The History of Gold
Gold has been part of human affairs for millennia. The earliest suspected human use dates back to 40,000BC where fossil experts discovered traces in Palaeolithic caves in Spain. Fast-forward to approximately 3,000BC and evidence exists of gold artifacts in Egypt, the Levant, the Balkans and Bulgaria as nascent smelting technology developed.
It is clear to see why there was such an early attraction to the yellow metal. First of all, gold is one of the noblest of the noble metals. This means that it is resistant to oxidation and corrosion in moist air. Aesthetically, gold keeps its form and colour in normal conditions making it perfect for jewellery and other creative art. Its malleability is unsurpassed by any other metal making it the perfect element for a multitude of enterprises. It’s beauty to the eye and relative scarcity have endured it to our species to this very day.
In myth and religion gold has always been identified as the peak, or the apex of perfection. Whether it was Jason and the Argonauts searching for the Golden Fleece, as a gift to the baby Jesus, Midas and his golden touch, the legend of Eldorado, golden Egyptian funerary masks for Pharaohs, or the Incan belief that gold was the beads of sweat of the sun, the human fascination for gold transcends time and civilisations unknown to one another. They all revered the yellow metal above all else. This historical fascination with gold is an intrinsic part of our universal human story and is part of the reason it remains so today.
As trade advanced gold developed a use beyond art and displays of wealth. Merchants needed a standardised method to value products and to exchange products for payment. The rarity and nobility of the metal led to its use as currency in Lydia in 610BC and also China. Gold coins used for trade had seals stamped on them, indicating origin. Using Gold as a currency would eventually be picked up by people across the world making it one of the first ever global currencies.
During the 19th and early 20th century, the international Gold standard was adopted worldwide. This is a financial system where a country’s currency (paper or fiat money) has a specific value that is directly proportional to the amount of Gold held in a national central bank. Paper currency worth X could be exchanged at the bank for an equivalent amount of physical gold. Although this system was abandoned, several countries still hold significant gold reserves. The United States, for example, holds the largest Gold reserves with over 8,000 tons.
Throughout history, gold has been a physical commodity that has perennially been in short supply, and its value over the long term has increased. Gold is considered a stable, secure long-term, safe-haven investment especially in times of uncertainty.
The metal remains a key part of culture everywhere. At the Olympics first prize is always a gold medal. Past periods of prosperity are referred to as the “Golden years”. Movie awards are gold. Even the enemy of James Bond, Goldfinger, was fascinated with this most precious of metals. The list of examples is almost endless and shows how so many different cultures prize gold so highly.
Gold’s Intrinsic Value
On a long-term perspective gold’s long-term popularity has rarely waned. The primary consumer is the jewellery industry, which accounts for close to 50% of all gold produced. A further 40% is in the form of investments like bullion, Gold coins, and companies investing in the metal on their client’s behalf. The remaining 10% is used for industrial purposes.
Another factor that contributes to the intrinsic value of gold is its limited supply. It is finite. Estimates suggest the gold that can be economically mined today is roughly about 54,000 metric tons. Despite the Alchemists’ best efforts, the only way to obtain new gold is to mine it. And as mines become depleted, the remaining deposits elsewhere are far more costly to extract.
Hedge Against Inflation
Gold has an enviable track record of being one of the most popular and reliable inflation hedges. Since its discovery, there have been thousands of human-made currencies. Gold has outlasted them all. This is because of the repeated tendency by governments, empires and central banks to debase their currencies in order to finance spending, or to pay back debt, or to inflate their way out of debt. This increases the money supply thereby increasing the gold price. As more money is printed the value of that money relative to non-cash assets goes down. Investors flock to something is real, tangible and holds universal appeal. In inflation gets out of control, hyperinflation can occur rendering the currency almost worthless, and thus useless as a medium of exchange or store of value. Gold’s long-term history shows it has both and thus is the true protector of wealth versus inflation.
Gold is an asset that appreciates in value when there is inflation. Holders and buyers of Gold have more faith in the yellow metal than they do in governments, which almost without fail over the long-term, will usually, eventually debase their own currencies. This is especially true in our present time and thus we see the Gold price making new highs.
Liquidity of Gold
Gold, as an always in-demand commodity, is highly liquid. This property of gold to be easily sold in times of emergencies makes it a reliable safe-haven asset. It is an alternative to traditional investments like real estate, stocks, and bonds because of its liquidity. This is especially true in times of economic crises when these traditional assets are more correlated with the economic performance. Gold is probably the sole exception to this rule usually outperforming other assets in times of crisis.
Gold has specific qualities that make it a valuable financial asset. Even its physical traits, like the fact it does not rust or corrode, making it a dependable ally in your investment portfolio. All these factors together make the metal an asset that consistently demonstrates its uncorrelated value over long periods.
· is rare.
· is finite.
· is liquid in the financial sense.
· cannot be created.
· for millennia and across civilisations has always been highly sought after and prize.
· is embedded in human history, religion and myth and within culture.
· has outlasted or outdates every religion, political doctrine or philosophy, every empire and alliance, every nation and treaty, and everybody.
· Chemical Symbol: Au
· Atomic Number: 79
· Amount Above Ground as of 2019: 197,576 tonnes
· Approximate Value Above Ground at 2020 prices: USD11Trillion
· Gold Consumption: 50% Jewellery, 40% Investments, 10% Industry