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Author Topic: Why is gold so valuable?  (Read 5904 times)

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Online Oniya

Re: Why is gold so valuable?
« Reply #50 on: January 26, 2015, 04:58:02 PM »
8) Tradition

* Oniya now has Topol dancing on her head. 

Offline Deamonbane

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Re: Why is gold so valuable?
« Reply #51 on: January 27, 2015, 01:51:07 PM »

Offline TaintedAndDelishTopic starter

Re: Why is gold so valuable?
« Reply #52 on: March 02, 2015, 07:14:49 PM »
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..

Offline Aeons

Re: Why is gold so valuable?
« Reply #53 on: March 03, 2015, 11:35:19 AM »
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.

Offline Inkidu

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Re: Why is gold so valuable?
« Reply #54 on: March 06, 2015, 11:54:59 AM »
Another thing about gold is that it's damn near indestructible. Short of an atomic blast it won't go anywhere, it remains gold.