- Our content is independently written and reviewed by trusted reviewers & fact-checkers.
- Your information is never sold. We can earn money by connecting you with top Gold IRA Companies. Learn how our reviews work.
- Want to learn more? Meet our authors and explore our editorial policy.
Is gold valuable? That’s not a question you’re likely to hear anyone ask anytime soon. The real question is, why is gold considered so valuable?
In this article, we’ll take a look at a few reasons why gold is valuable. We’ll also discuss why gold is important and if it is likely to remain so.
Table of Contents
What Sets Gold Apart from Other Metals?
Why is gold considered so valuable? There are several reasons for this, partly historical and partly based on the metal’s properties. So, why is gold worth anything? Let’s take a closer look.
Scarcity
When you stop to consider how much gold is left in the world, its scarcity is definitely one of the reasons why gold is so valuable. Part of what makes gold so valuable is the fact that it’s a Goldilocks metal. It’s neither so common as to be utterly worthless nor rare enough to be unattainable.
Inertness and Durability
Why is gold worth so much? One of the reasons is that it has highly attractive qualities. One of these is its durability. Of course, you don’t want to use a material that’s easily damaged to store value or use as currency.
Inertness is another useful element that helps answer the question, “Why do we value gold?” This metal is not prone to corrosion, tarnishing, or other forms of decay, which helps to give it a stable value.
Malleability and Ductility
What is gold good for? Gold is incredibly malleable (it can be easily shaped, beaten, folded, and molded), which means that it’s easy to work with and ideal for purposes like making jewelry.
It’s also highly ductile (it can be drawn out into thin wires without breaking). Both of these elements make it ideal for jewelry and other decorative elements. This usefulness adds to its value. Another aspect of this malleability is that it makes it easy to mold gold into bars, bullion, and other forms of value holders.
Historic Significance
If you want to know, “Why is gold so important?” you need to turn to ascribed value as well as actual value. Since gold has been used as a form of currency and a value storage material for so many years, it has a fair amount of value due to its historic significance. It has a recognizable, honored, and trusted place in human recollection and society as a whole.
Value Storage
If you want to know why gold is more valuable than money, this is a good place to start. Over the years, gold has garnered a reputation for maintaining its value. For this reason, it has often been used as a form of value storage.
For instance, let’s say that the gold value is around $1,871.15 per ounce. There may be slight fluctuations in this price, but it mostly remains pretty stable. The average gold bar weighs 400 troy ounces, which is equivalent to roughly 439 standard ounces. So, if you have a single gold bar, you know you have a value reserve of roughly $821,434.85.
Global Acceptance
The importance of gold results at least partially from its acceptance as a form of currency and value reserve. To some degree, things only have the value that is attributed to them. Since gold is a recognizable and accepted form of value reserve, that value attribution is part of what makes gold valuable.
Central Bank Reserves
Many different countries use gold as a central reserve. What is gold good for? It offers a level of stability in terms of value. Because of this, a central gold reserve gives a measure of security and reliability to a country’s currency and economy.
Why Has Gold Always Been Valuable?
The value of gold is derived from more than the properties described above. In fact, much of its value comes from something almost entirely outside of itself. So, why is gold a precious metal? The key to this is the fact that it is hard to attain.
For instance, to obtain usable gold in any noteworthy quantity, several different difficult processes are required:
- You must have the mineral rights to the area where the gold is to be found.
- You must have the tools, equipment, and manpower required to mine the gold in its base form.
- You need the knowledge, practical expertise, and equipment required to turn gold ore into molten gold.
- The molten gold must be purified and prepared using a different set of skills and abilities.
- You require the skill, manpower, and tools to turn the purified molten gold into gold bars, coins, or another standardized form.
As you can see, when you ask the question, “Why is gold so expensive?” There’s far more to consider than the properties of the metal itself. Part of the value is explicitly intrinsic, while the rest of the value is implicit. It comes from the fact that the process of obtaining, purifying, and preparing gold is in itself costly and complex.
When Did Gold Become Valuable as an Investment?
Initially, if you look at the question, “Why was gold so valuable?” the answer is significantly different than you might expect. If, back then, you had asked, “Why do people like gold,” the response would have been that gold was money.
Gold was literally the thing that money was minted from, and so its value was inherent. However, after 1973, when the U.S. government abandoned the gold standard, and people were allowed to own gold privately, the value of gold shifted and increased.
This is because gold no longer only had value as money. Instead, its value was also in investment and value storage. Since 1974, the value of gold has increased by more than 12 times.
Since 1998, when gold had an average closing price of $294.12, the value of gold has increased by over six-and-a-half times. This means that if you had invested in an ounce of gold 25 years ago, you would have made a profit of approximately $ 1,635.88.
Is gold the most valuable option out there or the investment that has most increased in value? Certainly not, but it’s still a useful part of any investment portfolio.
The Value Of Gold: Who Should Invest In Gold?
Is gold valuable? Without a doubt. But is it the right choice as an investment for you? Not necessarily.
