The Golden Timeline: Tracing History and Market Forces Behind Gold’s Value
“This article provides valuable insights for enthusiasts and investors, connecting the dots between gold's history and its role in today's markets. By combining thorough research with a clear focus, we explore why gold holds its esteemed position as a store of value, as well as understanding the complex factors driving its price changes in our modern economy.”
Before we dive into the history, we need to understand what Gold Bullion is. The term defines “a tangible and highly sought-after investment option, captivates financial enthusiasts and experienced investors alike. As a crucial component in wealth preservation and portfolio diversification, gold bullion comes in various forms such as gold bars and gold coins.”[1]
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History of Gold
Gold has a captivating history that transcends time and place, evolving from its early role in rituals to becoming a universal currency and store of wealth in human civilization. Even today, it remains a sought-after investment due to its perceived safety and potential for value appreciation.
With a history spanning thousands of years, gold carried cultural importance well before the Egyptians fashioned elaborate artifacts from it. Recognized globally, gold became a symbol of affluence and well-being.
Around the sixth century BCE, gold emerged as a form of currency as merchants sought a standardized means of exchange to facilitate trade. The introduction of stamped gold coins marked a significant advancement, offering durability and ease of use compared to other forms of currency like grain-based debts. This transition was a natural progression, given gold's widespread acceptance in various cultures.
With gold established as commodity-based money, its importance only grew, solidifying its position as a cornerstone of economic systems worldwide.
The role of Gold
Gold's role as a currency underwent significant development, particularly during the 17th and 18th centuries when many nations adopted the gold standard. This system tied the value of a country's currency to a specific amount of gold, ensuring stability and confidence in the monetary system. For instance, the U.S. fixed gold at $20.67 per ounce until 1933, while the British government set it at GBP 3,17 shillings and 10½ pence per ounce.
However, economic challenges led to the gradual abandonment of the gold standard in the early-to-mid-20th century. The Bretton Woods Agreement in 1944 established the U.S. dollar as the global reserve currency, allowing for more flexible exchange rates. Finally, in 1971, the U.S. completely ended the gold standard due to an inability to maintain the fixed exchange rate. This move, coupled with the transition to a fiat currency system, led to a significant rise in gold prices.
Today, gold's value is influenced by various factors, including supply and demand dynamics, economic conditions, geopolitical tensions, and mining costs. While gold no longer serves as the foundation of monetary systems, it remains a popular investment choice and a reliable store of value worldwide.
Refer from: https://www.investopedia.com/gold-price-history-highs-and-lows-7375273
Gold Production
Globally, the major gold mining players are China, South Africa, the United States, Australia, Russia and Peru. The quantity of gold produced worldwide directly impacts its price, reflecting the balance between supply and demand. Gold production reached approximately 3,000 metric tons per year in both 2020 and 2021, down from its peak of around 3,300 metric tons per year in 2018 and 2019.
Despite an uptick in production around 2010, gold mining output has remained relatively stable since 2016. One contributing factor is the depletion of easily accessible gold reserves, forcing miners to dig deeper to access quality deposits. The increased difficulty in accessing gold brings about additional issues: Miners face more hazards, and there's a greater environmental impact. Simply put, it costs more to extract less gold. These factors contribute to higher production costs for gold mines, occasionally leading to elevated gold prices.
What Sets Gold Apart: Unravelling Its Value
Gold is valuable because it has been seen as a symbol of wealth throughout history. People agree that it holds value, both from the past and into the future. Its durability and resistance to wear make it a good way to preserve wealth. Additionally, gold is used for making jewellery and in technology, adding to its appeal.
Overall, its historical significance, agreed-upon value, stability, and usefulness contribute to why gold is highly valued.
Refer from: https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx#citation-7
We would have understood why gold holds its esteemed position as a store of value. As we conclude this exploration, we've gained insights into why gold has maintained its revered status as a store of value throughout history. Stay tuned for the upcoming part, where we delve into the intricate factors steering gold price fluctuations in today's dynamic economic landscape.