Why do we value gold so highly?

scorza

scorza

scorza

Caporegime
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With all the news recently, I've been doing some thinking about the economy, which is always a bad idea. A few weeks ago the price of gold was at a record high - something like $1000 an ounce. Putting aside the current economic climate, why would anyone pay that much for some metal? As far as I can see, it has only one use in the modern world - jewelery. Other metals such as copper, tin, aluminium have values derived from usage e.g. copper used in electronics and demand for electronics has gone up, hence the value of copper has gone up.

Ok so I can see that in the days when currency was actual gold, gold was worth something extra - but why do we still value it so much?
 
The jewelry market isn't exactly small, and it's not going to get any smaller with our ideologies, and for some, gold is still currency.

Why wouldn't it be valuable? It's a precious metal, that looks nice.
 
It's rare, and it's eye candy, which results in it being of high value. A long while ago, Aluminum was of higher value than gold because it was difficult to extract.
 
Because it's something that people want and there is a limited supply of it.
Same as anything else.

If suddenly no-one wanted gold then the price would drop through the floor.
It's only the assumption that it will be worth something to sell on that keeps the price high.
 
Haircut said:
Because it's something that people want and there is a limited supply of it.
Same as anything else.
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Yeah, but I could have phrased my question "Why do people want it?" Is it really just about the jewelery?

Haircut said:
If suddenly no-one wanted gold then the price would drop through the floor.
It's only the assumption that it will be worth something to sell on that keeps the price high.
Click to expand...

This is what I think in my ignorance.
 
scorza said:
Yeah, but I could have phrased my question "Why do people want it?" Is it really just about the jewelery?
Click to expand...

No, it has other uses, but I would imagine most of it is mixed with other stuff to make moody/***** gold.
 
scorza said:
Yeah, but I could have phrased my question "Why do people want it?" Is it really just about the jewelery?
Click to expand...

That's where the questions become more difficult!
Why does anything have value?

If enough people think a commodity is worth something then it becomes worth something, that's the nature of markets.
Why did tulips cost more than people's annual wage at one point?
It's only because enough people thought they were worth that amount.

Gold costing the price it does is absolutely nothing to do with its uses in jewellery or electronics, but is merely a function of how much people want it.
This is how bubbles form in economics, people see lots of people paying $x for gold so they think it must be a good idea to buy gold.
So, some more people buy gold for $x+10 (as no-one is selling for $x anymore) and then even more people think buying gold is a good idea.
Gold goes up and up in price because everyone is jumping on the gold bandwagon.

Suddently people start wondering why they paid that amount for gold at all and they try to sell it.
If lots start to sell then people start seeing that selling gold might be a good move so the price gets pushed down.

Obviously this is simplified but it starts to explain why things have value in markets.
 
same reason we highly value bits of paper from the royal mint with pictures of the queen on

most of gold's value comes from its use an investment/store of value - if it was purely used for jewelry/electronics it wouldn't fetch such a premium.
 
We go through loads of 25Kilo plates of pure Palladium and Tantalum at work every month.

They look rubbish, but at that weight and purity, puts the price of Gold, silver and Platinum to shame. Some of the plates cost close to $100,000 due to their near purity and material makeup. Obviously, they have to be signed out by 2 employees at a time and their weight measured. But it just shows the cost of some of the rarer metals (and Ta is very difficult to extract from what I understand)
 
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Precious metals do not always conform to all market reactions. It is seen as a "safe" form of investment. The materials are of limited supply, whilst always being in constant demand from a vast mixture of industries. These include jewelery, electronics and chemical to name just a few.
 
divosuk said:
We go through loads of 25Kilo plates of pure Palladium and Tantalum at work every month.

They look rubbish, but at that weight and purity, puts the price of Gold, silver and Platinum to shame. Some of the plates cost close to $100,000 due to their near purity and material makeup. Obviously, they have to be signed out by 2 employees at a time and their weight measured. But it just shows the cost of some of the rarer metals (and Ta is very difficult to extract from what I understand)
Click to expand...
Out of interest, what do they use palladium and tantalum for where you work?
 
It's a luxury, luxuries demand higher prices therefore higher value. That's how I see it. There's more to it now I realise that's what caused it to go up in value
 
Gold can't be affected. We can't make it. There's no way you can produce it, so it's worth something.

It's just a standard. With money, the country can print more of it and devalue it, but we can't (currently) magic up more of it, so it serves well as a standard.
 
The answer, like so much else in our economy, boils down to just two words:

Supply and demand.

Gold is of very limited supply - it has to be found and extracted, and is also of high demand for all the things mentioned above. Ergo people are perpared to pay a premium to secure a supply of it - and thus it has high value.
 
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