me as a mistake not entirely dissimilar to the one the Spanish made. If you really think war hitting home or total collapse of our finance systems are likely enough risks to devote resources to, wouldn't you be better off hoarding wealth than money?

I mean from an individual's perspective, not a nation.

If a country collapses, paper money would be worthless. People might have to abandon their land and possessions in a war. Gold is still valuable across the border and it's very portable. So people could run from say, Syria to Austria with a gold necklace and wrist band and pawn it for enough money to rent out a house and buy some food for a few months. Even if they don't speak the same language, the value is carried over.

You see this with fine art too. It amazes me how much much high-end art is auctioned off for - we're talking millions and millions in some cases. In such a case, the art is just a canvas that's hard to reproduce - or of which there is only one authentic, identifiable copy.  To me, it looks as if it is being effectively turned into a currency - one who's worth can be manipulated in the future by those who play the game.

Yeah, pretty much. I know a guy who trades artwork. He says that it's a great full time job because art works as a better currency than cash, although a bit less liquid. Art's value rarely goes down unless the artwork is damaged or the artist is forgotten. But as with many kinds of investments, people expect a bunch to do OK, even making a slight loss, and 1-2 to turn into a big hit.

[Ephiral]

I mean from an individual's perspective, not a nation.

If a country collapses, paper money would be worthless. People might have to abandon their land and possessions in a war. Gold is still valuable across the border and it's very portable. So people could run from say, Syria to Austria with a gold necklace and wrist band and pawn it for enough money to rent out a house and buy some food for a few months. Even if they don't speak the same language, the value is carried over.

Yes, but how do you get from Syria to Austria if your resources are all tied up in gold rather than, say, fuel and food and self-defense? Gold is worthless outside the context of a society that can afford luxuries.

[alextaylor]

It's a currency. Currencies are there to trade for resources you need. You can't eat gold, but neither can you eat money.

I mean you can steal a car and food. Or hoard. Or beg. You could also trade for it.

Whether the country cares or not for luxuries doesn't really matter. It's easier to sell a gold ring in Austria than it is to sell a gun or a car. Or if Austria bars you from entering, you could still your gold ring in Turkey, Sudan, anywhere in the world with a developed economy.

It happened in practice. My grandmother hung on to her jewelry and hid it back in WW2 when the Japanese were invading, raping, killing, printing their own temporary currency, and seizing houses. After the Japanese left, the currency they made up was worthless. Gold still kept its value.

Another situation are bank robberies and credit card fraud. There are cases where someone commits credit card fraud and buys lots of jewelry. Why not buy a car? Because cars can be tracked and can be lost. It's easiest to launder money in the form of jewelry because it's more easily traded.


* Actually in reality, Syrian Pound inflation seems to be 59.1% as opposed to USD which is 1.7%. So you're probably literally better off using gold instead of Syrian money.

[Inkidu]

In the event of a financial collapse I picture starving goldbugs running around begging for food from farmers who basically look at it and say "I can't even wipe my ass with that."

If it gets that bad, I'm thinking lead will be more valuable than gold. :J

[Ephiral]

It's a currency. Currencies are there to trade for resources you need. You can't eat gold, but neither can you eat money.

But... the entire premise given for hoarding gold is a situation dire enough that currency becomes basically valueless. In such a situation, it doesn't much matter what the currency is. Gold is pretty much entirely useless without a society with considerable resources to spare, and so has no particular reason to be valued in a survival scenario. If you've got enough leisure to devote people to goldsmithing, or the industrial capacity to make gold-doped circuits, then there are other currencies that are waaaay more convenient to have and use. If you don't, then... who exactly wants this gold? For what?

The reason I likened it to the Spanish error is that it's fundamentally the same thing: Mistaking gold and currency for wealth.

[Zakharra]

But... the entire premise given for hoarding gold is a situation dire enough that currency becomes basically valueless. In such a situation, it doesn't much matter what the currency is. Gold is pretty much entirely useless without a society with considerable resources to spare, and so has no particular reason to be valued in a survival scenario. If you've got enough leisure to devote people to goldsmithing, or the industrial capacity to make gold-doped circuits, then there are other currencies that are waaaay more convenient to have and use. If you don't, then... who exactly wants this gold? For what?

