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Why Is Gold Valuable?

Used for investments, jewelry, and in the production of medical and electronic devices, gold is a sought-after commodity. As of March 2021, the price of gold was slightly less than $2,000 per ounce, a price that remains up considerably when compared to the last decade. The enduring value of gold makes it one of the most valuable precious metals. Learn more about why gold holds such value for collectors and investors.

What Properties Make Gold Valuable?

MacBook Pro set up in coffee shop displaying graph of gold value over time
Image via Unsplash by austindistel

Gold retains its universal appeal because of three specific properties: durability, malleability, and scarcity.

Durability

Gold holds a distinct quality that few precious metals can claim. It resists rust and tarnish and can only be corroded under particular conditions. Gold’s durability is one of the reasons it continues to hold value throughout history. Gold is the proverbial fountain of youth among precious metals, retaining its appeal and vitality across the centuries.

Malleability

Even if you consider durability and scarcity alone, gold wouldn’t enjoy its valued metal status if it didn’t possess superior malleability characteristics. Malleability refers to gold’s ability to be shaped. You can beat it with a hammer or use large rollers to extend it to the desired thickness. 

When compared to other metals, gold exceeds them in malleability. According to the American Museum of Natural History, “Gold is so malleable that a single ounce of it (about the size of a quarter) can be beaten into a thin continuous sheet measuring roughly 100 square feet. It would take 576 ounces (or just 36 pounds) of gold to completely cover a football field or a whopping 367,211 ounces (or about 11 tons) of gold to completely blanket all of Central Park.” 

Pure gold, which is quite soft for metal of its type, can be handled and shaped without any difficulty. This property makes this type of gold particularly desirable for many applications, from jewelry making to manufacturing. While pure gold is too soft to stand up to the demands of everyday wear, it can be combined with various alloys to give it durability and strength.

Scarcity

Gold wouldn’t be so valuable if it was abundant in the Earth’s crust. 

As of Feb. 1, 2021, the World Gold Council estimates that approximately 201,296 tonnes of gold have been mined from above-ground stocks. “Since gold is virtually indestructible, this means that almost all of this metal is still around in one form or another,” the council observes. “If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure around 22 metres (meters) on each side.” Approximately 50,000 tonnes are categorized as below-ground reserves.

When Did the United States Abandon the Gold Standard?

Throughout much of history, gold served as a form of currency. Since gold was synonymous with money, the idea of owning gold held little appeal. In 1973, the United States terminated its adherence to the gold standard. In 1974, U.S. President Gerald Ford repealed a former prohibition on owning gold or conducting gold transactions. 

Today, you can purchase and sell precious gold bullion and coins from gold and jewelry dealers. The Federal Reserve Bank does not buy or sell any precious metals. The U.S. Mint makes bullion available through dealers.

According to the Federal Reserve Bank of Richmond, no country bans private ownership of gold.

Why Is Gold Production an Influencing Factor in the Value of Gold?

The state of gold production worldwide affects the price of gold. A January 2020 Mineral Commodities Summaries report by the U.S. Geological Survey noted that gold mining production had not witnessed major changes during the last four years. 

Domestically, U.S. gold mining production is estimated at 200 tonnes. This figure is approximately 11% less than the amount in 2018, which had an estimated value of about $9 billion.

How Does Investment Demand Affect Gold’s Value?

Gold maintains a certain level of investment demand from exchange-traded funds. These types of funds carry the shares for metal and issue that investors buy and sell. 

Global investment trends also influence gold’s desirability and value. Consider this example from the World Gold Council. In a 2019 Gold Demand Trends and Full Year and Q4 2019 statement, the council reported that gold purchases from various investment sources added up to about 1,271.7 tonnes. According to the council’s report, “Low interest rates and geopolitical uncertainty pushed holdings of gold-backed ETFs to record highs of 2,905.9 tonnes during the fourth quarter of 2019,” the latest period for which information is available. 

Why Does Gold Offer Wealth Protection?

Gold has been able to retain its value through periods of economic gains and losses. Despite recessions and stock market fluctuations, investors move toward gold investment because of its long-term value. In an article describing factors that influence the price of gold, Investopedia observes, “When the expected or actual return on bonds, equities, and real estate fall, the interest in gold investing can increase, driving up its price. Gold is viewed as providing protection during periods of political instability as well.”

Gold’s ability to hold its value despite currency devaluation or inflation makes the precious metal particularly valuable from an investor’s perspective. When you consider factors such as the demand for gold worldwide, the quantity of gold held in bank reserves, the value of the U.S. dollar, and gold’s universal appeal, you can begin to appreciate the level of wealth protection gold offers to investors worldwide. 

Get Your Gold Appraised Today

With gold prices remaining at record-high levels, now is the best time to sell gold. Do you have old gold jewelry pieces stored in your jewelry box or safe deposit box, and you aren’t certain what to do with them? Bring your gold jewelry to the professionals of Las Vegas Jewelry & Coin Exchange. We pay cash for the gold you own. 

Visit Las Vegas Jewelry & Coin

Contact us online or give us a call at 702-547-1670 to schedule your gold appraisal. Visit us today at our Henderson, Nevada, showroom to get a free, no-obligation cash offer for your gold. 

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