Of all the minerals that are extracted from the land, none is more useful than gold. The usefulness of gold derives from a variety of very special properties. Gold is a good conductor of heat and electricity. It is the most ductile and malleable metal. Transparent sheets, with a thickness of 0.00001 mm, can be easily made or stretched into wires with weights of 0.5 mg / m.
Gold dissolves easily in mercury to form amalgams. It is one of the least chemically reactive metals. It does not lose luster, nor does it burn in the air. It can be alloyed with other metals, it can be melted and cast into incredibly sharp shapes. As if all this were not enough, it has a wonderful and bright color.
Definitely , gold is a memorable metal that occupies a privileged place in the human mind. No other element of the same nature has a more visible and prominent place in our society.
Throughout our planet’s history, almost all established cultures have used gold to symbolize power, beauty, splendor, prosperity, and purity. Gold also symbolizes wisdom, constancy, wealth and light.
I have talked about gold several times in my texts and it has allowed many of my jewelry designs to materialize, but rarely have I addressed its uses beyond jewelry.
At the request of some of my readers and clients, today I begin a series of articles about the many uses of this precious metal that does not exhaust its ability to captivate us. I will start with one of its most interesting and debated utilities throughout history: Gold as a bargaining chip.
History of Gold as a bargaining chip
Because gold is highly valued and its supply is very limited, it has long been used as a bargaining chip. The first known use of gold in transactions is said to date back more than 6000 years. Amazing!
Its characteristics as a durable, divisible, homogeneous and difficult to falsify good made it the liquid good par excellence in almost all cultures on the planet, which is why it was accepted to serve as currency of exchange.
The first gold coins were minted under the order of King Croesus of Lydia (a region of present-day Turkey) around 560 BC.
Why have we chosen gold as a bargaining chip?
For the preparation of this article I wanted to find out more about why, of the 118 elements that we find in the periodic table, gold is the one that we have used to choose as currency exchange. I have found a interesting article published by the BBC that states that a good bargaining chip must be stable, portable and non-toxic. It must also be rare enough, many people would be surprised how little gold there is in the world.
A very curious fact that this report contributes is that if each earring, gold coin, the tiny granules inserted in all the computer chips in the world, all the statues were put together Pre-Columbian, each marriage alliance and fused, it is estimated that what would result is a cube of 20 meters, approximately. It surprises you, right?
But the scarcity and stability of gold are not everything. In addition, gold has another quality that distinguishes it among all the adversaries of the periodic table: it is golden.
All other metals are silver except copper and copper corrodes, turning green when exposed to moisture in the air. Consequently another secret of the success of gold as a currency is its incredible beauty. A hundred-year-old piece of gold is still as shiny as the day it was made!
The Gold Standard
Some initial banknote prints were backed by government-held gold for each unit of money put into circulation. The so-called Gold Standard consisted of maintaining a gold reserve to back each banknote in circulation. Under this rule, anyone could present the paper money to the government and demand an equal value in gold in return.
One of the drawbacks of metals as currency is their weight, which is why banknotes soon became common, emerging as signed promises to deliver the amount in gold to their bearer that was indicated in them. Banks issued these notes taking care to maintain a balance between the money they had issued and the gold reserves that they kept in their safes, since otherwise, they would lose the trust of their customers.
The gold standard was used by many nations but over time it became too complicated and is no longer used by any nation. Since then, all major currencies are fiat, which means that the law of the country says that it must be accepted as payment, even if it is not backed by precious materials but by a promise.
Gold used as financial backing for currency in circulation was often held in the form of gold bullion. The use of gold bars or bars has minimal manufacturing costs and allows comfortable handling. Today many governments, investors and institutions hold gold investments in the convenient form of bullion.
Goodbye to gold as currency
Some experts argue that the problem with gold is that its supply is not keeping up with the needs of the economy. The supply of gold depends on what can be extracted from the mines and is insufficient as it does not correspond to the global supply of goods (related to economic activity in general and not only to mining), that the gold reserves are poorly distributed in proportion to the real weight of the economic activity of each country in the world.
Many countries in the 1930s avoided the Great Depression by unlinking their currencies from the gold standard. In this way, they were free to print more money and reactivate their economies.
Today gold coins are no longer in widespread use for financial transactions. However, gold coins issued in specific pesos are popular ways for people to buy and own small amounts of gold for investment. Gold coins are also issued as “commemorative” items. Many people enjoy these commemorative coins as they have both a collectible value and a precious metal value.
I hope you enjoyed this text. Now I would love to hear your opinion in the comments, for example about the gold standard, its advantages and disadvantages.
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Greetings and see you very soon.