Gold is valuable for a number of reasons. It’s very rare and finite, with some estimates suggesting that just a single Olympic swimming pool’s worth exists in the entire world. It’s also extremely stable, able to last for an extremely long time without corroding or being spoiled.
While new gold is mined regularly major gold producing nations make less than 500oz of gold per year, and much of that is used for jewellery or industrial purposes.
This means that there will never be enough gold for everyone, and gold that exists is not going to decay or be destroyed.
Physical gold has an intrinsic value. Therefore unlike equities or digital currencies, its value can never fall to zero. It will always be worth the cost of extracting it from the ground. For this reason, gold has always been used as a store of wealth especially during uncertain times.
Although its price changes, one of gold’s principle advantages is that it’s a way to keep your money safe from inflation.
The UK is one of the only countries in the world where wages are falling and the economy is growing, and inflation is rising rapidly as a result, meaning that sums of money will become worth less and less in real terms as time goes on.
Worse, interest rates remain low, which means that most sums of money in most banks do not gain value in real terms. Gold, on the other hand, holds a consistent value, meaning that you will still be able to exchange it for a reliable amount of money no matter the inflation rate.
If you take an ounce of gold and a £20 bill in 1920 both are worth the same and could buy a designer suit. If you fast forward to today’s value of currency, £20 will barely cover the train ticket to purchase this suit however an ounce of gold is worth close to £1,000 an ounce. Can see how gold maintains its value and purchasing power over time (as opposed to holding cash)?