We often wonder why they invested in gold and why of their intrinsic value, its importance in the global economy, its direct relationship with money; why the gold standard, its daily price and functioning. We will try to resolve all these issues.

Gold, the noble metal coveted since the origins of the oldest civilizations. No other metal is found in nature has been more coveted, desired and sought after than gold its distinctive and characteristic golden yellow color, its malleability, its easy divisibility, his incorruptibility, his difficult adulteration and counterfeiting, its relatively easy removal and Of course, its scarcity (remember that gold can be found in nature at a rate of 0.0000005% den weight) has meant that this metal has such great importance to mankind, from its beginnings until today. Hence its intrinsic value. Although from the beginning were used countless items or goods in exchange or as money, – spices, livestock, salt, etc. .-, which are consolidated above all was the gold that even though the fractional minting coins par excellence and in further cases, silver was used, its true value, usually gold. Even now, today, oil is known as “black gold”, giving more prominence to the value of qe to own gold oil.

Gold standard

The gold standard to guarantee a ticket to determine their worth in gold, but stopped using it during the World War 1, as many countries that participated in it were forced to issue more tickets in excess of the capacity guarantee the same with its gold reserves. Another was re-established the gold standard after the 2nd World War. This one was called gold exchange standard, which remained stable until 15 August 1971. The difference between the gold standard and gold exchange standard is that the latter fixed the value of a currency in a given quantity of gold, and thus ensure that the issuer of the ticket could change at any time the value of the gold to the bearer. The currencies of excellence that guaranteed the gold exchange standard was the dollar and sterling. Switzerland was the last country in the world to abandon this pattern, in 1998.

Direct relationship between gold and money

The human being has needed since time immemorial, to exchange the goods obtained. Emerged as well, barter. For example, a fisherman could change some fish skin with a blanket, but the problem arises and the difficulty when you need other types of assets such as a bronze knife. There’s a blanket and then find someone to replace the blanket wanted and needed the bronze knife. The solution was to find a good that would be easily interchangeable, not pose a problem for the exchange and also easy to transport. Here comes in gold, which begins to be desired and coveted, not its usefulness, if not for market liquidity. We can get a quick and simple: Who has not seen a movie that takes place in prison? Well, we see that you are a smoker or not, cigarettes are treasured and used to exchange for other property, having cigarettes in prison, it means having liquidity and get the good you desire. Some practical examples clarify our ideas. Suppose that 1 kg. Salt equivalent to 5 grams of gold, and 5 kg of potatoes equals 5 grams of gold. And now imagine that 1 euro is the monetary value equivalent to 5 grams of gold, so that we can buy 1 euro or 1 kg or 5 kg salt potatoes. What happens from here is that 5 grams of gold have been replaced by a non-precious metal coin or non-noble, which coined recorded or see the value “1 euro”, so that money becomes represented by a sign. That’s when the form of price rises, but do not forget that its true value lies in representing the equivalent of 5 grams of gold.

Importance of gold in the world economy

As noted earlier, gold is the value most important refuge in times of crisis or inflation. Referring to the example of the 70s, during the American and world crisis, the price of gold rose from $ 35 due to fears of a decline in value of currency (paper money) for the effect of the crisis. When President Nixon abandoned the dollar / gold and announced that no more gold would be delivered in exchange for money, the value of gold rose to 350%. Since then, the value of gold has risen to 500%, which leads us to conclude that gold is more stable and suitable value for money. In addition, we also see through the crisis suffered by the various economies in the world that it really is unstable is the paper / coin.

If the paper / coin is not backed by legislation or forced tender laws, and if for any reason, the state is limited in its powers, gold becomes officially recognized as money if the state has all its powers and paper can be coin / currency assigning a monetary value, then the gold passes of currency or official money to be worth refuge, while the paper / coin suffers depreciation against other paper / currency of other states. We see that the way it is, gold does not lose or change their properties, and remains immune to crisis, depreciation and currency devaluations. Hence any state bases its economic structure from the gold reserves of the same and hence one of the main functions of gold jewelry apart, is his hoarding, no other commodity or product could be equivalent to gold and This is precisely what makes gold to be different from any type of property.

The conclusion is obvious: the gold coin is not used, but fully recognized and valid for all states and countries. In the medium to long term, the rising price of gold, generating confidence in the economic system and financial policy of a state, and of course, the central bank of the state or country. Whenever the financial market is in an uncertain time or investors lose confidence and provide economic difficulties, will come, swift, gold.

To summarize: the gold, besides, if a commodity is a monetary asset like no other.