Investing in Gold

 gold as a financial investment, particularly as prices have soared to record highs in recent years. Too many of these are surrounded by ads for questionable investments, though thankfully, there are many excellent resources as well for more novice investors in the metal—almost all on platforms like this one that aren't selling you some version of gold as a commodity.

Yet beyond the charts and investment theses lies a deeper story about humanity's fascination with this precious metal. Below, we focus on the social and psychological aspects of gold that make its value endure. While investors debate gold's role as a hedge against inflation or a safe haven in times of uncertainty, the metal's appeal transcends pure economics—gold's value involves aspects of human psychology, cultural value, and collective trust that have persisted through millennia.

KEY TAKEAWAYS

• Gold has held actual and symbolic value throughout human history, from ancient civilizations to modern times, with prices reaching nominal record highs above $2,700 per ounce in 2024.
• Beyond its role as an investment vehicle, gold has served many functions in human society: as a medium of exchange, as a store of value, for jewelry, and as a symbol of power and wealth.
• Gold's value is ultimately a social construction; its worth is sustained by our collective agreement about its importance and our belief in its future value.
• Gold's physical properties—its lustrous quality, relative scarcity, durability, and difficulty of extraction—reinforce and justify its perceived value.
• Unlike other precious metals, gold strikes a balance of being rare enough to be precious but abundant enough to serve as a practical medium of exchange.

Why Is Gold Valuable?

Whether it's Egyptians adorning their pharaohs' tombs, the Inca filling temples with sacred golden artifacts, the Chinese Han dynasty using it to trade along the Silk Road, or a crypto millionaire converting digital wealth to physical gold bars with a few taps in an investment app, gold has been both a store of value and something far beyond that for humanity all through recorded history.

Nevertheless, many argue that gold has no intrinsic value, dismissing its value as a holdover from the long era of human history before modern monetary policies and the science of economics. They contend that in modern economics, paper currency and digital transactions are the medium of exchange, and that gold's only worth in the end is as a material for jewelry and industrial applications.

At the other end of the spectrum are those who assert that gold is an asset with various intrinsic qualities that make it uniquely valuable. The reality lies in understanding both gold's physical properties and its psychological appeal. The reasons behind gold's enduring value include the following:

• Gold has embodied wealth, power, and prestige across cultures and throughout history.
• It has maintained its role as both a luxury item and a medium of exchange for millennia.
• The metal serves as a potential store of value should traditional currencies falter.
• Its physical properties—durability, malleability, and resistance to corrosion—make it practical for various uses, including as a store of value that's hard to lose or destroy.
• Gold's relative scarcity contributes to its lasting appeal.
• Its industrial applications in electronics, medicine, and aerospace add practical value.
• Unlike other precious metals, gold is rare enough to be precious but abundant enough to serve as a practical medium of exchange.

What makes gold particularly fascinating is how it combines practical utility with symbolic value. While platinum might be rarer and silver more practical for industrial use, gold occupies a striking position in human consciousness‚ as something that has endured through the rise and fall of countless currencies and civilizations. Today, it's still among the most favored investments of ordinary Americans:

Gold’s Essential Dichotomy

Most would agree that gold has always had value as jewelry, currency, and an financial product. But beyond these tangible uses lies a fascinating paradox: part of gold's value comes from our collective belief in that very value. While bitcoin derives its worth purely from digital consensus and paper money from government backing, gold occupies a middle ground—a physical asset with tangible worth and a value driven by trust in its continued worth.

Even as modern investors trade gold through smartphone apps and exchange-traded funds (ETFs), they're participating in a tradition that stretches back to the first civilizations. This duality—gold as both ancient treasure and modern investment—helps explain its enduring appeal.

212,000 Tons

Over 212k tons of gold exist above ground, valued at over $13 trillion, with annual mine production adding about 6,000 tons in 2024, representing a 6% yearly increase. This balance between scarcity and availability supports gold's enduring investment appeal.1

In Search of a Method of Exchange

Our ancestors were faced with devising a method of exchange that was easier to implement than a barter system. A coin is one such medium of exchange.

Gold is the logical choice of all the metals in the periodic table of elements. We can rule out elements other than metals because a gaseous or liquid currency isn’t convenient from personal portability.

This leaves metals like iron, copper, lead, aluminum, silver, gold, palladium, and platinum. Yet the first four of these are prone to corrode over time, so they don't work well for storage—a requirement for coins.2 In addition, aluminum feels very light and unsubstantial—not ideal for a coin's material that should invoke feelings of security and value.

FAST FACT

Gold's value isn't just about supply and demand—it's about human culture. We've collectively agreed for thousands of years that this metal is precious, and that belief has become self-fulfilling.

Platinum or palladium are reasonable choices because they are mostly nonreactive to other elements—that is, they produce little corrosion. But they are too rare to generate a enough coins to circulate.3 To assign value to a metal, it must be somewhat rare (so that not everyone can produce coins with it) but plentiful enough so that a reasonable number of coins can be created for commerce.

This brings us to gold and silver—both of which have served as international currency standards in the last 200 years. Gold doesn’t corrode. It can be melted over a flame, making it easy to work with and stamp as a coin. Silver and gold are beautiful metals that are easy to form into jewelry, and both of these precious metals have their own devotees in fine jewelry circles.4

In the digital age, when wealth can be created and destroyed with a few keystrokes, gold's physicality takes on new meaning. Central banks continue to hold vast reserves of gold, with almost one-fifth of the world's supply held in their vaults, even as they embrace digital currencies. This isn't mere tradition—it reflects gold's unique position as a bridge between the ancient and modern worlds of value.

TIP

While gold is traditionally viewed as an inflation hedge, its price is influenced by a complex interplay of factors, including geopolitical events, central bank activities, and overall market sentiment. As such, at times like the mid-2020s, gold prices can rise even when inflation is decreasing or flat.

