Why is Gold so valuable?

[Pappa]

... but that only accounts for so much of gold usage. Why is it that most gold gets hoarded? It if were that valuable as a status symbol, why isn't there a move to realise the value of hoarded gold by selling it on to "users"?

Gold is a lot more plentiful than it used to be when all of its cultural associations were made. Its status seems to have dropped a fair bit too... just look at all the cheap gold jewellry that chavs wear.

One other reason it's hoarded is because it's price is so stable compared to other investments.

[Pensioner]

Thousands of miners dig a hole in the ground in South Africa at great risk to themselves, while other men dig a hole in the ground in London. One hole is called a mine the other is called a vault. Transport gold across the world and store it another hole in the ground.

[klr]

... but that only accounts for so much of gold usage. Why is it that most gold gets hoarded? It if were that valuable as a status symbol, why isn't there a move to realise the value of hoarded gold by selling it on to "users"?

Gold is a lot more plentiful than it used to be when all of its cultural associations were made. Its status seems to have dropped a fair bit too... just look at all the cheap gold jewellry that chavs wear.

Seeing as it has become relatively rarer (given exploding global population and increasing levels of wealth), one might have predicted that its value would have risen. But as you've pointed out, the reverse seems to have happened.

One other reason it's hoarded is because it's price is so stable compared to other investments.

Possibly too stable:

http://en.wikipedia.org/wiki/Gold_as_an ... sus_stocks

In the last century, major economic crises (such as the Great Depression, World War II, the first and second oil crisis) lowered the Dow/gold ratio, an indicator of how bad a recession is and whether the outlook is deteriorating or improving, to a value well below 4. The ratio fell on February 18, 2009 to below 8.[52] During these difficult times, many investors tried to preserve their assets by investing in precious metals, most notably gold and silver.

The performance of gold bullion is often compared to stocks due to their fundamental differences. Gold is regarded by some as a store of value (without growth) whereas stocks are regarded as a return on value (i.e., growth from anticipated real price increase plus dividends). Stocks and bonds perform best in a stable political climate with strong property rights and little turmoil. The attached graph shows the value of Dow Jones Industrial Average divided by the price of an ounce of gold. Since 1800, stocks have consistently gained value in comparison to gold in part because of the stability of the American political system.[53] This appreciation has been cyclical with long periods of stock outperformance followed by long periods of gold outperformance. The Dow Industrials bottomed out a ratio of 1:1 with gold during 1980 (the end of the 1970s bear market) and proceeded to post gains throughout the 1980s and 1990s. The gold price peak of 1980 also coincided with the Soviet Union's invasion of Afghanistan and the threat of the global expansion of communism. The ratio peaked on January 14, 2000 a value of 41.3 and has fallen sharply since.

On November 30, 2005, Rick Munarriz of The Motley Fool posed the question of which represented a better investment: a share of Google or an ounce of gold. The specific comparison between these two very different investments seems to have captured the imagination of many in the investment community and is serving to crystallize the broader debate.[54][55] At the time of writing, a share of Google's stock was $405 and an ounce of gold was one day from breaking the $500 barrier, which it did December 1. On January 4, 2008 23:58 New York Time, it was reported that an ounce of gold outpaced the share price of Google by 30.77%, with gold closing at $859.19 per ounce and a share of Google closing at $657 on U.S. market exchanges. On January 24, 2008, the gold price broke the $900 mark per ounce for the first time. The price of gold topped $1,000 an ounce for the first time ever on March 13, 2008 amid recession fears in the United States.[56] Google closed 2008 at $307.65 while gold closed the year at $866. Leading into 2010, Google had doubled off that (100%), whereas gold had risen 40%.

The analysis of log-linear oscillations in the gold price dynamics for 2003–2010 conducted recently by Askar Akayev's research group has allowed them to forecast a collapse in gold prices in May – July 2011.[57] Note that the team has already forecasted correctly with a one-day accuracy the start of the collapse of the silver bubble.[1]

In his book Basic Economics, Thomas Sowell[58] argued that, in the long-term, gold does not hold its value compared to stocks and bonds:

To take an extreme example, while a dollar invested in bonds in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in stocks that same year would be worth more than half a million dollars. All this is in real terms, taking inflation into account. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just 78 cents.

Emphasis mine.

[Pappa]

... but that only accounts for so much of gold usage. Why is it that most gold gets hoarded? It if were that valuable as a status symbol, why isn't there a move to realise the value of hoarded gold by selling it on to "users"?

Gold is a lot more plentiful than it used to be when all of its cultural associations were made. Its status seems to have dropped a fair bit too... just look at all the cheap gold jewellry that chavs wear.

Seeing as it has become relatively rarer (given exploding global population and increasing levels of wealth), one might have predicted that its value would have risen. But as you've pointed out, the reverse seems to have happened.

