Why is Gold Valuable?
At a Glance:
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- Gold is valuable because of its rarity, usefulness, and capacity as a safe haven asset.
- Gold’s durability and intrinsic value made it an effective currency throughout history.
- On this page, you’ll learn what gives gold value – as well as the history of gold as an investment.
Why Is Gold Valuable, Anyway?
In 2024, gold prices have been high for as long as most investors can remember. It has become the new normal for investors to expect gold to be worth at least $1,500 per troy ounce – and usually more. Believe it or not, gold has not always been quite so expensive. For much of human history, gold was far cheaper than it is now.
Even during periods when gold was cheaper than it is today, the precious metal was still considered an extraordinarily valuable asset. For most of human history, gold has been a sign of wealth and financial stability.
So why is gold valuable, anyway? Gold is valuable because of its rarity, usefulness, capacity as an investment, and beauty. Because of gold’s durability and scarcity, it has always been an exceptionally perfect metal to use as currency. Even after the collapse of the global gold standard, gold’s usefulness as a safe haven asset allowed it to remain one of humanity’s most valuable assets.
This page will walk readers through the entire history of gold as an asset to answer one pivotal question: why do we love gold so much?
Gold Throughout History – Humanity’s Oldest Obsession
Throughout history, gold’s usefulness and beauty have made it a consistently valuable asset in nearly every developed civilization. Why is gold valuable – and why has it been historically valuable? While gold’s earliest applications came in the form of jewelry and artwork, gold’s modern value comes from its use as currency – and as a safe haven asset capable of surviving even the roughest economic climates.
The Earliest Gold – Jewelry and Artwork
In early human history, gold was primarily found in jewelry, artwork, and religious idols. According to experts, gold was first used to create decorative objects. Archeological dig sites dating back to as early as 4,000 BC suggest that early humans made jewelry, idols for religious worship, and other decorations using unrefined gold.
In a sense, the modern gold jewelry industry has its roots over 6,000 years ago! Even in some of humanity’s very first civilizations, the natural beauty and luster of gold made it clear that the precious metal was valuable. Archeologists believe that the very first discoveries of usable gold came from streams and rivers in the region now known as Eastern Europe.
Gold’s story hardly ended with the golden artifacts that decorated religious spaces in 4,000 BC, though. It wasn’t until nearly 2,500 years later in Ancient Egypt that gold became the instantly recognizable medium of exchange that we know today.
Historical Use As Currency
Around 1,500 BC, Egypt was experiencing an unprecedented boom. New trade relations with Nubia allowed Egyptians a steady supply of gold bullion. Over time, gold became a standard medium of exchange in Ancient Egypt. The earliest Ancient Egyptian Gold Coins were called Shekels and were made with electrum, a natural alloy of gold and silver.
The use of gold for coinage and currency in the region never really ended. In the 600s BCE, the Kingdom of Lydia produced what historians consider to be the first standardized gold coin. Like the Ancient Egyptian gold coins, Lydian coins were produced using electrum. For the next 2,500 years, gold continued to be the standard for currencies around the world.
Post-WW2: The Rise of the Global Gold Market
As readers already know, gold is not often used as a legitimate currency today. The collapse of the gold standard, a monetary system where paper currencies are backed by actual gold bullion, was a slow process that started in the early 1930s. Under President Roosevelt, the United States suspended the gold standard in the United States. Over time, other nations followed suit.
A series of economic policy reforms by President Richard Nixon known collectively as the “Nixon Shock” officially ended the gold standard for the United States, ushering in a new era dominated by fiat currencies. Why is gold valuable in the 21st century? Gold’s declining role as a currency has made the precious metal a more popular speculatory commodity, which plays a major role in giving it its high price tag.
Responding to the suspension of the gold standard, gold prices shot up in the decades that followed. This led to some of the highest gold prices in history. With gold no longer pegged to international currencies, the gold market exploded as investors realized the potential hidden in the yellowish precious metal. Generally, historians agree that gold took off as a commodity.
Gold As a Status Symbol
Throughout history, gold has always been a symbol of wealth and prestige. This was true in the time of the Ancient Egyptians – and it is still true today. Because of gold’s rarity, historical value, and beauty, possessing gold is a way for investors to display their wealth and financial stability. In Ancient times, wealthy Kings and powerful military leaders would display gold artifacts and trade in rare gold coins. In the 21st century, skyrocketing gold prices make it one of the most exclusive investments on the market.
Why is Gold So Valuable? 3 Main Reasons Behind Gold’s Value
Clearly, gold has almost always been one of humanity’s biggest obsessions. But why is gold valuable? Gold is valuable for three main reasons:
- Gold is both rare and useful
- Gold is a safe haven asset
- Gold is beautiful
In a time where it is increasingly difficult to trust the consistency of fiat currencies, gold presents itself as a rare and beautiful asset with the capacity to thrive in difficult economic climates. In other words, gold is valuable because it is useful in a number of ways.
1. Gold Is Both Rare and Useful
Everybody knows that gold is rare. The precious metal is practically synonymous with scarcity and exclusivity. What makes gold so valuable is its unique combination of rarity and usefulness. Some objects are extremely rare but not particularly useful. Think of moon rocks as an example. We live on Earth, so rocks from the moon are hard to come by. But because moon rocks are not useful aside from their collectability, they are not particularly valuable.
