Gold As Money
Long considered the most precious of precious metals, gold has played, plays and will continue to play an important role as a store of value.
Gold is believed to have first been used by the Egyptians and Sumerians as far back as 4000 BC. Gold was prominent in Greek, Roman and Oriental cultures as a currency and store of value by circa 1000 B.C. and its role in monetary systems has increased since then. Gold also holds a second role as a commodity; mining companies mine gold while jewelers and other manufacturers buy it.
As a commodity, gold has many practical uses due to its inert nature and malleability. From shielding of solar panes on satellites to scanning-electron microscopy, gold has a wide range of industrial applications in addition to its aesthetic appeal and use in jewelry. Whether gold jewelry is categorized as use as a commodity or as a store of value is debatable, but in effect is probably a bit of both.
Gold has many metrics worldwide:
A one troy ounce bar is standard in North America – its mass about 31.1035g.
The Indian 10 Tola bar is equivalent to 3.75 troy oz. or 116.64g
The Chinese 5 Tael bar is equivalent to 6.017 troy oz. or 187.145g
The Thai 10 Bhat bar is equivalent to 4.901 troy oz or 152.44g.
As currency gold has two functions: a medium of exchange and a store of value. Due to gold’s monetary role, today it is in direct competition with fiat currencies as a store of value. In an era of dizzying government debt there is a general consensus among policymakers that paper should prevail in investors’ minds over relics such as gold, especially when printing trillions in fresh currencies year after year.
Over the past half century many governments have divested themselves of gold bullion that was accumulated over even longer periods of time. Ironically, gold that historically added stability to currencies was being actively divested in order to illustrate the instability of gold as a store of value. As bullion reserves are finite in nature this practice cannot go on indefinitely.