Going for the Gold

2,000 grams' worth

Keep your stocks and bonds. Right now, the hot investment is good old-fashioned gold. On Monday, gold traded above $540 an ounce, the first time that's happened since 1981. Gold prices have risen more than 20 percent this year, and they've doubled since 2001.

Traditionally, gold is where investors put their money when they want to make sure that inflation or instability doesn't eat it away--a safe haven, the "mattress." Of course, traditionally, gold was money, and money was gold. Today, money is paper, or even just a constantly rearranging tally inside bank computers. But gold's value is still as intrinsic as it gets. Here's why.

Today's Knowledge
Why Does Gold Rule?

Money is a funny thing. It plays such a big role in our lives that we rarely stop to think that the cash we try to amass has almost no inherent worth.

Of course, for the world's financial systems to function, it's best not to dwell on that truth. Once society has decided to honor cowrie shells or tulip bulbs or big rocks as a way to pay debts and acquire goods, we all have to play along. You can't have people looking in their wallets and saying, "Hey, these pictures of dead presidents are just heavy-duty paper. I'm not accepting these crummy things for work anymore--and certainly not so few of them."

But there is one store of value that has been treasured by nearly every society that has encountered it. One element that has for millennia captivated humans with its glitter and glow. One treasure--whose luster is buffed by the knowledge of how hard it is to pry from the earth--that quickens the pulse of young women and old men alike. Nothing else is as good as gold. Why?

• It's immutable. That gold that forms a circle on your finger today could have been mined in Spain before Christ was born, fashioned into a torque necklace by the Celts, buried in a bog for centuries, rediscovered, traded, melted down to form Venetian ducats, and shipped to China as payment for silks and spices. Or it could have been blasted out of the earth just a few years ago. Gold does not rust or corrode. In fact, pure gold won't even tarnish. Precious artworks made by the ancient Egyptians are as beautiful today as they were when they were received by the pharaohs.
• It's malleable. A single ounce of gold can be stretched into a thin wire five miles long or hammered into a hundred-square-foot sheet. Because it's soft, gold is easy to work with. That means that ancient cultures without sophisticated tools could fashion elaborate works of art.
• It's scarce. You know how people are. When anything becomes common, we just don't value it as much. After trade with the Far East got far easier, those precious silks and spices came down in price. But gold, well, you still don't find gold just lying around. Gold-mining remains miserable, hard work. South Africa's mines, for example, must move 70 million tons of earth a year just to get 500 tons of gold. In fact, we've only ever managed to mine about 170,000 tons of the metal. That's it. You could put the whole world's gold supply on a single oil tanker and sail it from king to king.
• It's useful. Gold has always been the metal of choice for impressing your minions, but gold isn't just for goblets anymore. Today, gold gets used in high-tech applications, from the semiconductors in your computer to the heat shields on NASA's space shuttle. Only copper and silver conduct heat and electricity better.

In this uncertain world, gold is valued because of its permanence, its beauty, and the fact that its value transcends borders and modern monetary systems. Not too long ago, the U.S. military was still issuing gold coins to fighter pilots in case they were shot down in hostile territory. It's comforting, somehow, to know that even now a hefty coin can be swapped for a ride to the border.

Colleen Kelly
December 14, 2005

Want to learn more?
Get answers to more questions about gold
from the World Gold Council
http://www.gold.org/discover/knowledge/faqs/index.html

From: KnowledgeNews