Why Is Gold Money?

Yesterday I asked then question, Do You Own Gold? I gave my reasons why I, and many others, believe that it is important to own some gold as insurance against economic calamity.

I realize that many people may not even understand why gold is important or why it is even considered money. So today I would like to explain.

First, gold has intrinsic value. That means that even if it is not formed into coins, it has value. People continue to find new uses for gold every year. It is the most corrosion-resistant metal known to man. It is the best conductor of electricity. That is why they make gold plated audio cables...no loss of signal. It is beautiful, which is why it is formed into jewelry. There is only so much gold in the world so when we look at all of the uses for gold, we understand why it retains its value.

Gold is easily divisible. This means that it is easy to form it into extremely small coins or heavy golden bars.

It is durable. It will not rot, rust, corrode, break, or evaporate. It is chemically inert, so it will not react with other chemicals.

It is convenient. You can carry your entire wealth in your pocket. Not like having all your money tied up real estate.

It is consistent. 24 Carat gold is the same everywhere. No danger in getting differing qualities.

Finally the most important fact about gold. It cannot be created by governments or banks. Oh, they may try to add impurities, but that is easily discovered. This one fact is why governments and banks bad mouth gold at every opportunity. If you believe what the government tells you, then they have accomplished their goal. I can tell you this, people in China, Japan, and other countries around the world are buying gold. They are concerned about what the governments are doing to their respective paper currencies. As the government increases the supply of paper or digital dollars, the value of those dollars goes down. Gold is not affected by governments except to increase in value relative to the paper dollars.

So, do you own any gold? Well, what are you waiting for?