Believe it or not, fish used to be used as a currency. So have seashells, salt, tea, cigarettes, rocks and all sorts of common and rare items throughout the history of mankind. But there is only one commodity that has stood the test of time and been recognized as valuable for millennia- gold.
Gold would not necessarily seem a good candidate to hold value from generation to generation. It is the softest and most bendable metal, making it useless for any kind of practical uses. Things like silverware, jewelry, and trophies generally can’t be made of 100% gold- they must be alloyed with other, stronger metals.
Gold’s main chemical strength is that it doesn’t react with other substances, and it doesn’t tarnish, unlike its main competitor, silver. This purity has made gold the choice of kings and conquerors throughout history. Things made of gold are likely to look just as beautiful in 1000 years as they do today.
Gold is rare, but not so rare that it can’t be found and mined with some effort. It hits the sweet spot for mankind that it’s just rare enough that only the wealthy of society can own it and feel special. If it were too commonplace, it would become worthless for conveying value.
History would no doubt have looked very different had gold not existed. This ability of gold to concentrate value and rewards those who can find it drove much of modern exploration. Christopher Columbus, and many explorers after him, were in search of gold more than anything else, as gold could bring immediate fortune back home and finance future expeditions. European explorers talked of the 3 G’s that drove their quests, God, Glory and Gold.
For a time, gold was at the center of world economies. Currencies had to be backed by reserves of gold that were held by the government. The famous depository at Fort Knox, Kentucky was where our gold was sent to back up the dollars that were printed by the government. The gold standard, as this system was called, was gradually left behind in the 20th century, and now money is only backed by the faith of those who use it. (Some believe the Wizard of Oz books were an allegory about the gold standard)
Today, gold has many competitors that can signify wealth and value. With virtual money outnumbering paper currency, there is little place for gold in our economic system, except as a fallback.
This is where things get interesting. Gold is now traded on commodity markets and its values are closely watched. In the past fifty years, gold prices have varied from as low as $200 per ounce to as high as $2,000. Since gold has such little value beyond what we give it, this difference can only be ascribed to anxiety about the value of everything else- stocks, bonds, real estate and cash. In bad times, the price of gold goes up, as people give up on the stock market and look for “safe” places to put their cash.
In good times, the price of gold crashes back to earth, and it has proven to be a poor investment in the long run. Gold prices are volatile, and it’s not a good place to put your money unless the economy is about to crash. Gold will always be exchangeable for goods and services, unlike more risky investments like Beanie Babies, Bitcoins, or Netflix stock.
Gold prices skyrocketed in 2008 with the big recession and have never quite recovered. Prices remain historically high, at above $1500 an ounce as I write this, which doesn’t give me too much confidence in where things are headed. We shall see.
