Why Does Gold Have Value? (Explained)

Have you ever wondered why gold is so valuable? It is a question that has been asked throughout history, and the answer is not completely clear. Some say that it is because gold is rare, some say it is because humans are naturally attracted to it, and others say it is because gold has a long history of being used as currency. 

Gold is abundant enough that coins can be created, but also rare enough so that it can only be produced selectively. It has a long history and financial reasons to support its value. However, psychological and even spiritual reasons may be why humans value gold.

This article will leave gold nuggets of wisdom that will help you understand exactly why gold is valuable. Get ready because it may change your perspectives on this shiny yellow metal rock.

Why is gold so valuable to humans?

Gold is durable, meaning it does not corrode and is not affected by most chemicals. This means it can be stored as a valuable item. The scarce supply also helps support the economic demand for the commodity. Lastly, gold is malleable, meaning it can be turned into thin sheets or wires without breaking. 

This allows for practical uses such as in electronics and jewelry. Robert T. Kiyosaki (author of Rich Dad Poor Dad) has described gold as 'god's money'. This is because gold was created by the universe. He compares this to 'government money' as it is printed by central banks and governing institutions. 

Make sure to keep reading because we will go into depth about the reasons why humans are infatuated with this shiny yellow metal.

Humans are physically and emotionally drawn to it, partly because different societies have placed a tremendous amount of value on gold. Through history and human psychology, gold has become a very valuable commodity.

Why is gold more valuable than silver?

The answer to this question can be found by looking at the properties of each element. Gold is rarer than silver, but both elements are found in the Earth's crust. Gold is more durable than silver and does not corrode. 

Lastly, gold is more malleable than silver, meaning it can be turned into coins or jewelry without much difficulty. All of these factors contribute to the value of gold.

Silver on the other hand was replaced as a currency because it is more abundant than gold and therefore less valuable. It is also not as durable as gold, meaning it will corrode over time making it a poor store of value. 

Both gold and silver are commodities and are often classified in that same asset class. However, culture has deemed gold to be more valuable than silver and this is reflected in prices.

Why was gold valuable in ancient times

Each culture throughout history has its own reasons why they value gold. As you will learn, some of these reasons are practical, while others are more spiritual. Some were for economic reasons and others were for power accumulation.

How did ancient civilizations use gold?

Gold was first used as jewelry and ornamentation. It wasn't until around 560 B.C. that people began to use gold for other purposes such as trading and currency. The Lydians were the first to create coins out of gold that had set weights. This became the standard form of currency in ancient times. 

King Croesus

Croesus was the last king of Lydia. He was so wealthy that his name became synonymous with wealth and riches. Croesus was said to have so much gold that he could literally pave the streets with it.

While Croesus was an incredibly wealthy man, his story has a tragic ending. Croesus was defeated in battle and taken prisoner by the Persian king Cyrus. Cyrus had Croesus killed, despite his pleas for mercy.

Croesus' story is a cautionary tale about the dangers of being too trusting. Croesus trusted in his riches and thought that they would protect him from harm. But in the end, his wealth was not enough to save him.

The moral of this golden story is that no matter how much gold and wealth you have, you will still have to protect it. This asset can quickly turn into both a financial and emotional liability. Gold can symbolize power, but that symbol can be a signal for thieves and other power-hungry individuals.

The Egyptians and The Skin of The Gods

Another way gold was used in ancient civilizations was in foods and drinks. The Egyptians believed that gold had special properties that could heal the body and make one immortal. Gold was also used in religious ceremonies. The ancient Egyptians regarded gold to be the flesh of the sun god Ra. This is where the saying 'gold comes from the skin of the gods' originated from.

The Incas & Gold Production

In ancient times, the Incas were masters of gold production. They had extensive mines in modern-day Peru and extracted large quantities of the metal. In fact, at the height of their power, the Incas produced more gold than any other civilization in history.

The value that the Incas placed on gold was evident in its prominent use in religious ceremonies. Gold was often used to fashion objects that represented gods or goddesses. It was also believed that gold had mystical powers and could protect against evil spirits. As a result, many Inca rulers were buried with large amounts of gold.

Eventually, the value of the gold captured the attention of Francisco Pizarro. In 1532, Pizarro led a Spanish expedition that conquered the Inca Empire. The Spaniards looted the Inca treasury and took massive amounts of gold back to Europe.

This was a turning point in the history of gold. For centuries, it had been largely unknown in the Western world. But after the fall of the Incas, gold became an important commodity in international trade. It was also used to finance wars and build empires.

