Why does gold have value?

gold is a precious metal for which many turn when it comes to investing some of the money they have set aside, or to conserve value for the future. A little everywhere we find shops that allow us to buy and sell gold, and we see this metal as a symbol of power attributed in various ways. Portuguese try to counteract the rise in prices that have been felt, it is worth questioning why gold has value.

Use of Gold in Ancient Civilizations

Before we understand why gold is valuable in today’s times, it is important to see why it was so used by ancient civilizations, and why its value has risen over time.the theuro has been used for at least five thousand years as a precious metal, having been used by several ancient civilizations – including the Romans – as a bargaining chip. The metal has some characteristics that help it to be valuable for use as money, and as such as a bargaining chip. There are other important characteristics such as accepting a product as money, including having a limited supply to achieve value. Before money as we know it today, various products were used as money, including salt.For something that can be used as money a society needs to have the following characteristics:Durability: needs to be durable to allow savings, investments, and other uses;Portability: needs to be easy to carry and handle to facilitate changesDivisibility: needs to be divisible to facilitate transactionsoffer limit: a coin with unlimited supply would have no valueUniformity: without uniformity, it would be difficult to quantify valueGold fits almost all, being its portability, uniformity and divisibility improved through the creation of coins and bars. Precious metal does not deteriorate over time, and because it is difficult to find, it retains its value. The use of gold by ancient civilizations as a bargaining chip helped it to flourish, and it remained popular for a long time. gold was used indirectly as a currency until 1971, when the United States stopped allowing the redemption of dollars for gold at a fixed price of 35 dollars per ounce. jewelry with high value, including sentimental. This sentimental value also helped the appreciation of gold. over time.

The psychology behind the value of gold

The properties of gold make the precious metal a great solution for creating an exchange currency, but they do not explain why it still has value today, at a time when we don’t pay for groceries in the supermarket with gold coins.At this point, the reason is based on the psychology that sustains the relationship between human beings and the precious metal🇧🇷 Some experts in this field argue that gold is an ancient relic, which does nothing and is of no use today, except for some industrial uses and for jewelry. However, the beauty of gold and the difficulty in finding it create an in the human being that makes it useful for subjective experiences. Gold is the chosen material for medals, special engravings, or jewelry with unique meanings, not only because it does not deteriorate, but because its beauty attracts us.This attraction creates a perception of greater value, which also contributes to the price of the precious metal in today’s markets. Gold is so precious that it is an essential part of the reserves of several central banks around the world. These central banks, like the Bank of Portugal, have among their main objectives the price stabilization and the creation of favorable economic conditions.

Central bank gold reserves

O gold is considered a safe asset which can be used as a store of value. This statute has seen its importance increase in times of crisis, in which investors fear riskier assets, such as shares, and seek the maximum possible security, as a rule gold and the real estate market. The history of gold as an asset has more of five thousand, and as such your safety is established. For close to 50 years, between 1871 and 1914, there was a “Golden pattern“, in which fiduciary currencies such as the euro and the dollar were linked to the precious metal. Until 1971, this “gold standard” was maintained indirectly, with nowadays the value of gold is determined by the laws of supply and demand. The precious metal plays a crucial role as an asset, and is used as a reserve by central banks around the world..According to the World Gold Council, an organization that promotes the gold industry, the largest gold reserve in the world belongs to the United States, which have more than eight thousand tons in their vaults.Portugal appears among the 15 largest reserves (in 14th place) with more than 382 tons of gold. This puts Portugal ahead of countries like Spain, the United Kingdom, Belgium, and Brazil. These reserves are not limited to staying in the vaults, but are used as source of income through complex financial operations called swaps.Between 2018 and 2019, for example, the Banco de Portugal accumulated 109 million euros through these operations, without selling a single gold bar. Close to half of Portugal’s gold reserves are at the Bank of England, the Bank of International Payments (BIS), and the Bank of France.

Gold against inflation?

While some resources exist in abundance in the world, gold is relatively scarce🇧🇷 This scarcity, along with other factors (mentioned above) that give gold its value, has helped the precious metal to be seen as a inflation safe investment.Hélder Rosalino, administrator at Banco de Portugal, recently stated that the demand for gold should remain high at this time, given that in the 1970s, when shocks in the price of oil led to a rise in inflation, the precious metal has proven its usefulness as an investment.As of this writing, gold has also shown strength against inflation. Each ounce of gold started trading at €1,594 in 2022 and has since risen by over 7.5% to €1,714.60. market when buying the physical metal. If you are looking to sell your gold, remember that there are essential precautions to be taken.