• Question: Why is pure gold so valuable?

    Asked by kamilo12 to David, Jonathan, Ou, Pete, Sam on 6 Jul 2012.
    • Photo: Pete Etchells

      Pete Etchells answered on 6 Jul 2012:

      That’s an interesting question. There are quite a few complex factors that have come about to dictate the value of gold, but basically, it’s valuable because people *think* it’s valuable. When we assign value to things, it might be because they’re useful, or it might be because it looks very nice, and so becomes a status symbol. I think gold’s valuable for the second of these two reasons – it’s a fairly inert element, which means that it won’t degrade over time, and it won’t lose its shine either. It’s a fairly soft metal, which means that it can be easily made into jewellery. So while we don’t necessarily need gold, we quite often want to have it – and because of this demand, coupled with the fact that it is quite rare, it becomes valuable. Say there was only one of some thing in the world, like an extremely rare piece of rock. If I had it and you didn’t, but you wanted it, I might be regarded as being in a better state of affairs than you, and so value is placed on that rock regardless of whether it is of any use.

      These sorts of factors have been in play for thousands of years, and so given the amount of time gold has been treated in this regard, it’s now used as an investment commodity by banks. It’s all a bit weird though!