The fall of the Inca Empire marked the end of large-scale gold production in Peru. However, the country remains an important source of gold today. Peru remains on the list of the top ten gold producers in the world.

The Richest Man In Babylon & Gold

In ancient times, gold was often used as a symbol of wealth. This is reflected in the story of The Richest Man in Babylon. The story is set in the ancient city of Babylon and tells the tale of a man who becomes rich through his wisdom and understanding of money.

In the story, gold is seen as a means of preserving wealth. The main character recommends that people save at least ten percent of their income and invest it in gold. He also advises against borrowing money, as this can lead to financial ruin.

While the story is set in ancient times, its message is still relevant today. Gold remains an important asset for preserving wealth. It is also a valuable commodity that can be used to finance projects and spur economic growth.

This story set in ancient times is commonly read by those that are looking to become more financially literate. The use of 'gold' instead of money and currency in the literature has led some to believe that this is an allegory for investing in gold.

While the story does use gold as a metaphor for wealth, it is not an allegory for investing in the metal. Instead, it is a cautionary tale about the dangers of borrowing money and living beyond one's means.

The Alchemists

Alchemists throughout history have been trying to find a way to turn lead into gold. Alchemy was a serious career pursuit in ancient times, similar to modern-day chemists. Some famous historical figures that studied alchemy were Isaac Newton and Leonardo da Vinci.

While alchemy may seem like a fool's errand, it has some scientific merit. 

The transmutation of lead into gold is possible, but it requires a massive amount of energy. This process also results in the production of radioactive isotopes, which is why it is not feasible on a large scale.

Alchemy may seem like an ancient practice that is no longer relevant, but it has some modern applications. Scientists today are using the inspiration of alchemy to create new materials and understand the universe at a fundamental level.

King Midas' Golden Touch

The Midas touch is a metaphor for having the ability to turn anything into gold. This phrase is derived from the Greek myth of King Midas. In the story, Midas is granted the power to turn anything he touches into gold. At first, Midas is thrilled with his newfound ability. He turns his clothes, food, and even his daughter into gold.

But Midas soon realizes that his power is a curse. He can no longer touch or enjoy his possessions. He is even forced to live in isolation, as he can no longer interact with other people. In the end, Midas decides to give up his power and returns to normal life.

While the story of King Midas is a myth, it contains an important message about the dangers of greed. Midas illustrates that having too much of anything, even something as valuable as gold can lead to misery. This ancient myth should not be ignored in your pursuit of financial freedom. Being able to turn your Midas touch off and on is an essential skill to have as you build your wealth.

Lessons From The Golden Ages

Gold has been prized by cultures around the world for centuries. Today, gold remains one of the most valuable metals in the world. Its value is derived from its rarity, practicality, and aesthetic appeal. Gold is also a symbol of wealth and power. For these reasons, gold will likely continue to be prized by people around the globe for many decades to come.

Gold is no longer used in currency or coinage. However, it remains an important asset for individuals and central banks around the world. By understanding the history of gold and how it relates to our current financial system, we can improve upon our financial knowledge.

Why are humans attracted to gold

As mentioned earlier, there are some economic and practical reasons why humans value gold. However, there are also interesting psychological and evolutionary reasons why humans are attracted to gold. Let's dig a little deeper.

Greed & Fear

Gold is often bought because it is believed it will explode in value or they buy it because they are afraid of inflation. Both influences are caused by emotion. There can be strategic and intelligent approaches to buying for this reason, but like with any market, bubbles can occur.

Proven By History

In the case of gold, there is also a long history of it being used as a form of currency. This means that some view gold as a way to preserve their wealth. Wars have been fought over it. Empires collapsed due to not having it. Egyptians drank it for spiritual and health reasons. The long history acts as social proof for many that gold is valuable.

If our ancestors valued it, why shouldn't we? Social proof influences us, humans, on a deep psychological level because we are tribal in nature. This means that we are attracted to things that our tribe (or in this case, society) values. By owning gold, we feel like we are part of a larger group that has valued it for centuries.

Psychological Scarcity

Gold is mined out of the ground and it can’t be created like fiat currency. The world is slowly running out of gold and that will likely increase the price. This is supply and demand. When the supply is low, the only other factor you can control is demand, which has remained high for centuries.

For example, humans hunted wooly mammoths to extinction. Each year there was less and less. This influenced hunters to desire it more as they became aware that they may never have the chance to enjoy the fatty meat. Not knowing that their desire takes from the total supply, leaving less available in the hunting market. This in turn just makes the item even more valuable and rare.

