The History of Gold
With no documentation of man’s first encounter with gold, it is safe to say that the discoverers of this shiny metal were oblivious of its impending impact on the ancient and modern world. Gold has become an important facet of every culture in the world. It is seen as a sign of wealth and prosperity while within some cultures it has been associated with gods and immortality. As a metal of magnificent qualities (i.e. scarce, does not corrode or tarnish to air, water or moisture, it readily creates alloys with other metals, is a good conductor of heat and electricity & is highly lustrous,) it has stood the test of history to remain the world’s most precious metal via its beauty, glamour and symbolism. Love has been declared for its glamour, wars fought for its intrinsic value and empires born around its symbolic power thus words cannot fully express the magnificence of this metal.
Throughout the history of man, gold has had various uses, but it is its value that has been fully exploited through its use as a form of currency. Gold is the world’s oldest international currency defining monetary systems for over two thousand years.
So how did gold come to be so sought after by humanity?
Throughout ancient history, before gold was used as a form of currency, it was sought after as a desirable commodity by the Phoenicians, Indians, and Chinese with slaves and prisoners sent to work the mines for it. The rich and powerful utilized gold’s beauty in the creation of precious jewelry and works of wonder which spurred its importance for these civilizations. Gold’s value was globally accepted and it was only until 500 BC that it was first used as a form of currency.
The Egyptians were the first to smelt gold in around 3600 BC learning to alloy gold with other metals for hardness and color variation. In Egypt, gold was a reserve of the royals and the gods. Credit goes to the Egyptians for inventing the lost-wax technique that is still used today in the making of jewelry.
The first evidence of this dates back to 500 BC with the discovery of the touchstone. The touchstone was able to test the purity of a stone by estimating the amount of gold in an alloy. It was during this time that the concept of standard coinage was first introduced. This was in Lydia, present day Turkey. It was achieved through minting of coins and stamping an emblem depicting its weight and value with the value of the lower currency having a much lower content of valuable metal.
Due to its scarcity, beauty, density and the ease by which it could be melted and shaped, it was desirable as a standard coin easing up trade that was before through barter exchange.
Gold coinage was further explored during the reign of the Greeks in 433 BC, who mined it throughout the Mediterranean and Middle East. Famed ancient philosophers Plato and Aristotle wrote about gold and even posited theories that gold was a dense combination of water and sunlight.
The Roman Empire furthered gold exploration in 50 BC. From diverting streams to mine gold hydraulically, to building sluices and underground exploration, the Romans are considered the masters of gold mining. The Roman Empire through this gold coinage was able to obtain spices from India, silk from China and other commodities they didn’t themselves produce. This facilitated the use of gold coins throughout the world.
In the thirteenth century, Frederick II is credited with introducing the metal currency to Europe. Gold coins had gained public trust by the 14th century prompting a wide demand for the precious metal as compared to other types of coins. This paved the way for the evolution of gold coins from being just a unit of weight to being a unit of its own value, the difference between the two been seigniorage.
Gold also paved way for the creation of the banking system. The goldsmiths, who held gold on behalf of the people for safe keeping, submitted a paper token given to the bearer of the gold, which was proof of the amount of gold vested on the goldsmith’s watch. The goldsmiths were able to create reserves. These reserves were in turn loaned out to other people thus inventing the banking system.
This was from the 18th century to the outbreak of the First World War in 1914.
The gold standard was a system where the currency of a country was linked directly to the weight of gold reserves. Great Britain was to apply this system, and through its economic power was able to influence other countries to follow. The gold standard ensured that there was a favorable international balance of payments as differences between countries was settled in gold ensuring a self-correcting mechanism, called the ‘price-specie flow mechanism’ set by economist David Hume. Countries with a balance of payment surplus would receive gold inflows while countries in deficit would experience an outflow of gold. The gold standard also helped maintain a fixed exchange rate as all currencies were valued by the gold standard.
Through this study of history, it is clear that gold has been a master of trade, and has stood the test of time. But is gold still relevant in today’s technological world?
Due to its lustrous characteristic, gold is an obvious choice for space exploration as it protects astronauts from the sun’s harmful radiation. With its ability to resist corrosion, gold today is used in communication appliances, defense systems and medical equipment.
Gold remains in use in jewelry as it is still unmatched in beauty and is awarded to winners, particularly in sports, as a sign of excellence. At the time of writing this, as an investment, gold bought ten years ago, will fetch 500% more if sold by today’s prices. It has been an extraordinary way to store wealth, particularly in uncertain times.
A ‘barbarous relic’ or ‘as precious as gold'? You be the judge.