What Makes Gold so Valuable?


The use of gold goes back thousands of years, from its role in jewelry making to its use as a currency in nations across the globe. But why is gold valuable? Several factors contribute to the value of gold, from its historical significance to its scarcity and durability. In this guide, we’ll walk you through the history of gold, as well as the factors that play a significant role in gold’s value. Continue reading to learn more about gold and whether investing in gold is right for you.

What Is the History of Gold?

Alt-text: History of gold

The history of gold dates back thousands of years, being one of the first metals humans were introduced to on a wide scale. Around 3,500 years ago, Egypt was the first to implement gold as the currency for trade both locally and abroad. Gold was turned into shekels and grew quickly in popularity. Thanks to international trade, everyone passing through Egypt got a chance to see this new monetary system at work.

Around 1,000 years later, the Greeks were digging for gold as well, using it as money, similar to how most of Asia Minor had been. The Greeks had become so proficient at gold mining that all these years later, archeologists continue to come across evidence of their work today.

Of course, if the Greeks were doing it, the Romans weren’t far behind on their mission to accumulate as much gold as territory. Modern technological advances made it possible to increase gold production through new means, such as diverting entire streams and mining underground with water wheels.

The pursuit of gold did something that very few things of the time could; unite. This was the first time there was a world economy with a monetary standard. Gold simplified trading, and coins from Rome were showing up as far north as Britain and all the way down to North Africa.

With the discovery of the New World, North America brought renewed visions of gold. In 1607, the Virginia Company sailed to the east coast of the Americas, with one goal being gold. It would take almost two more centuries before the metal was found in any documented amount.

The California Gold Rush is familiar to many Americans, but the first rush took place in North Carolina. Around the turn of the 19th century, people were flocking from all over the newly established United States to find gold for themselves. Half a century later, James Marshall sparked a rush on the opposite coast by finding gold in California. The mania surrounding the search for gold lasted about seven years, ending in 1855.

As monetary systems change, so has our use of gold. In the early 1930s, the US started the process of going off the gold standard as a monetary system. By the 1970s, it was completely left behind in an effort to curb domestic inflation. The gold standard, where a nation’s currency is equated with gold, is no longer in practice anywhere.

Why Is Gold Valuable?

So, why is gold so valuable? There are several factors that contribute to the high price and demand of gold, from its scarcity to its historical significance. If you want to learn more about gold’s worth and what makes it highly sought after, continue reading below.

Factors that make gold valuable

Scarcity

In general, gold is challenging to extract. There is only a finite amount here on earth, making its scarcity one of the top reasons why this element is valuable. However, gold has a great balance between scarcity and availability. It’s hard enough to extract, resulting in relative scarcity, but common enough to be found in areas across the globe.

Durability

Not many precious metals can claim durability the way gold can. Not only is it beautiful to behold, but gold also benefits from its inability to rust, corrode, or tarnish over time. These properties make gold ideal for jewelry making and other decorative objects. Additionally, its durability helps gold retain its value, as investors can have peace of mind knowing their gold won’t deteriorate or break down over time. With that said, the durability of hold helps it holds its value over time.

Historical significance

Gold has been seen as a symbol of opulence since it was discovered. With a color unlike anything seen thousands of years ago, early users equated gold with royalty, wealth, and even the divine. Any object, metal or not, with that kind of obsession behind it, helps to increase its overall value.

Demand

All of the factors above can trace back to the high demand for gold, which helps it hold its value. The scarcity of gold makes people want it to exhibit their personal wealth, while jewelers and other artisans seek gold to create long-lasting and elegant jewelry. On top of that, its historical significance increases the demand for gold, further boosting its value.

What Causes Gold’s Value to Fluctuate?

It’s no secret that gold regularly fluctuates. Here, we’re going to explain the factors that cause the varying values and why.