The top sales professionals know this and gold has a unique built-in emotional scarcity that works on our subconscious. Humans are also attracted to rare things and gold is one of the rarest elements on earth.

It's Our Human Nature

From an evolutionary perspective, some scientists believe that humans are attracted to gold because it resembles the color of the sun. The sun is essential for life, so it makes sense that early humans would be drawn to something that looked like the source of all life.

Allows For Creative Reality

Gold is also a very malleable metal. This means it can be easily turned into coins or jewelry. For early humans, this would have been a very useful property. To create art, whether it be in buildings, jewelry, or other objects, gold was an excellent medium.

Humans have always been searching for ways of expression, starting from cave drawings to modern-day digital art. Gold has been a luxury material that has been used for self-expression.

This creative collaboration with the material can even add to the gold itself. For example, a gold necklace made by a famous jeweler would be worth more than just the value of the gold.

Status Symbol

Gold is often seen as a symbol of power. This is because, in the past, only those with a lot of wealth could afford to own gold. Today, gold is still seen as a symbol of power and wealth. Even though anyone can buy gold, it is still seen as a sign of success.

It's Culturally Significant

Similar to power and status, gold also resembles achievement. This can be seen in the Olympics with winners receiving gold medals. This puts the metal on a pedestal above all other metals.

This can be seen in the business world as well as in schools. Reviews for products are determined by how many gold stars they received. Children and programmed to value gold as some teachers reward a student's behavior with gold stars.

Alchemic Philosophies

The story of the alchemist is commonly explained as a mysterious person who can turn lead into gold. This was seen as the ultimate achievement. To this day, the term "alchemy" is still used to describe processes that turn one thing into another, usually of greater value.

Humans communicate more effectively through stories, and the story of the alchemist has been passed on through generations in multiple cultures. However, what most mainstream alchemists miss is the spiritual teachings of this practice.

In short, alchemy is a way to describe the spiritual process of enlightenment or achieving self-actualization. It's about turning the old and undesirable 'lead' into the new and valuable 'gold'. The story uses gold to touch base on a deep desire of humans to reach the top of the pyramid of the hierarchy of needs.

The alchemic philosophy turns the practitioner into 'gold' creating artists. It does not matter if they give away all their wealth to charity, or if it is stolen from them. Since they have gone through their alchemic transformation, they can always find ways to create more wealth.

Is The Value of Gold Irrational?

Warren Buffet, the famous investor does not value gold. In one of Buffett’s most memorable quotes about the shinny metal he states that "It has no utility, it gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it."

The value perception of gold for Warren Buffet is low but the quote also shows that some people do value it. They value it enough to go through the entire process of digging deep and protecting it.

The Berkshire Hathaway founder isn't wrong about his practical assessment of gold, but he is missing the psychological influence it has on human nature. In the culture of business investing, gold plays little to no role, but in other avenues of life and personal perspectives, gold can be worth more than Berkshire Hathaway itself.

Gold’s value is more than monetary

For spiritual practices, a piece of gold can anchor someone to their alchemic philosophies. Striving for achievement and success can be seen as a personal 'holy grail'. The value of gold then is much more than just a practical element. It's an element that can drive humans to change themselves and the world around them for the better.

If wearing gold jewelry helps you get accepted into a certain social class or gold-painted walls in your home make you feel more powerful, then the value of gold is very real to you. These status symbols can help with networking too. Some mentors may teach you how to have the Midas touch, but only if you look like golden royalty.

It is said that "All that glitters is not gold" but to some, glittering objects are worth more than just the value of the physical gold itself.

When it comes down to it, gold is only worth what humans assign to it. Whether that be Warren Buffet's perspective of zero value or the spiritual practitioner's view of worthiness, gold is a representation of human values. And as long as humans assign value to gold, it will always have a place in society.

Richard Nixon and The Gold Standard: From Money To Currency

There is no doubt that inflation will continue. This is because there is no cap on the currency. Ever since Richard Nixon took the U.S. off the gold standard, there has been a disconnect between the value of paper money and actual commodities.

After this decision, US dollars became currency and not 'sound money'. The difference between currency and sound money is that currency can be created at any time out of thin air. Sound money, on the other hand, is backed by a commodity such as gold.

The US government can print as much money as they want and this causes inflation. Inflation is when the prices of goods and services rise due to currency debasement. The reason for most poverty in first-world nations is a combination of the fiat system, a lack of financial literacy and not owning assets.

