Liquid Gold
A brief history of gold and discussion of its recent market performance
Though it’s difficult to pinpoint the exact time at which gold was discovered, historians generally believe it was found by different cultures across the world simultaneously. One of the first civilizations to discover and refine their gold was Ancient Egypt, as early as 4,000 BCE. Even in ancient civilizations, the precious metal inspired adornment and reverence: the first use of gold was for jewelry and religious tokens.
Gold first became used as widespread currency in 600 BCE, marking the beginning of the “gold standard” which lasted through the 1970s. Gold was found to be a suitable fit for currency due to its chemical properties. Gold is (of all the periodic elements) scarce, malleable, potable, divisible, fungible, and perhaps most important of all, durable. Gold can be stored over periods of time in darkness, in water, and in all sorts of conditions and forms. When gold coins were minted, this became the first time that a currency was made up of material directly appraised at the monetary value it was attributed to. While gold value could experience short-term fluctuation, its worth remained, and even accrued, in the long-term.
One of my favorite legends to tell is that of pirates, adorned with gold hoops all along their ears. As the stories go, this adornment served a purpose beyond fulfilling a costume designer’s vision. In the event of a pirate’s death, should their body be washed up on shore and found by honest passers-by, this gold on their body would afford the seafarer a proper burial. Similarly, and in a more modern context, lies the story of the traveling businessman with a Rolex on his wrist. If he finds himself across the world without knowing anybody, at the end of a business deal gone wrong leaving him penniless, his watch could buy his passage home. I love this fun take on jewelry as more than flashy accessory, but as wearable assets.
The workability of gold is what maintains its status as the metal of preference for jewelry. The fact that gold can be maintained and refurbished even after hundred of years of use allows for preservation of the integrity of original designs. Repurposing heirloom jewelry and making new creations from passed-down jewelry has shown me the value of gold as a medium which retains its value and can be reworked over and over.
At the time of this writing, gold is valued at $2,946 per ounce. This record-breaking high would once seem unthinkable, with gold traders even 15 years ago thinking it would never break $2,000. Now, as we look toward the future, predictions of surpassing $3,000/oz this year grow more and more likely to become reality. The projections go even farther, with some estimating a $5,000 (or even $10,000) cost of gold in the next 5-10 years. While these ideas may seem outrageous or even impossible, I’ve seen the price of gold increase since I started working in fine jewelry just 8 months ago, when the price of gold was unbelievable and sure to decline having reached $2,700 an ounce. To put this in perspective, the price of gold in 2015 averaged $1,158.86/oz and the cost of gold 25 years ago was $279.29/oz.
But how long will gold prices remain high? There are many factors which influence the gold market. Gold trends opposite of the American dollar, as during times when standard currency is weak, people flock towards the fungible alternative. Gold prices also surge during times of political unrest and economical uncertainty. The recent institution of tariffs from President Trump and unpredictability of global relations has the people seeking gold as a safety net for their savings and investments.There has also been a very recent discovery of 1,000 tons of gold in China, estimated to be valued at $80 million USD. While gold prices are more heavily influenced by demand than supply, this will likely influence extended outlook on the gold market, depending on how the findings are acquired and by whom. There certainly seems to be an over all trend of appreciation, with gold prices increasing more than 82% in the last 5 years.
Some investors believe that a strong and diverse portfolio has a 5%-10% holding in gold and precious metals. There are many ways to invest in gold: through ETFs, holdings in gold mines and production industries, and of course the physical material itself. There are preferences amongst all types of investments. In terms of collecting actual gold, many prefer bars for easy storage and larger holdings. Other collectors enjoy gold coins, and dive deep into the study of numismatics, as well as the gold value. Many enthusiasts enjoy investing in jewelry, taking advantage of the wearable nature of their assets and find the labor cost to be worth the price of their ability to utilize their holdings for decades before cashing in on their return. They also appreciate its divisible nature, such as taking off a single link from a cuban chain to exchange for its value by weight.
Ultimately, the appeal of gold lies not only in its monetary value but also in its utility value and the significance it carries. From gold’s discovery in ancient civilizations to its modern relevancy in industry, jewelry, and trading, gold remains a highly accessible and valuable resource across the world.
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