Why is Gold So Valuable?

By Kent Ninomiya, eHow Contributor

Gold is valuable primarily because a lot of people believe it is. Gold's value is a cultural phenomenon. Its price is determined by a complex combination of factors but not necessarily need. Cultures that do not use gold or do not seek it do not value it. Gold is mainly an investment commodity. It is seen as a refuge from shaky currencies during tough economic times.

 History

1.          Gold has been prized throughout history. Cultures ranging from the ancient Egyptians to the Chinese to the Native Americans valued it for its beauty and unique characteristics. Gold was so treasured that the pursuit of it led to human atrocities ranging from war to colonialism to slavery. The Americas were colonized largely as a result of gold exploration. Spanish conquistador Hernan Cortez wiped out the Aztec Empire, and fellow Spaniard Francisco Pizarro destroyed the Inca Empire while plundering gold. Many human migrations, like the 1849 "gold rush" to California, were a direct result of gold discoveries. So many people moved to the California Territory that it gained statehood decades earlier than surrounding territories. Most paper money around the world was based on the gold standard until the 20th century. The Great Depression prompted most countries to leave the gold standard by 1932.

Features

2.          Gold is valuable because it has unique properties. It is a soft metal so it is easy to forge but incredibly strong. It does not tarnish, rust or corrode. Gold maintains an aesthetically pleasing luster over time. All these factors enticed cultures all over the world to treasure gold for artwork, jewelry and coinage. Gold is an element. On the periodic table it has atomic number 79 and its symbol is Au. It conducts heat and electricity well. That makes gold useful for electronics and chemical applications. Virtually every computer in the world has some gold in it.

Function

3.          Gold is actively traded on world markets. It is treated as a commodity with the actual metal never changing hands. It is seen as a refuge for investments during tough economic times. Investors believe that gold will always hold its value while currencies and stocks will not. Gold is valued in jewelry and artwork. It does not cause allergic reactions and requires no maintenance to sparkle and look great. Gold is also treasured in coinage and bullion. Gold coins made by ancient civilizations still survive today and are prized by collectors.

Misconceptions

4.          There are misconceptions about how the price of gold is determined. It is not only about supply and demand. In fact, in 1999 and 2000 there was a high demand for gold jewelry but the price of gold remained low. Gold's value is influenced more by world currency markets. The price of gold is closely linked to the confidence in the U.S. dollar. The value of gold rises as confidence in the dollar falls. There is also a misconception about the definition of "pure gold." Nearly all gold in private ownership is an alloy, meaning it is partially gold. It is commonly combined with silver or copper to make it hard enough to handle. Eighteen-karat gold is only 75 percent gold. Fourteen-karat gold is less than 60 percent gold.

Significance

5.          Gold is also valuable because of its rarity. It is estimated that all the gold in the world would form a cube measuring just 19 meters on each side. That is a remarkably small amount considering the size of the Earth. More gold is mined all the time but demand also increases as there are more people to desire it.