Silver reflects these attributes, although it appears to be less scarce and therefore less valuable per ounce. It should then be clear that gold has an intrinsic value due to its natural properties and the circumstantial geological composition of the Earth. However, arriving at that conclusion is far from simple. It turns out then that the reason why gold is precious is precisely because it lacks chemical interest.
Because gold and silver have been assigned an intrinsic value, they are often used as a hedge against rising inflation. Other commodities can't do this, and most will rise in price as inflation increases. However, despite its bright exterior, it is inherently useless. Apart from its limited uses in electronics and dentistry, gold only has value in human society because it is gold and nothing else.
This explains why more than 80% of the annual global demand for gold goes to jewelry and investment, rather than industrial use. We spend most of our time using gold as gold and not as a conductor of electricity or as a replacement for its pearlescent whites. That is, gold is inherently valuable. Something with an intrinsic value is valuable because of the way it is.
Gold is a durable, dense metal and yet it can be molded into virtually any shape due to its malleability. So, let's say you had to go lamb or flee from an invading army. Let's also say that you need to hide your wealth for an indeterminate period of time. Physical demand for gold has been tepid due to the economic weakness of one of the world's leading gold-buying countries, China.
Therefore, the amount of gold that is actively available for purchase today is only a fraction of the gold that exists. When your progeny opens the time capsule, a golden brick will remain a golden brick and will continue to have value. While most investors, including me, have been scared of gold because of its record of high risk and low reward, there are arguments in favor of owning gold because of its ability to add value at the portfolio level. Gold is the metal we will turn to when other forms of currency don't work, which means that gold will always have value in difficult and good times.
The intrinsic value is a measure of the value of gold, which can be achieved by an objective calculation rather than using the current price of gold in the commercial market. In the 16th century, the discovery of South America and its vast gold deposits caused a huge drop in the value of gold and, therefore, a huge increase in the price of everything else. Gold mining is also costly, especially at this time when most of the near-surface gold has been mined. To get gold you have to be good at war Be able to get ample human labor to extract it Mastering global supply and logistic routes Being able to command guards who will guard your gold and not steal it Have the technical knowledge to get gold out of the ground, which is expensive and cumbersome.
One of the most striking things about gold is how incredibly difficult it is to reach it (and hold on to it once you have it) and the different things you have to master to get gold. As a result, the price still inflated by fear leaves gold vulnerable over the next year and, with limited and unpredictable links to global demand, as well as sentiment-driven prices, investors should be aware that gold is an expensive and limited hedge. If you had to collect all the earrings, every gold sovereign, the little traces of gold on every computer chip, every pre-Columbian statuette, every wedding ring and melt it, it is estimated that you would be left with only a 20-meter cube, or something like that. Gold can stimulate a subjective personal experience, but gold can also be objectified if it is adopted as an exchange system.
Over time, different societies adopted gold in money, with the earliest forms of gold coins dating back to around 1500 BC. .