  • Supply and demand: As we know, the earth only contains so much gold. The more people want a finite resource, the more that has an impact on the supply. Less supply can increase prices because there’s more demand. However, if gold production increases, resulting in more supply, the price of gold can dip due to decreased demand.
  • Economic and political stability: When the economy is on the upswing, the cost of gold can decline as investors seek other forms of investments with rising interest rates. However, if the public gets nervous about a recession or political uncertainty, gold prices can increase because investors view it as a safe way to hold onto wealth.
  • Interest rates: When interest rates rise, the cost of gold tends to decrease. At the same time, when interest rates go down, gold prices can increase.
  • Inflation: In times of inflation, many citizens invest their funds in gold because of how it retains value. When the value of a currency declines, the value of gold increases.

Should You Invest in Gold?

The attractiveness of gold has many eager to invest. However, this isn’t necessarily the right move for all investors, depending on what their long-term goals are. Generally speaking, gold is a low-risk investment. As discussed, the value fluctuates, but gold has inherent value and has historically increased in value over time.

Overall, investing in gold can be a great way to diversify your portfolio. Diversifying your portfolio with a variety of assets, such as real estate, cryptocurrency, and precious metals like gold, can help reduce your overall risk and potentially provide increasing returns. Precious metals like gold often perform strongly when the market is experiencing downturns.

How Do You Invest in Gold?

Whether you’re looking to diversify your portfolio or protect your current savings, investing in gold and other precious metals can help. Below, you’ll find ways to buy gold to reach your investment goals.

Precious Metals IRAs

A precious metals IRA is a self-directed IRA (SDIRA), which is a type of retirement account that allows you to invest directly in physical gold and other precious metals like silver, platinum, and palladium. With a precious metals IRA, you choose a custodian who can purchase and store your gold on your behalf and hold it until you reach retirement age. Precious metal IRAs are beneficial in that they allow you to invest in physical gold without having to store the metal yourself. When it comes time to make withdrawals during retirement from your precious metals IRA, you can make in-kind distributions, where you receive your physical gold, or make liquid distributions, where the value of your gold is converted into cash.

Physical Possession

If you’d rather have physical possession over the gold you invest in, you can have your gold sent to you via home delivery rather than placing it in a Precious Metals IRA. When having gold sent to you, you have complete control over how and where you store your gold. With physical gold, you can sell it at any time as well as buy gold that might not meet IRA-eligibility requirements. At Birch Gold Group, our specialists can help you purchase gold and send it safely to your location.

What Are the Different Types of Gold?

When it comes to investing in gold, there are different types you can choose. Common types of gold include gold coins, rounds, bars, and numismatic coins. Let’s take a look at each type below.

Gold Bullion Bars & Coins

A common type of gold investment includes gold bullion bars and coins. Purchasing physical gold like coins, bars, and rounds can be a great way to diversify your portfolio and protect your current savings. Bars, coins, and rounds that meet eligibility requirements can also be placed in a precious metals IRA.

Gold bullion coins are coins valued on their gold content and are issued by private mints or governing bodies. These coins are more affordable than other types of coins, as they are not produced in limited editions like gold proof coins. Gold proof coins are minted for investors, as they contain unique designs, higher finishes, and are minted in limited quantities.

When investing in these types of assets, the value is determined by their weight and the current market price of gold. Dealers like Birch Gold Group offer safe ways to purchase gold bullion bars and coins and have them stored securely.

Numismatic Coins

In addition to gold bars, rounds, and coins, you can also invest in numismatic coins. Numismatic coins are collectible coins whose value is based on their rarity and historical or cultural significance. Typically, numismatic coins tend to increase in value over time as their rarity and demand from investors increase.

Wrapping Up: Investing in Gold

So, why is gold valuable? There are several factors that determine gold’s value, from its historical significance to its scarcity and durability. Overall, investing in gold can be a great way to protect your current savings, as gold is a safe haven asset and has historically increased in value over time. At Birch Gold Group, you can invest in precious metals like gold and find an expansive collection of gold coins to add to your precious metals IRA.