The reason I likened it to the Spanish error is that it's fundamentally the same thing: Mistaking gold and currency for wealth.

Paper currency would become worthless, not gold. There will always be a lot of people who value gold and for many people there will be a market for it so those with gold will be able to find someone to buy stuff off of.

[Oniya]

There is a saying:  In the country of the blind, the one-eyed man is king.  In general, the things that people want but don't have are 'valuable', regardless of their composition.  In a drought-stricken area?  That gallon of water is going to attract more interest than that Faberge egg.  Power outage in upper Saskatchewan in January?  Blankets, sweaters, and heating fuel are going to suddenly become 'worth' a lot.  Need to travel a long distance?  You're going to get farther with a bicycle than a backpack of jewelry.  Things with tangible purpose - or the skills to acquire those things - are a 'wealth' of a different sort.  The latter, particularly, is a 'wealth' that gives bigger returns the more it is spread around.

[gaggedLouise]

In Germany at the height of the 1922-23 hyperinflation it used to be said that having a hooker in the family was worth more than a respected job and a well-furnished apartment. The lovegirl would get paid at once, or in goods instead of money, and she could easily adjust her prices upwards, while the salary from an ordinary job would never keep pace with the inflation.  ::)

[Oniya]

In Germany at the height of the 1922-23 hyperinflation it used to be said that having a hooker in the family was worth more than a respected job and a well-furnished apartment. The lovegirl would get paid at once, or in goods instead of money, and she could easily adjust her prices upwards, while the salary from an ordinary job would never keep pace with the inflation.  ::)

It was also said that if you left a shopping cart full of Deutschmarks on the sidewalk, thieves would take the cart and leave the Marks.

[Lithos]

Gold is valuable cause it is rare, easily moldable and rather pretty / doesnt tarnish easily.

[Inkidu]

Gold has been seen as a good item of value. Unless you work on a barter economy you need some kind of medium.

It's like the idiosyncrasy of a lot of elderly people who take their government check down the bank and cash it. It's a government check. If it's not good then the money you traded it in for is no good either. Each bill be it one or one hundred is basically a check worth that face amount. There is actually very little of worth backing any modern economy, especially when an economy becomes a tertiary one (ie post-industrialist). 

[Lrrr]

Now I'm sitting here trying to think of something that is rare but, not worth a great deal of money...

Answer: Bald Eagle poop.

And for something that's worth a lot because we say it is:  OEM inkjet printer ink at $50 an ounce.  (I use bulk ink at $1 an ounce)

[Mathim]

I always thought it was just superstition that made it valuable. Yeah, it's rare, but it's not the only rare thing, and until recently it hasn't been really useful in a practical sense, but now we can put it in computer chips and stuff as a conductor. So other than cosmetic uses (jewelry) the reasons for it are fairly shallow. Too bad people back in the day didn't realize alchemy was basically attempting to do something that nuclear cold fusion would need to be mastered to accomplish.

[Inkidu]

I always thought it was just superstition that made it valuable. Yeah, it's rare, but it's not the only rare thing, and until recently it hasn't been really useful in a practical sense, but now we can put it in computer chips and stuff as a conductor. So other than cosmetic uses (jewelry) the reasons for it are fairly shallow. Too bad people back in the day didn't realize alchemy was basically attempting to do something that nuclear cold fusion would need to be mastered to accomplish.

That was just the end-goal of alchemy, the big prize. Besides, as a culture that values money that only has value because someone says it does, I don't think we have room to talk, especially since cold fusion still isn't quite viable on the large scale.

At least alchemy gave us the foundations for modern chemistry. Our love of money gave us Wall Street. :P

Though if we could print diamonds onto circuit boards that'd be something amazing.

[Oniya]

Though if we could print diamonds onto circuit boards that'd be something amazing.

Printing nanotubes is probably more useful (and likely more feasible.)

[Caehlim]

Yeah, it's rare, but it's not the only rare thing, and until recently it hasn't been really useful in a practical sense,

When you think about it though, do you really want something useful to be used as our currency? If our currency were apples for example, we couldn't eat apples without taking money out of circulation. With gold having no real uses, we don't lose anything by sealing it up by the ton in something like Fort Knox. Also it never corrodes, which makes it useful for a perpetual currency as well.