Gold is a different story. Throughout history, gold has been considered both exceptionally rare and uniquely useful in a variety of different ways. Investors like to call objects that are both rare and in high-demand scarce.
How Rare is Gold?
How rare is gold, really? Gold is found in the Earth’s crust at a rate of about .0013 parts per million. This makes gold one of the rarest precious metals on Earth, although it is not quite the hardest precious metal to find.
When we consider gold’s insane rarity, it is hard to imagine how so much gold ended up in the hands of Ancient Egyptians – who lacked the sophisticated mining equipment and infrastructure available to modern humans. But like the Ancient Egyptians, lucky prospectors can still find small amounts of gold in rivers and creeks.
Gold’s rarity plays a major role in determining “why is gold valuable,” but the metal wouldn’t be nearly so expensive if it was just rare. Instead, gold’s value comes from a combination of rarity and usefulness.
Gold’s Many Historical Uses
Today, most of humanity’s gold is used in jewelry and investment-grade gold coins and bars. Because of the sheer size of these sectors, it is easy to forget that gold is also integral to hundreds of other major industries. In fact, gold is a pivotal resource used in several products that humanity uses every day.
Just a few of gold’s uses in the 21st century include:
- Dentistry
- Aerospace engineering
- Electronics
Global demand for gold continues to grow in nearly every sector. Gold is valuable because it is both extremely rare and exceptionally useful.
2. Gold Is a Safe Haven Asset
Not all of gold’s value comes from its industrial usefulness. Gold plays an important role in the modern investment portfolio. Because gold is a safe haven asset, the precious metal is constantly in-demand from investors who want to shield their assets from inflation, recession, and geopolitical uncertainty.
Just as we discussed earlier, gold pivoted from being primarily a useful commodity to a highly valuable asset sometime during the 20th century. Today, much of the world’s global demand for gold comes not from industry – but from investors. Why is gold valuable today? Gold is considered an excellent investment because of its steady performance during difficult economic climates.
Investor Lesson: What Is a Safe Haven Asset?
A safe haven asset is an investment that tends to perform well during traditionally bearish markets. When troubling economic conditions like high inflation or stock market crashes become commonplace, investors turn to assets with intrinsic value. Common safe haven assets include real estate, foreign currencies, and precious metals like gold.
Safe haven assets do not always perform better than traditional investments during difficult economic climates. Some safe haven assets may also become less valuable during recession or economic downturn, as demand for pricy commodities decreases when consumers no longer have access to disposable income to invest.
For the most part, though, objects with intrinsic value have historically fared well during economic crises. Part of what makes gold so valuable is its status as a safe haven asset, which helps increase demand for the precious metal leading up to – and during – troubling financial periods.
What Makes Gold a Safe Haven Asset?
Why is gold a safe haven asset? Gold is a safe haven asset because of its historical performance during uncertain economic times and because of its intrinsic value.
Throughout the past century, gold has performed exceptionally well during nearly every major economic depression. Investors should also note that gold is considered an excellent investment during war and geopolitical conflict. Investors turn to safe haven assets – particularly precious metals – when they fear that geopolitical instability will harm the health of their traditional assets, including stocks, bonds, and currency.
Gold also has intrinsic value, which helps make it a better safe haven asset. During a stock market crash or a financial depression, the value of a given stock can collapse entirely. Throughout all of human history, gold has retained at least some value. This is because of gold’s intrinsic value. Intrinsic value refers to what an asset is worth at its core. Gold’s value is not dependent on the state of the general economy or the performance of a given company, so it is considered more intrinsically valuable than most other assets.
Gold’s status as a safe haven asset is an easy way to answer the question, “why is gold valuable?” Gold is valuable because it performs well during financially uncertain climates, which keeps demand for the metal higher than its supply.
3. Gold Is Beautiful!
The final reason why gold is valuable is that it is beautiful. This may seem like an oversimplification, but it really is not. When the first humans discovered gold, it was gold’s inherent shine and luster that caught their attention. Since then, gold has always been one of the most valuable precious metals on the planet.
Gold’s beauty is the reason why collectable coins, jewelry, and luxury watches are made using gold. At our core, humans love beautiful things – and gold is one of the most beautiful things on the planet.
Everybody Loves Gold – Here’s Why
Clearly, humankind has always loved gold for several reasons. Why is gold valuable? Our argument is that gold’s intrinsic value comes from a combination of its rarity and its beauty. From the Ancient Egyptians to modern America, the beautiful shine of gold is a love affair that mankind is unlikely to ever end.
Will Humans Ever Get Tired of Gold?
Why’s gold so valuable, anyway? From the very birth of mankind, gold’s beauty and usefulness as a medium of exchange have given the precious metal unprecedented value. We’ve been in love with gold for thousands of years, and that will likely never change.
In 2024, gold has shined like never before. Stay up-to-date on the latest updates in the world of precious metals by joining our email list. You’ll find a sign-up form at the bottom of this page.
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About The Author
Michael Roets
Michael Roets is a writer and journalist for Hero Bullion. His work explores precious metals news, guides, and commentary.