Who should invest in gold? Well, if you meet any of the following criteria, you might want to consider investing in gold:
- You don’t mind investing in something with high risk. The value of gold is relatively stable and usually grows, but it may dip significantly from time to time.
- You’re not in the market for massive yields in the short term. The reward may be relatively low.
- You’re not looking for an asset that compares well to other potential investments. Compared to fast-growing investments like the S&P 500, gold can seem like a relatively low-scale investment.
Gold is a unique type of investment. While there’s absolutely no doubt that gold is valuable or that it provides a return on investment in the long term, it’s not a traditional investment by any means.
Advantages of Investing in Gold
Gold is definitely valuable and desirable as an investment, but what are the advantages of gold as an investment? Let’s take a closer look.
- Gold offers a hedge against inflation. This metal often does the inverse of what most investments do during a recession. While metals and investments like platinum may drop in price during a recession, gold will often increase in price. This is because people rely on gold as a stable value storage.
- Gold acts as an investment diversifier. When added to your portfolio along with other investments, gold acts as a hedge against the performance of other assets. When other investments underperform due to economic uncertainties and other factors, gold provides a reliable source of returns and value.
- Gold offers liquidity to your portfolio. Gold is an incredibly liquid asset that provides you a buffer against any major losses. Since gold is always in demand, you always have a form of liquidity in your portfolio. If you need the value held in gold, you simply need to sell it at any given point in time.
- Gold is a long-term store of value. Because gold has a reasonably consistent value, it functions as a long-term value storage. If anything happens, you know that you’re more likely to turn a profit than to lose money on the deal.
- Gold can hedge against currency weaknesses. While people are often concerned about weaknesses in currencies like the U.S. Dollar, gold can offer a buffer against such weaknesses. Since gold is no longer linked to the value of the Dollar through the gold standard, gold can maintain its value even when the Dollar’s value falls.
- Gold has the potential for capital appreciation. While gold may not increase in value as quickly or significantly as some other investments, it still has excellent potential for capital appreciation, increasing the value of your stored funds.
Why Do People Want Gold? The Bottom Line
In the end, When it comes down to it, “Why do people like gold?” is really a matter of personal outlook. To some people, gold may be incredibly valuable. To others, it may be nothing more than a nominally valuable metal.
But where does the value of gold originate? There are many contributing factors, but what is the main reason? Some of the factors we discussed included the following:
- Historical significance
- Scarcity
- Durability
- Malleability and ductility
- Worth as value storage
- Global acceptance as a valued metal
- Value as a reserve for central banks
So, which of these things is the true source of value? Or is it none of these things, and mainly because of the complex and costly process required to get usable gold?
The reality is it’s all of these things and none of them. In the end, gold has the amount of value that you interpret it as having. To some people, gold is incredibly valuable. They seek it; they desire it because, in their minds, it is the measure of wealth.
To other people, gold is an outdated metal with little value as a modern investment. These people pursue the best and the brightest current investment instead.
Gold will always be valuable because its value is innate and passed down from generation to generation. It is durable, it is reasonably consistent, and it is useful for a range of different industries.
However, gold is just a useful metal. Is it valuable? Yes. Will it remain valuable? Yes. Will it always be considered as valuable as it is now? Probably not.
The likelihood is that in 150, 200, or maybe 300 years, gold will be immensely valuable. It may even have more value than it does now. But, it will be one of several different bastions of value and value storage rather than the main one.
Is it worth investing in gold? Absolutely! Is it the right investment for you? Only you can decide. But rest assured that if you own gold, you own value.
FAQs
Why Is Gold So Valuable to Humans?
Why does gold have value? There are a range of different factors that contribute to this question. But, the main answer lies in the qualities of this metal. Why do we value gold? Its scarcity, malleability, ductility, durability, inertness, and historic significance all contribute to making it uniquely valuable for both value storage and bank reserves.
Will Gold Always Be Valuable?
Is gold expensive? Yes. Does it have value? Certainly. Is it likely to keep that value long-term? Absolutely. Once you’ve answered the question, “Why do we value gold?” you know that its scarcity is part of the reason why it’s so valuable. And, as time goes by and the scarcity of gold increases, its value will increase as well. So, yes, gold will continue to be valuable and will increase in value as time goes by.
Article Sources
At Gold IRA Blueprint, we dive deep into the world of gold IRAs, using trusted sources to back up our insights. Our sources range from official documents to expert interviews, ensuring our content is both accurate and reliable. We also draw on research from reputable publishers to give you the most comprehensive understanding possible. Check out our editorial policy to see how we maintain our high standards for accuracy and fairness. Also make sure to check out our Financial Review Process to have a better understanding of our process.
Nick Maggiuli – Why is Gold Valuable? [The Definitive Guide] – Accessed 30/11/23
Joshua Warner – Why Is Gold Valuable – Accessed 30/11/23
Rupert Rowling – Why is Gold so Valuable and What Makes it Precious – Accessed 30/11/23
Michael Bromberg – Why Gold Has Always Had Value. – Accessed 30/11/23