Too bad people back in the day didn't realize alchemy was basically attempting to do something that nuclear cold fusion would need to be mastered to accomplish.

We have actually transmuted lead to gold in the present day, ironically by mistake. A damaged nuclear reactor's lead lining had large parts of it change from lead to gold because it was leaking a lot more radiation than it should have. Also the physicists at CERN can create gold atom by atom, although it would take millions of years of continuous operation to create enough gold to even have a speck you could see with the naked eye.

The medieval alchemists weren't actually interested in making gold for financial gain. The idea was that if you could perfect something like a metal, turning base lead into pure gold (believed at the time to be an intrinsically superior substance) they thought that it would be possible to do the same to a human. Based on Christian mythology, they wanted to return mankind to how it was during the garden of Eden. Lead into gold was just meant to be a proof of concept.

[Oniya]

Got a source for that nuclear reactor thing?  I was only able to find an article on the 'atom-by-atom' conversion (and apparently they used bismuth and not lead, because it was easier to detect the gold that way.)

[Inkidu]

Printing nanotubes is probably more useful (and likely more feasible.)

What about printing diamond nanotubes?

[Oniya]

Well, the difference between nanotubes and diamond is the arrangement of the carbon atoms, so the two are kind of mutually exclusive.  Nanotubes have the atoms arranged like a honeycomb, and diamond has the atoms arranged like a caltrop.

[Caehlim]

Got a source for that nuclear reactor thing?  I was only able to find an article on the 'atom-by-atom' conversion (and apparently they used bismuth and not lead, because it was easier to detect the gold that way.)

Found it, it was from the Terry Jones Medieval Lives: Philosopher documentary.

Here's the video, it starts at 6m33s

http://youtu.be/ZTf2EzTd1TE?t=6m33s

[TaintedAndDelish]

The medieval alchemists weren't actually interested in making gold for financial gain. The idea was that if you could perfect something like a metal, turning base lead into pure gold (believed at the time to be an intrinsically superior substance) they thought that it would be possible to do the same to a human.

http://cdnimg.visualizeus.com/thumbs/03/8c/boobs,girl,gold,nude,woman-038c03070961d9465955d9d13b227c1e_h.jpg

:)

Sorry.. I couldn't resist...

[Caehlim]

http://cdnimg.visualizeus.com/thumbs/03/8c/boobs,girl,gold,nude,woman-038c03070961d9465955d9d13b227c1e_h.jpg

:)

Sorry.. I couldn't resist...

:D

[Mantis Shrimp Prime]

I suppose another way to look at it is the mentioned qualities: rare, doesn't tarnish, beautiful, and useless, make it a luxury good and thus a status symbol.

So in ancient times someone with access to a lot of practically valuable goods (like control over agricultural land and herds of livestock), they could afford to exchange some of that in order to have pretty stuff made of gold lying around.



No idea if this has any support, but it's a good enough hypothesis to merit perhaps looking to see if anyone has done research into it.

[Nachtmahr]

I actually thought the value of gold in modern days were because of it's technological applications, being a decent conductor and what not.. But then I started thinking about it, and I realized that there can't really be a huge demand for 'industrial' gold when there is so much 'recreational' gold going around, can there? That would be sort of backwards.

Then I felt a bit dumb. ^^'

I guess gold is just really valuable because we've all just grown up thinking that? We've always been taught that gold is a reward or a treasure, so when we hear the word we just automatically associate it with great value even if it doesn't actually have all that many uses.

I would probably argue that the it is indeed because of it's long-lasting potential and it's fairly stable value, meaning that any investment in something that's made with gold can eventually be turned back into currency if you so desire, I.E. a ring made of gold with a diamond in it worth 500 [currency] is going to stay around that value, or simply just increase over time as it becomes antique - But I like the idea that we've just been taught to value gold more. x)

[Caehlim]

I would probably argue that the it is indeed because of it's long-lasting potential and it's fairly stable value, meaning that any investment in something that's made with gold can eventually be turned back into currency if you so desire, I.E. a ring made of gold with a diamond in it worth 500 [currency] is going to stay around that value, or simply just increase over time as it becomes antique - But I like the idea that we've just been taught to value gold more. x)

Actually most jewelry instantly loses about 80% of its value the moment you walk out of the store. The raw materials, even when gold, aren't worth anything like what you pay for the craftsmanship of buying a new piece of jewelry. Unless as you say it becomes an antique, but that requires it competing against all surviving pieces from the same time period and usually possessing a unique trait of some sort as many would-be comic book investors are discovering after the burst of the comics bubble in the 90s.

