Some dude just told me gold is rarer than diamond because...

Your friend isn't as mad as it might seem. There is a lot more carbon out there, but not all necessarily bonded in a way to give diamond. With gold, we haven't found that much on earth, and it's element 79, which means it is only formed by a supernova. Not common at all. :)
 
MassiveJim said:
I read a fact that 99% of the earth's gold is in the core. So gold actually extremely common just not extractable (at present)
Click to expand...

Yes and the cost of extracting it if possible would contribute to making gold just as rare. Similar to now we do have many gold reserves but not all of them easily obtainable.
1 billion ounces on some beach in Peru I think but spread out over hundreds of miles at far less then 1 gram per ton of soil its not worth bothering with (currently)


I might have missed it being mentioned but this is why gold is used as money and diamonds are more leveraged to excessive wealth; like artwork might be or classic cars, they are each unique and gold is just an element:
http://en.wikipedia.org/wiki/Fungibility

Banks keep gold as its a known quality where as fiat notes or debt varies in its quality and demand like diamonds. Debt can become illiquid as it is unique to its issuer and diamonds can be similar but every piece of gold swaps with every other so almost certainly there enables a buyer at a greater price then diamonds suffer at their worst.

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A bank without reserves is in trouble soon after hence they keep hold of solid assets but with a liquid market to them. Read on Lehmans recently and the bad debt is proving quite profitable however it was not liquid when it was required.
The sub prime crisis stemmed from a misunstanding of holdings which were supposed to be just as good, land is a good longterm asset.


 
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