Gold has been on this earth since the existence of planet. Through years of mining, panning and digging most of the world’s gold supply has been extracted. The initial findings were easier to obtain and didn’t require the use of modern day heavy equipment. Now gold is much harder to obtain and it is more difficult to find new sites.
Gold is rare, in fact it is estimated that all of the gold ever mined can fit into a 20 yard cube. If you look at any natural resource that is in limited supply you will find that it has value. In fact that rarer it is the more valuable it is likely to be. Diamonds for example can be very expensive. The larger the diamond the more rare it is, and the more valuable. Gold is a natural resource that is in limited supply and has high demand.
Gold has been a trusted medium of exchange for over 5,000 years. From Pharaohs and Kings to modern day governments, gold has been the world’s real form of money for millennia. In fact even the United States Government considered gold to be money up until 1971. The reason that gold is considered to be the only real form money is because there is a limited supply of it. A countries money supply used to be equal to that of its gold supply. It kept central banks in check as they could not print money in excess of their gold reserves.
Gold has uses beyond its use as a form of money. The electronics industry uses it in cell phones, computers and many other types of circuitry. The jewelry industry uses it in rings, necklaces, bracelets etc. The dental industry uses it in fillings. The demand for gold in these industries is strong and should continue to stay strong so long as the price of gold doesn’t make it impractical for use.
Gold is also used as an inflation hedge, therefore it has investment demand. From hedge funds and central banks to individuals, people around the world create demand for gold due to its ability to keep up with inflation. This is why gold is so valuable today, demand is outstripping supply. Demand continues to grow as the economic crises worldwide continues on its path of slow recovery. Investors around the world are concerned with preserving their assets as nations print money (digitize money) to bail themselves out. This simple set of circumstances has driven the price of $252 an ounce in 1999 to $1,400 in 2010 for an ounce of gold.