Also diamonds are also not rare at all, but an artificial scarcity is maintained upon them by the corporation that has a monopoly on them in order to keep their value high.

[Nachtmahr]

Also diamonds are also not rare at all, but an artificial scarcity is maintained upon them by the corporation that has a monopoly on them in order to keep their value high.

Heh! Sounds like dentists in my country!

But well - It was just a guess after all. ^^ I mean, you could argue the same thing with all kinds of art - A Van Gogh is literally worth nothing in terms of raw materials, compared to their actual price. If you get some jewelry from a famous source, which is sort of what I was hinting at, rather than something that's produced en masse, but it might have been a bit vague and general. But hey, it's just a thought. ^^

I mean, gold is probably just valuable because we need something limited to base currencies on, otherwise they collapse.

[Inkidu]

Heh! Sounds like dentists in my country!

But well - It was just a guess after all. ^^ I mean, you could argue the same thing with all kinds of art - A Van Gogh is literally worth nothing in terms of raw materials, compared to their actual price. If you get some jewelry from a famous source, which is sort of what I was hinting at, rather than something that's produced en masse, but it might have been a bit vague and general. But hey, it's just a thought. ^^

I mean, gold is probably just valuable because we need something limited to base currencies on, otherwise they collapse.

I don't think there's a G20 country in the world that's still on the gold standard. I know in America the value is basically whatever it's decided on being. If someone hacked the NYSE tomorrow and made everything plummet it'd be pointless. The treasury department could just go back a day and reset the values like a restore point on a computer.

[Nachtmahr]

I don't think there's a G20 country in the world that's still on the gold standard. I know in America the value is basically whatever it's decided on being. If someone hacked the NYSE tomorrow and made everything plummet it'd be pointless. The treasury department could just go back a day and reset the values like a restore point on a computer.

Well, like I said: I'm not claiming that I know what the answer is - It's just what I think/thought. So far it even seems that the theory of gold being valuable simply because we like to pretend that it is is the most viable one.

[LostInTheMist]

The value of gold is the value that the market sets it as. It's not an artificial number at all. It's what people are actually paying for gold by the ounce. In times of great instability or uncertainty, gold's value increases significantly, because even if the government collapses and all currencies implode, gold will still be there, the idea being that the gold standard could be set, no matter what happened to the dollar/euro/pound/lira/whatever. So the more worried people are about the future, the more they're willing to pay for a currency that will still be valuable whatever may happen in the future. In 2008, even when the stock market plummeted, the value of gold rose sharply, steadily, something like tripling in value between 2008 and 2012. I'm sure everyone remembers that in early 2008, there was a very real fear that we were headed for another Great Depression.

Oh, also, random fact. There are 12 ounces in a pound of gold, not 16. So an ounce of gold weighs more than an ounce of feathers, though a pound of each weighs the same. (You can use that as a double trick question.)

[Oniya]

Oh, also, random fact. There are 12 ounces in a pound of gold, not 16. So an ounce of gold weighs more than an ounce of feathers, though a pound of each weighs the same. (You can use that as a double trick question.)

This is because gold is measured in Troy ounces and feathers are measured in avoirdupois ounces.  Troy ounces are also called 'apothecary' ounces.

[Lrrr]

Oh, also, random fact. There are 12 ounces in a pound of gold, not 16. So an ounce of gold weighs more than an ounce of feathers, though a pound of each weighs the same. (You can use that as a double trick question.)

According to the big, big book (just teasing, it's a URL) of unit conversions:

1 pound = 14.583333333 troy ounces
1 troy pound = 0.82285714286 pounds
1 troy pound = 12.000000000 troy ounces

So, actually, a pound of each doesn't weigh the same if you're using troy pounds for the gold and pounds for the feathers.

