The story of gold begins some 200 million years after Planet Earth sprang into existence. Meteorites packed with gold and other metals bombarded the earth’s surface. The genesis of gold is presently believed to have originated in extremely rare and violent explosions in the far reaches of outer space. A massive star–at least eight times more massive than the Sun–collapsed. The element of gold formed after the collision of two neutron stars.
In an article by The Washington Post it is stated, “It has long been understood that Earth’s elements are of cosmic origin. Carbon and oxygen atoms in our bodies, for example, come from the interior of stars, where they were formed under high pressure and heat. They were later spewed into the universe in supernova explosions.”
Humans have known of the existence of gold since prehistoric times. Gold’s early uses were mainly ornamental; and its brilliance and permanence linked it to deities and royalties of early civilisations. The demand for gold was such that by 2000 BCE; the Egyptians had begun mining gold. The mask of Tutankhamun was constructed with two sheets of gold that were hammered together and weighs a total of 22.5 pounds (10.23 kg).
The minting of gold coins, however, began around 640 BC in the Kingdom of Lydia–situated in present-day Turkey–using electrum, an alloy of gold and silver. It was the beginning of the journey of money, currency and a world economy that was based around a common denominator that all humans understood.
The late astronomer Carl Sagan is quoted as saying that we are all star stuff. Gold’s status on earth as a shining embodiment of wealth is an echo of the dust from which the Solar System formed.
Gold’s Earthly Legacy
The lion’s share of gold is used to make jewellery to beautify and adorn ourselves. Due to the softness of pure 24k gold, it is usually alloyed with other metals for use in jewellery. Alloys with a lower karat rating contain higher percentages of copper, silver or other base metals. Demand for gold jewellery spikes around September during the Indian wedding season and in December before Chinese New Year celebrations–a pattern which is known as The Love Trade.
Gold is a rare highly malleable metal. Its versatility has allowed it to be used for ornamental purposes as well as for industrial use in electronics. According to 2019 statistics, some 13% of gold in the world is sealed within the devices which we use everyday to connect with the rest of the world. The use of gold allows for the rapid and accurate transmission of digital data from one device to another. Gold is a particularly excellent conductor of electricity as it neither corrodes or rusts. According to the World Gold Council, a typical cell phone may contain 50 mg of gold, worth about 50 cents. But since nearly one billion cell phones are produced each year, 50 cents in each phone adds up to a total value of $500 million.
Gold alloys are used in restorative dentistry, especially in tooth restorations, such as crowns and permanent bridges. The earliest medicinal use of gold can be traced back to 2500 BC. Chinese physicians used pure gold to treat furuncles, smallpox, skin ulcers and to remove mercury from skin and flesh. Today, the metal is primarily used to treat patients with arthritis and is utilised to reduce swelling, bone damage and to relieve joint pain and stiffness.
Gold leaf, flake or dust is used on and in some gourmet foods–notably in sweets or drinks as decorative ingredient. Pure metallic elemental gold is non-toxic and non-irritating when ingested.
Some of the gold that originated in the cosmos even makes it back to its celestial origins. Space vehicles are fitted with gold-coated polyester film to reflect infrared radiation and to help stabilise core temperatures. According to NASA, astronauts’ helmets are covered by a visor that is coated with a thin layer of gold to filter out the sun’s harmful rays.
The Gold Standard
Gold is one of the only currencies that has an intrinsic value. The history of gold as a currency and as a medium of exchange for goods and services dates back to over 6,000 years ago. This was a time when minting still did not yet exist and transactions were completed using pieces of gold.
In the 1870s, in an era of a booming world trade market, European countries adopted the gold standard. It guaranteed that the government would redeem any amount of paper money for its value in gold. This meant that transactions no longer had to be done with heavy gold bullion or coins, since the value of the paper currency was tied to something tangible and universally valued. Trust between trading partners increased and global trade grew. This decision, however, came with its own risks. Gold prices–and therefore currency values–dropped each time miners found large new gold deposits.
In July 1944, 730 delegates representing 44 countries met in Bretton Woods. The 1944 Bretton Woods Agreement pegged the exchange value for all currencies in terms of gold. It obligated member countries to convert foreign official holdings of their currencies into gold at these par values. Since the United States held the majority of the world’s gold, most countries decided to peg the value of their home currency to the dollar instead of gold.
Countries were required to monitor and maintain their currency pegs which they achieved primarily by using their currency to buy or sell U.S. dollars as needed. The Bretton Woods System, therefore, minimised the volatility of the international currency exchange rate. This helped global trade relations; and the increased stability in foreign currency exchange rates was a contributing factor to the successful support of international loans and grants from the World Bank and IMF.
In the early 1970s, however, the Bretton Woods System came to an end when President Nixon announced that the U.S. would no longer exchange gold for U.S. currency. The gold standard was replaced by the current regime that is based on freely floating fiat currencies. Fiat money is a term used to describe currency that is used because of a government’s order; and therefore the currency that must be accepted as a means of payment.
Gold in the Modern Economy
These days, the thought of carrying coins; let alone bars of gold as a significator of wealth will probably come as a shock to most of us. With the proliferation of apps and online banking, the only evidence of our money’s existence is the numerical figure in our bank account.
The chief benefit of a gold standard is that a fixed asset backs the money’s value–giving it an intrinsic value. Historically, the gold standard also spurred exploration and was the reason why so many dared to undertake highly risky voyages to find gold and increase their prosperity. This led to the phenomenon of the Gold Rush: the rapid influx of fortune seekers to the site of newly discovered gold deposits.
One major problem with the gold standard is that the size and health of a country’s economy grows dependent and reliant upon its supply of gold. The economy ends up having no real need to rely on the resourcefulness of its people and its businesses. Countries without any gold–or any other natural resource for that matter–are at a competitive disadvantage. The gold standard also makes countries obsessed with keeping or protecting their gold–leading them to ignore or downplay the more important task of creating a thriving ecosystem.
Although no longer used in most transactions, most nations hold a large amount of gold bullion in their vaults and gold coins remain a popular way to own the metal for investment purposes.
As for me, my ideas of gold are mainly cosmic. I am still enamoured by the thought that gold–and by extension humans–are nothing but stardust.