Wednesday, November 10, 2010

The Value of Gold - Today And Yesterday

Every culture throughout history has known of gold and treasured it. Unlike many other metals, gold can be found in its natural state as nuggets that can be very pure without further refining. Gold may have been the first type of metal ever known to humans, for archaeologists have found small nuggets of natural gold in caves that were inhabited by humans as long ago as 40,000 B.C.E. The oldest solid evidence of gold are pieces of jewelry from ancient Egypt around 3000 B.C.E. These items are also the oldest known examples of jewelry of any kind that have been found.

The discovery of King Tutankhamen's tomb in the 1920's revealed the extent and mastery of working in gold that ancient Egyptians possessed. Among some of the items found in this 2000 B.C.E. tomb were many pieces of gold jewelry and a sarcophagus that weighed over 3,000 pounds. Inside the sarcophagus were 3 coffins nested inside each other, with each coffin more elaborate than the other. The two other coffins were made from wood and were covered with sheets of gold. The inner coffin was pure gold, and weighed over 240 pounds. Inside this coffin the face of the mummified king was covered with a death mask that was made from pure gold and precious gems that weighed 220 pounds.

While gold was treasured by the ancient Egyptians, it wasn't used as money for trade and exchange. Barley was the favored material for use as a medium of exchange, while gold was given an even higher spiritual value in that the metal could help pay the departed's way into the next world. The first evidence of gold being used as a form of currency occurred in the 7th century B.C.E. in what is now western Turkey.

So why has gold always been and continues to be valued so highly? Gold has some very unique qualities:
  • Pure gold's luster does not tarnish or corrode.
  • One ounce of pure gold can be hammered into a sheet as thin as 5 millionths of an inch thick and cover over 100 square foot. That is so thin that 1,000 of these sheets piled on top each other would equal one thickness of a sheet of newspaper.
  • Gold is a very dense metal. One cubic foot of pure gold would weigh more than a half of a ton.
  • The visual beauty of the metal also plays a part in its value.
All of these attributes are part of the reason for gold's high value, but the main reason is its scarcity. Even with the estimation that 75 percent of all gold that has been produced has been extracted since 1910, gold remains one of the rarest metals found on earth. How rare? Imagine using a simple kitchen measuring cup, and measuring out 1 million cups of earth into a pile. How much gold would be contained in this pile of earth? 4 thousandths, or 0.004 of a cup! Compare that with the 56,000 cups of iron contained within the same pile of earth and you can get an idea of how rare gold is, and the reason for its value today and yesterday.

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