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Why is gold valuable? Insights into its unshakeable market status

Why is gold valuable? Insights into its unshakeable market status
Bogdan Stojkov

Gold has captivated human civilizations for millennia and is revered for its glamour, rarity, and enduring value. While modern economies have shifted towards digital currencies and paper money, gold remains an enduring symbol of wealth and stability. In this article, we’ll answer why is gold valuable and discuss its unshakeable status in the market.

About gold

Since ancient times, gold has held a special place in human societies. From the adornments of pharaohs to the treasuries of empires, gold has been a symbol of wealth and power. Its scarcity, malleability, and resistance to corrosion made it ideal for crafting jewelry, coins, and other artifacts. Furthermore, across cultures and civilizations, gold emerged as a universal medium of exchange, facilitating trade and commerce.

Intrinsic properties of gold

Gold possesses several unique characteristics that contribute to its enduring value:

  • Scarcity: Gold is relatively rare compared to other metals, with limited reserves available for extraction;
  • Durability: Unlike paper currency, which can degrade over time, gold is virtually indestructible, maintaining its shine and integrity for centuries;
  • Portability: Despite its density, gold is highly portable, allowing for easy storage and transportation of significant value in a small volume;
  • Divisibility: Gold can be divided into smaller units without losing its intrinsic value, making it a flexible medium of exchange.

Why is gold a hedge against inflation?

One of the key reasons behind gold’s enduring value is its role as a hedge against inflation. When inflation erodes the purchasing power of fiat currencies, investors often turn to gold as a store of value. Unlike paper money, which can be printed in unlimited quantities by central banks, the supply of gold is limited by its geological availability.

Gold as a safe haven asset

During times of geopolitical turmoil or financial crisis, investors flock to gold as a safe haven asset. The perceived stability and universal acceptance of gold make it a preferred store of value during periods of uncertainty. In contrast to stocks, which can be volatile and subject to market fluctuations, gold tends to maintain its value or even appreciate during times of crisis.

The role of central banks and institutional investors

Central banks play a crucial role in the gold market, holding significant reserves of the precious metal as part of their foreign exchange reserves. These reserves provide stability and confidence in the value of a country’s currency, as gold is universally recognized as a valuable asset.

Institutional investors, including pension funds and sovereign wealth funds, also allocate a portion of their portfolios to gold as a diversification strategy. This institutional demand provides support for gold prices and reinforces its status as a viable investment option.

In the following table, we’ll showcase the central bank gold reserves of the top 5 countries around the world:

CountryGold reserve
United States of America8,133.46 tonnes
Germany3,352.65 tonnes
Italy2,451.84 tonnes
France2,436.88 tonnes
Russian Federation2,332.74 tonnes
Table 1: Gold reserves by country (top 5). Source:

How to buy gold?

Although you can physically buy gold, it’s also possible to invest indirectly in it via various different financial instruments, such as gold ETFs, CFDs, gold-related stocks, and even American Express.

Impact of gold mining on the environment

While gold’s allure may seem undeniable, its extraction comes with significant environmental and social impacts. Gold mining can lead to deforestation, habitat destruction, water pollution, and displacement of indigenous communities.

Additionally, the use of toxic chemicals such as mercury and cyanide in the extraction process poses risks to human health and the environment. As consumers become more aware of these issues, there is growing demand for ethically sourced and environmentally responsible gold.

The bottom line: Why is gold valuable?

Gold’s enduring value stems from a combination of historical significance, intrinsic properties, and its role as a hedge against inflation and economic uncertainty. While its extraction may have environmental and social consequences, its status as a safe haven asset and store of value remains unshakeable. Whether in times of prosperity or crisis, gold continues to glitter as a symbol of wealth, stability, and enduring value in the ever-changing global economy.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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