When you think of something with a high monetary value, you most likely picture something made of gold or gold in color. While it is the image of gold in our minds that symbolizes something high in monetary value, gold seems to have no intrinsic value as we now use paper money rather than materials, which leaves the value of gold to be in what can be made out of it, such as jewelry.
While gold was considered to be of great value in the past when it was in materials that were traded and displayed to show wealth, the use of paper money and the rise of cryptocurrency has led to a decrease in the value of gold, making it possible for gold to one day be worthless.
Continue reading to learn why gold is becoming worthless. Also, continue reading to learn the current value of gold as well as why gold was thought so highly of in historical contexts.
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Reasons Gold Will Become Worthless
Money itself is only worth the value we give it. You may think that the piece of paper in your wallet is worth the number that is displayed on it, but that is only because, as a society, we have determined that that piece of paper is worth that numbered value when exchanged for a good or service.
It was this same idea when gold was introduced. As prices have changed over the years, the value of money as well as gold has also changed. We are currently also seeing a shift when it comes to spending and saving our money.
This shift is the result of technological advancements, especially when it comes to banking, as many now no longer carry paper currency. There are two main scenarios that can lead to gold becoming worthless in the future.
These scenarios are:
- The destruction of the economy to the point where the value of items is mainly determined by the practical purpose of the item.
- The stableness and security of cryptocurrency eventually replacing gold and other monetary items.
How Crypto Can Lead to Worthless Gold
As previously stated, the value an item has is mainly determined by what we as a society have deemed for that item, such as a five dollar bill being worth five dollars or a quarter being worth 25 cents when exchanged for an item or service.
It is eventually possible for cryptocurrencies to work in this way. Cryptocurrency is very different from the traditional currency we use today as it is entirely virtual, meaning there are no physical coins or notes that can be used to represent the currency.
Since the mid-2010s, cryptocurrencies were developed to serve as this idea of moving from the traditional money exchange we use today.
Cryptocurrencies work using a “blockchain,” which is a virtual chain of blocks that contain a batch of transactions as well as other data. Through this method, the data is contained and cannot be changed or moved.
If society shifts more to the use of cryptocurrency, gold will decrease in value as gold serves as “hardware” money which helps to back up the virtual value of the notes and coins we use today.
When the money we use today is no longer of value, the gold we use as a “hardware” to determine the value of that money will also no longer have value.
Value of Gold
The value of gold does not depend on the amount we assign to it when exchanging it for a good or service as we do not use gold for this purpose; instead, we use notes, such as dollars, or coins, while using gold more as a store of value.
The Price of Gold
Some common uses for gold which contribute to its value are:
- Investment purposes
- Jewelry making
- Manufacturing electronics
- Manufacturing medical devices
The price of gold as of March 2021 was $1,700 per ounce of gold. This amount is approximately more than $300 lower than the price of gold was recorded in September of 2020.
The price of gold and the value of the U.S. dollar are inversely related. This means that if the value of the dollar rises, the price of gold decreases and vice versa.
During inflation, prices tend to rise, causing the value of the dollar to decrease and the price of gold to increase.
Demand for Gold
In 2019, the jewelry industry accounted for about half of the gold demand. Gold has been used to make jewelry for centuries and is often used as a sign of wealth in this way.
Historical Value of Gold
Gold is believed to have first been discovered in rivers and streams throughout the world. The beauty and luster of the gold would catch one’s eyes.
In 4000 BCE, in what is now Eastern Europe, gold was first used to make decorative objects. Gold would also be used to create jewelry as well as idols for worship.
It was not until 1500 BCE in ancient Egyptian times where gold became the first medium of exchange for international trade. This is the first instance of gold being used in the sense of using money today.
While there is still a price to gold today, it is possible that gold could become worthless in the future. The price of gold and the value of the dollar have an inverse relationship, meaning that as the value of the dollar increases, the price of gold decreases.
Despite the worth we assign to those who have objects that look golden, gold itself serves mainly as a “hardware” behind the money we use.
There are two scenarios for the future which would cause gold to become worthless. The first is that the world becomes so damaged and destroyed that we only value items by their practicality.
The second is that cryptocurrencies become safe and secure options for transactions causing traditional money to no longer be of use.