Debasing the value of fiat dollars by creating more supply lowers purchasing power significantly. In 1971, a gallon of gas cost $0.36. This is approx. $2.52 in 2022. Sound money such as gold prevents this from happening because the supply cannot be manipulated by governing institutions. Most 'gold bugs' understand this, and that is one of the reasons they invest in gold.

'Fiat currency always eventually returns to its intrinsic value-zero.' 

- Voltaire

The decreasing value of paper money is one of the reasons why some people invest in gold. They see it as a way to hedge against inflation. However, there are other ways to hedge against inflation such as investing in real estate or stocks. So, the question is, why do some people prefer to invest in gold?

One of the reasons could be that gold has been used as a form of currency for centuries. Even though paper money is now the primary form of currency, gold still has a place in society. It is also not subject to the same volatility as stocks.

Gold is also a popular choice for investors because it is a tangible asset. You can hold gold in your hand and it is much more portable than real estate. Gold is much more tangible because you can trade it with anyone in smaller amounts. 

This benefit makes gold a good investment for people who are looking for an asset that they can hold on to in the event of an economic collapse.

It may not rise in value as much as some stocks or real estate, but it has properties that financial savvy investors look for. It is a safe investment and one that will always have value.

How rare is gold?

Gold is a relatively rare element. It is estimated that there are only about 0.004 grams of gold for every 100,000 grams of Earth’s crust. Gold is also only found in very specific types of rocks. Gold is not just rare on Earth. 

It is rare in the universe. Scientists believe that gold was formed in supernovae or massive star explosions. When a star explodes, all of the elements are thrown out into space. 

This cosmic event does not happen very often, at least not close enough to our solar system to affect the supply of gold on Earth. Gold is one of the most valuable elements in the universe because it is rare and difficult to recreate.

Reasons why gold is valuable

As you can see, gold has had a long history in human civilization. Wars were fought over it. Currency was created with it. Even today, the 'gold bugs' are accumulating it. Whether we as humans are attracted to gold for its aesthetic purposes or perceived value, there are many reasons why gold is valuable. Here are the top 10 reasons why gold is valuable.

#1 Reason why gold is valuable: Gold is rare

Gold is a scarce resource. It is not easy to find and it is not easy to produce. The world does not have an infinite supply of gold. This makes it valuable because it is not easy to find and it is not easy to produce.

Gold is scarce because it is difficult to find and extract. It takes a lot of work to mine gold. Gold miners have to go into the earth and dig deep mines to find gold veins. The process is expensive and time-consuming. 

Once the gold is mined, it takes more work to refine it. Gold is not easy to produce, which makes it valuable. It's also rare in the universe as it requires special conditions to form.

Combined with the psychological influence scarcity has on human psychology, gold's rarity makes it valuable.

#2 Reason why gold is valuable: Inflation Protection

Gold is a good investment for people who are looking to protect their wealth from inflation. Gold has been used as a form of currency for centuries and it is not subject to the same volatility as stocks. 

When the value of paper money decreases, the value of gold increases. This makes gold a good investment for people who are looking to hedge against inflation.

#3 Reason why gold is valuable: Cultural Influences

Gold has been seen as a valuable commodity for centuries. Different cultures have placed different levels of importance on gold, which has led to its value increasing over time. 

In some cultures, gold is seen as a sign of power and wealth, while in others it is seen as a way to store value. No matter the reason, gold has been seen as a valuable commodity for centuries, and its value is likely to continue to increase in the future.

#4 Reason why gold is valuable: Useful Form of Collateral

Gold is a useful form of collateral because it can be used to secure a loan. If you have gold, you can use it as collateral to get a loan. This is because gold has value and can be sold if the borrower defaults on the loan. This makes gold a good investment for people who are looking to get a loan.

This is a large reason why many nation-states hold gold reserves, as it's useful in times of crisis to act as collateral for loans. When countries get conquered, often the first place the new occupiers go to is the treasure troves of gold.

#5 Reason why gold is valuable: Utility & Application

While you can't eat gold or use it to pay your bills, it does have some practical uses. Gold is a good conductor of electricity and it is non-corrosive. This makes it valuable for electrical applications. 

Gold is also used in jewelry and dentistry because it is durable and does not tarnish. The practical applications of gold make it valuable. While it may not be useful in everyday life, gold does have some practical applications that make it valuable.

Conclusion

So, there you have it. Gold is valuable because it is rare, durable, and difficult to produce. The historic and psychological reasons also support the economic benefits of this asset. These qualities make gold an excellent store of value, popular investment, and cultural symbol.

I hope this article has helped you better understand why gold is so valuable to humans. Share this wealth of information with others and make sure to view other articles on this website before making your next investment.