Why is Gold Worth Anything!?

donshale

Can someone explain why gold is valuable? It is rare, but so is scandium so ‘being rare’ alone can’t justify any value.

Gold used to be used as a standard for monetary exchange but this practice has been abandoned long ago.

All forms of investment have flaws – but at least most have a veneer of logic:

Art - if you appreciate the art itself and find it beautiful, then at least you have something that gives you pleasure - even if the investment turns out to be poor. In the art market there is a saying, buy what you like first an foremost, profit is incidental. So gold as an investment doesn't pass that test really - it seems all about investment.

Property or land. If it is geographically well located, there is a benefit from living there. Gold doesn't offer any benefit.

Shares. If companies produce goods and services then there is some tangible benefit in the company’s existence to back up the investment. Gold doesn't seem to do much in the creation and social progress stakes.

If you wear gold people may say ‘gosh is that real gold?’ Why. Who cares?

Can anyone explain why – apart from the fact that everyone says it is valuable – a lump of gold actually is worth anything?

Is it just a case of "The Emperors New Clothes"? What happens when people decide it's not really worth anything any more?

Aegis

It's got a load of industrial uses as a catalyst or a conductor of heat/electricity, but from what I can see the majority of its value comes simply from its perception as something innately valuable. People expect it to do well in the long run, so they buy it up and hoard it more than probably any other commodity out there.

I don't personally see the appeal, it's more volatile than I like to see in a supposedly safe haven and it doesn't pay any dividends. I have some exposure to gold via gold-producing companies and a fund of commodity ETFs, but I don't really want to invest directly in it.


EDIT: I should point out that essentially the answer to your question is "Because people are willing to pay that much for it". Like any other asset, the buy/sell prices are determined by the market sentiment

Nosht

Tradition & habit.
Exactly, it could just as well be lead but the uses of lead are not as cosmetically pure as gold.

N.

LeeSouthEast

It's worth something because people say it is. No other reason really.

tradetime

But then in 2005 it seems Scandium cost $1984 an ounce.
http://wiki.answers.com/Q/How_much_does_scandium_cost

azureblue_2

Back in the mists of time, myth and legend, gold was deemed to have definate evil-defending properties. Also the more gold you wore the more of a god you might be. Check out ancient south american peoples and the spanish reaction to them and their gold. Also India.
My knowledge is that limited!

Masomnia

azureblue wrote: »

Back in the mists of time, myth and legend, gold was deemed to have definate evil-defending properties. Also the more gold you wore the more of a god you might be. Check out ancient south american peoples and the spanish reaction to them and their gold. Also India.
My knowledge is that limited!

I can believe that, since gold doesn't tarnish like silver or copper. Not sure that justifies it being that much more expensive, just makes good jewellery. It's a good conductor too, so useful in making wiring for speakers.

Thing is, if it wasn't hoarded by indiviuals and central banks, the IMF and the like then it wouldn't be nearly as valuable.

donshale

So on balance it does look like 'The Emperors New Clothes'. It has some uses in industry, can be digested in tiny amounts, but it is mainly just nice for jewelery. But it's real value is just that people have always said it is valuable! So golds intrinsic value - not much!

jon3001

donshale wrote: »

But it's real value is just that people have always said it is valuable! So golds intrinsic value - not much!

Same with cash.

ray123

Similar to diamonds. If the market was flooded with diamonds/gold, the price would collapse (supply/demand). Therefore its 'hoarded by indiviuals and central banks,' as Masomnia rightly said above.

If society was not so vain and materialistic, the price would most certainly collapse.

nzseries1

It's shiny. Oooo... shiny.