That's what you get when you approve engineers as members of a website. ::)

[DarknessBorne]

I'd say gold has retained its value because (in no particular order):

1) It's bright and shiny
2) It's (almost) infinitely divisible, and can be readily poured into a fixed volume
3) It's durable and resilient
4) You can pack a lot into a small space
5) They're not making any more of the stuff (well, it can be mined, but this only adds a tiny bit at a time to supplies, year over year)
6) There's no technology on the horizon that would enable gold to be made from anything else at a cost that would even remotely make sense
7) Because almost everyone agrees it has value
8) Tradition

[Oniya]

8) Tradition

* Oniya now has Topol dancing on her head. 

[Deamonbane]

[TaintedAndDelish]

The value of gold is the value that the market sets it as. It's not an artificial number at all. It's what people are actually paying for gold by the ounce. In times of great instability or uncertainty, gold's value increases significantly, because even if the government collapses and all currencies implode, gold will still be there, the idea being that the gold standard could be set, no matter what happened to the dollar/euro/pound/lira/whatever. So the more worried people are about the future, the more they're willing to pay for a currency that will still be valuable whatever may happen in the future. In 2008, even when the stock market plummeted, the value of gold rose sharply, steadily, something like tripling in value between 2008 and 2012. I'm sure everyone remembers that in early 2008, there was a very real fear that we were headed for another Great Depression.

So then there's a balance between gold being in a fairly small but limited supply and in people deciding to attribute value to it.

The second part of what I was saying was, does this then mean that other things that are limited in supply and thus difficult to "dilute" could also be used as a currency? I think paper money is an example of this - so long as its difficult to counterfeit and thus dilute the supply and hence reduce its value.

From here, I wonder if its possible to do the same with other assets and become wealthy. An example of which would be filing for a copyright on an invention. If the invention is good and the copyright gives its owner a claim to the use of that idea, then the copyright has value. In a way, this would be kind of like creating wealth. Owning property in an area where there is a demand to build would be another example. That deed would have value much like money does, and its value might be tweaked by making the land more desirable to builders ie. by advertising, creating a rumour that others are planning on building close to it, etc..

[Aeons]

I'd say gold has retained its value because (in no particular order):

1) It's bright and shiny
2) It's (almost) infinitely divisible, and can be readily poured into a fixed volume
3) It's durable and resilient
4) You can pack a lot into a small space
5) They're not making any more of the stuff (well, it can be mined, but this only adds a tiny bit at a time to supplies, year over year)
6) There's no technology on the horizon that would enable gold to be made from anything else at a cost that would even remotely make sense
7) Because almost everyone agrees it has value
8) Tradition

I may be repeating some things that have alrady been said but this topic interests me, enough so that I took an independent course on this subject last year, studying "essential nonessentials."

This list sums it up pretty well.  Gold is unusual in being nonreactive, so that all the gold ever mined basically still exists somewhere right now.  In addition, it is not particularly useful.  It's too soft to do much of anything that's not decorative with it, so it is not being used up in practical things.  Gold is difficult to get, it has to be mined, but is distributed fairly well over the entire earth, meaning that all cultures had some exposure to it. 

I think gold gained early fame because of the fact that it does not react, and therefore does not tarnish.  This associated it with eternity, and so people tended to associate it with divinity and religious things, rulers sought it out to connect themselves to the divine.  It therefore became associated with a sort of privileged prestige, that as the world democratized everyone wanted a part of.

When gold became a form of currency that pretty much decided its future.  It's interesting to imagine what would have happened if people had settled on another metal for this.  Gold retained value in Asia despite not being used as metal, but this was driven by a very privileged ruling class that hoarded it for that prestige value.  However, the value of gold and then the finding of gigantic amounts of it in the Americas led to a huge boom that coincided with the increasing use of it as metal, so everything remained in sync.  If Asia had rejected gold and silver, things would have happened very differently, perhaps we would not have mined so much gold and its value would still remain high.

[Inkidu]

Another thing about gold is that it's damn near indestructible. Short of an atomic blast it won't go anywhere, it remains gold.