It's economic value has increased in the past few years, but perhaps its association with the most 'common' elements of culture via all those ads for Gold By Post and the like have given it significantly lower social status. I think that's been happening for a while though, as 9ct gold sovereign rings and similar do give it a bad image. The rich are free to buy status with lots of other stuff now (including the usual gemstone favourites too).

[Bella Fortuna]

Aluminium was once considered a precious metal and was far more valuable than gold, because it wasn't found in lumps like gold could be and there was no effective way of extracting much of it. After a process was developed to produce it, its value went from about $1200 per kilogram in 1852 to around $40 per kilogram in 1859. Seems funny to think that what we wrap our leftovers in now was once considered so precious that the very rich served their guests with aluminium utensils while the less prosperous "made do" with gold.

[klr]

It's economic value has increased in the past few years, but perhaps its association with the most 'common' elements of culture via all those ads for Gold By Post and the like have given it significantly lower social status. I think that's been happening for a while though, as 9ct gold sovereign rings and similar do give it a bad image. The rich are free to buy status with lots of other stuff now (including the usual gemstone favourites too).

Cash for gold operators? We have those here in scads as well, looking to buy any amount of gold off people for cash. They are on every street and in every retail centre. Most likely playing on peoples' desperation during recessionary times, which are particularly bad here. But that's part of the problem with gold: You can't invest it. Even money sitting in a bank account earns some interest. In order to realise the value of gold, you've got to offload it, most usually at the time when it's value relative to other investments is at its most favourable, meaning you should really be trying to hold on to it.

As for the gems: Just wait until the market gets flooded with synthetic produce. De Beers can try all it likes to make people only "want" natural diamonds, but in the long run, that scam is also doomed to failure.

[Hermit]

... or the other precious metals?

For the same reason Jackson Pollock's paintings are so valuable, or any paintings that were produced by painters who died in poverty: Convince enough people of its value, and that is what it will be.

Coal sells for about 12 dollars a tonne. Imagine what would happen if coal was unavailable right now.

[charlou]

hmmm ... gold, coal, gas, petrol ...


I want a feather down quilt and fire in a humpy, by a river full of fish, with someone to cuddle and fuck.

[Geoff]

hmmm ... gold, coal, gas, petrol ...


I want a feather down quilt and fire in a humpy, by a river full of fish, with someone to cuddle and fuck.

How soon can you get here?

[.Morticia.]

it doesn't rust, it is found in a native state and thus doesn't need processing and is malleable

diamonds don't get scratched and are very very sparkly

those were the original reasons

now it's just bullshit reasons

[klr]

it doesn't rust, it is found in a native state and thus doesn't need processing and is malleable

diamonds don't get scratched and are very very sparkly

those were the original reasons

now it's just bullshit reasons

"End of thread"

[Warren Dew]

Everyone wants to make purdy things that don't tarnish. So that's why.

But with today's technologies, that's quite easy to do without using rare or expensive materials.

To the contrary: technology's continued inability to do this with less expensive materials is why gold is still used in critical electrical contacts and in some satellite applications.

[Atheist-Lite]

Everyone wants to make purdy things that don't tarnish. So that's why.

But with today's technologies, that's quite easy to do without using rare or expensive materials.

To the contrary: technology's continued inability to do this with less expensive materials is why gold is still used in critical electrical contacts and in some satellite applications.

Gold that belongs the long dead is still bright and shiney - it is a material that is always used in magic, necromancy and spells for eternal life. That's 'cos humans are fucked up in the head. Using it in electrical circuits to make 'connects' last longer is ironic really.

[klr]

Everyone wants to make purdy things that don't tarnish. So that's why.

But with today's technologies, that's quite easy to do without using rare or expensive materials.

To the contrary: technology's continued inability to do this with less expensive materials is why gold is still used in critical electrical contacts and in some satellite applications.

IIRC, only about 12% of gold is used in industrial applications. The rest is either used in jewellery or hoarded/held as a commodity. While gold is a "must use" material in some applications, there are presumably many more areas where it's an optional extra, and thus does not get used because it's currently too expensive.

[Atheist-Lite]

Everyone wants to make purdy things that don't tarnish. So that's why.

But with today's technologies, that's quite easy to do without using rare or expensive materials.

To the contrary: technology's continued inability to do this with less expensive materials is why gold is still used in critical electrical contacts and in some satellite applications.

IIRC, only about 12% of gold is used in industrial applications. The rest is either used in jewellery or hoarded/held as a commodity. While gold is a "must use" material in some applications, there are presumably many more areas where it's an optional extra, and thus does not get used because it's currently too expensive.

You could say the same about anything. If money was cheaper people wouldn't need so much of it.