Gold's Peaks and Valleys

When Mansa Musa, the 14th-century ruler of Mali, stopped in Cairo during his pilgrimage to Mecca, his caravan carried so much gold that his spending crashed the Egyptian economy, leading to a depression in the country and the value of gold for over a decade.5 This is emblematic of gold's swings in value over time.

Gold's highest moment of relative value wasn't in our modern era, despite 2024's nominal record of over $2,700 per ounce. When adjusted for inflation, gold's true peak came in January 1980, when it hit what would be about $3,300 in today's dollars. That surge came amid soaring inflation, geopolitical tensions with Iran, and intense global economic uncertainty—conditions that highlight gold's role as crisis insurance. Below is gold's recent price information.

But gold has also seen periods of relative disfavor. During the tech boom of the late 1990s, it fell below $300 per ounce as investors chased digital dreams instead of physical metal. The decade from 1985 to 1995 saw gold lose almost a third of its value, a period dubbed by some as 'the great gold bear market.' Even the ancient Romans saw gold's value fluctuate dramatically when they discovered new mines or conquest brought sudden influxes of the metal.

The pattern reveals an essential truth: gold's value doesn't just reflect economic conditions—it mirrors human psychology. Whether it's Egyptians storing wealth in tombs, Romans measuring their empire's worth, or modern investors seeking shelter from market volatility, gold's peaks often coincide with moments when humanity most needs something solid to believe in.6

Gold's Future

While crypto-enthusiasts tout digital currencies and central banks explore digital alternatives, gold's price has soared past $2,700 per ounce, demonstrating that ancient and modern concepts of value can coexist.

The reasons are both practical and psychological:

• Central banks continue to hold vast gold reserves, with almost one-fifth of the world's supply in their vaults—a tacit acknowledgment that even in a digital age, physical gold provides a form of security that virtual assets can't match.
• During recent periods of economic uncertainty—from the 2008 financial crisis to the 2020 pandemic and beyond—gold has repeatedly demonstrated its role as a psychological anchor. When other assets falter, the human instinct to seek gold's perceived safety kicks in.
• Yet unlike purely emotional investments, gold backs this psychological comfort with practical utility. Its role in electronics, medicine, and aerospace continues to grow, creating real-world demand alongside its investment appeal.

As we continue into the digital age, gold's role is evolving rather than diminishing. The same technology that enables cryptocurrency trading has made gold more accessible than ever, with mobile apps allowing investors to buy fractional shares of physical gold bars stored in secure vaults worldwide. This marriage of ancient metal and modern technology has created new ways to own and trade gold while maintaining its fundamental appeal.

Gold's Rising Popularity With the Young

Thus, you'd be wrong to think gold is an asset of choice for those who didn't grow up with cryptocurrency and other online assets. Surveys of both younger wealth and retail investors show that they are the cohort likely to have the most gold as a proportion of their portfolio—about a fifth.7

In addition, gold's physical properties continue to find new relevance. Beyond its traditional uses in jewelry and currency, gold has become essential to modern technology. Its exceptional conductivity makes it crucial for electronics, its biocompatibility is valuable for medical devices, and its durability is prized in aerospace applications. These practical uses add another layer to gold's value proposition—it's not just a store of wealth but a vital industrial material.

What Are the Benefits of Owning Gold?

Beyond its natural shine and mysterious allure, there are a number of financial reasons to own gold. For one thing, gold serves as a store of value, meaning that its value remains stable, rather than declining over time. Along these same lines, gold is useful as a hedge against inflation. Although inflation pushes down the value of currencies, gold isn’t subject to this downward pressure. The stability of gold as a financial asset also makes the precious metal attractive to own during periods of economic turmoil.

What Characteristics Make Gold Valuable?

The value of gold rests in a shared belief that the precious metal is, in fact, precious. However, some qualities of gold make it an ideal option to serve as a medium of exchange. Unlike many other metals, gold doesn’t corrode or otherwise deteriorate in quality. In addition, gold is rare enough that not everyone can make a gold coin, but there is a sufficient supply to ensure a healthy circulation of coins.

How Can I Invest in Gold?

Those drawn to gold by its physical allure may want to purchase gold bullion, coins, or jewelry. However, there can be significant storage and insurance costs associated with physically owning the metal. Other popular investment vehicles include gold ETFs and shares in gold mining companies.6

Do Countries Hold Stores of Gold?

Yes, and sovereign holdings of gold go a long way to underscoring the universal belief in its enduring value. As of 2024, the U.S. had more than 8.1 metric tons of gold.1

What Was the Gold Standard?

The gold standard was a monetary system in which a country's currency was directly linked to gold. Under this system, the value of a nation's currency was fixed at a specific quantity of gold, and the government or central bank was required to exchange currency for gold at that set rate upon demand.

Widely adopted in the 19th and early 20th centuries, the gold standard began to decline during the Great Depression as countries sought more flexible monetary policies to address economic crises. It was ultimately abandoned by most nations for fiat currency systems, with the U.S. officially ending its gold standard in 1971 under President Richard Nixon.6

The Bottom Line

The reasons behind gold's enduring value are complex. While its practical properties—durability, malleability, and rarity—make it useful for everything from jewelry to advanced electronics, gold's true power lies in our collective belief in its worth. From ancient pharaohs to modern investment funds, from central banks to those trying to find something of value in societies racked today by hyperinflation, gold continues to bridge worlds and epochs in a way no other asset can match.

While its price will likely continue to fluctuate with market conditions and human sentiment, gold's fundamental appeal appears unlikely to fade. After all, in a world where value increasingly exists as pixels on screens, there's something deeply reassuring to many about an asset that has held humanity's trust for millennia.