18

Related to this previous question, and this one, what gave gold value prior to "modern" uses?

Until its application in EM shielding, electrical connectors, etc, it seems that gold was merely something pretty to look at (a.k.a. "shiny rock syndrome") - but otherwise had no "value", other than its relative rareness.

Compare that to aluminum, which through the time of Napoleon was considered extremely valuable and rare (due to difficulty in mining and processing before modern industrial methods), but now is a commodity - valued for other reasons than its rareness.

Why value gold, then, over any other substance prior to its modern uses?

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    Can you imagine using salt as currency. Everybody and his brother would set up salt farms. – Martin York Aug 19 '11 at 19:35
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    @Martin ... surely you jest and do know that salt was used for pay at least during the time of the Roman Empire? – warren Aug 19 '11 at 20:22
  • That's why I used salt (rather than leaves). Salt was valuable to the Romans and could be used but when they got to the UK the locals laughed at them (and according to my history teacher (set up sea water => salt factories and flooded the roman market with counterfeit salt!!!)) Gold is a better currency because of its rarity and the inability of commoners to make it in their back garden. – Martin York Aug 19 '11 at 22:23
20

Gold has specific properties that make it more useful than most metals for monetary and decorative purposes:

  • It's extremely unreactive, so it doesn't corrode, rust, or otherwise tarnish. So gold, once pure, stays that way, unless alloyed.
  • It's very difficult to dissolve gold with acids - aqua regia, formed by mixing nitric acid and hydrochloric acid, must be used to dissolve gold (or platinum).
  • It's easily identified because it's both extremely dense - almost twice as dense as lead - and unusually soft - my understanding is that the mythological bite test for gold coins actually works, although is rather hard on the teeth.
  • It is one of the most if not the most malleable and ductile metal. This means it is relatively easy to work, not prone to cracking, can be bent, formed, or pounded flat, and is resistant to 'work hardening'.
  • The combination of the above makes it highly useful to produce shiny intricately-crafted objects that last.
  • It was easily mined, and often found in a pure or near-pure state (i.e. not an oxide) both freely available in rivers and in seams found in mines.
  • It's rare, which means that possessing it becomes a signal of social capital, which itself increases its value.

Gold seems to have been recoverable by ancient peoples in a way that, for example, platinum was not; uses of gold abound throughout history, while uses of platinum before 1500 or so are rare. This would seem to add gold's advantage as a display of wealth, since you need to actually know you're looking at a rare material.

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    It's also easy to identify because it's much more dense than any other substance that existed in those times: more than twice as dense as lead. – poolie Aug 18 '11 at 6:38
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    Most often no ore is required for gold it is found in its pure state in nature. Often in streams but also in Mining "Seems". – user4127 Aug 18 '11 at 16:42
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    @Chad: you mean "seams"? en.wikipedia.org/wiki/Seam_%28geology%29 – Steve Melnikoff Aug 23 '11 at 15:12
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    Just so it's clear, I feel I should point out that the "bite test" means that if you bite it and it's soft, it's not gold. A lot of people think it's the other way around because pure gold is fairly soft. – John Bensin Apr 24 '13 at 19:12
9

Gold has a few key attributes historically:

  • It's scarce.
  • Gold is mined in very localized places. So it's easy for the local king to monopolize production and supply.
  • Easy to identify.
  • Hard to destroy. (It is non-reactive)

Coins have also been made of bronze, copper, iron, and lead, but the properties of those metals make long-term less desirable.

  • Gold is also the most malleable and ductile metal, so it must be easy to work with for jewelry or fine crafts such as damasquinado from Toledo, Spain. And it is inert in the body, so it can be used as a dust on some desserts. It also is beautiful. It's not surprising it has been the king of precious metals. – Chelonian Aug 18 '11 at 3:44
8

It is as Adam Smith described it, shortly before 1800, with his "diamond-water" paradox.

Water is essential to life, and therefore "valuable," but there is so much of it that the value of the "marginal" (last) cup of water was close to zero.

Diamonds were "useless," (except for jewelry), but were so scarce that people paid a lot just to have a few of them around for comfort. Ditto for pieces of gold.

  • so it is merely because it's "rare"? – warren Aug 17 '11 at 21:06
  • @warren because diamonds are rare and shiny/pretty. – RonJohn Jun 17 at 23:32

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