Why Gold Is So Valuable And How The Industry Can Improve Transparency
Thu May 30 2024
Gold has increased in value over 12% since last year, hitting all-time record highs above $2,400 per oz in the first half of 2024. The recent explosion of interest and increase in the value of gold might seem like a one-time event—a frenzy caused by a combination of global factors—though that would be an incorrect assumption.
Investors, central banks and consumers alike must understand the history of gold exchange in order to forecast the future more accurately. For those working within the precious metals sector, committing to clear and transparent practices is critically important for building a reputation and a brand consumers can believe in and trust. As the economic activity around gold continues to flourish, a deeper understanding of the metal is important to make informed decisions on either side of the transaction—buying gold or selling it.
The history of gold, and the deep and enduring interest in the value of gold, began over 6,000 years ago in Eastern Europe, when it was used as jewelry and decoration according to the National Mining Association. Fast forward just a few years and by 1500 B.C., the shekel was used as an early form of currency in the Middle East—a coin made up of two parts gold and one part silver.
Since then, gold has been used in a variety of ways and for numerous reasons. From the time Babylonians were testing gold for purity using fire for the first time in 1350 B.C. to 1284 A.D. when the Venetians introduced the gold Ducat and Great Britain issued its first major gold coin, the Florin.
Considering the mining, use and selling of gold has been around for literally thousands of years—potentially one of the oldest industries on earth—I've noticed there is a pervasive lack of understanding when it comes to how gold is priced and what makes gold so valuable.
Influences On The Value Of Gold
For the past 25 years, since around the year 2000, gold has steadily increased in value. Here are some key factors why gold is so valuable in the 21st century:
• Economic hedge: Gold has historically been seen as a stable hedge against economic instability or recession. For that reason, many investors and even countries purchase gold to diversify their investments and achieve economic stability.
• Global socio-economic trends: As rising middle classes in emerging markets like China, India and Southeast Asia grow their wealth, the demand for gold, particularly in jewelry and as an investment, continues to rise. This demographic shift contributes significantly to the sustained demand and value of gold globally.
• Jewelry: The value of jewelry continues to increase because of the unceasing global demand for gold jewelry, averaging nearly $300 billion in global market size annually with no signs of slowing.
• Electronics: Gold has value beyond its appreciated aesthetics; gold is a very unique precious metal. Gold doesn’t corrode or tarnish and is a soft material which can be easily drawn out into narrow wires or plated into thin coatings. These qualities make gold an exceptional choice for use in electronics, circuit boards, electric vehicles, healthcare equipment and other vital technology sectors.
• Limited supply: Gold is a finite resource with a limited supply we continue to utilize. Mining gold is a difficult process and ecologically quite damaging, which contributes to the scarcity of available gold.
Gold retains its intrinsic and historical value as a result of its unique properties and its entrenched role across various sectors of human life. From ancient currency to modern technology, gold is valuable because of its practical applications, symbolic significance and its ability to act as a safeguard against economic volatility. Despite the leaps in technology and changes in society, the reasons why gold has been valued for millennia still hold true today, and likely will continue to do so for the foreseeable future.
Modern Gold And Alloy Markets
For anyone considering gold as an investment or a purchase, understanding its deep-rooted value in human history and its modern applications is essential. Sellers are also strongly encouraged to do their research and ensure they’re getting the highest price.
The factors that can impact gold prices include:
• Geographic location
• Quantity and quality of gold
• Knowledge of the industry
• Existing relationships
• Favoring virtual vs. in-person encounters
How Industry Leaders Can Prioritize Transparency
In general, firms and organizations working within the precious metal space have a major opportunity to continue to push transparency and customer education in their business practices. At my company, Alloy Market, we've made consumer education and transparency a priority. I've learned that consumers want:
• To be in contact with a real human who can educate them on how to sell gold and the pros and cons of various methods.
• Visibility into the process and the desire to experience transparency from beginning to end.
• To be recognized for engaging in an often emotional transaction selling heirlooms or family jewelry.
• Maximum pricing and value for their gold jewelry and gold bullion.
To accomplish this, I suggest business leaders invest heavily in their customer suppport programs. While product might seem paramount, it's often the relationships and trust that make the biggest impact on consumers.
Whether someone is planning to adorn themself with gold as jewelry, sell it or simply invest in it, it's important to remember why gold is so valuable: It isn't just a precious metal—it's a timeless treasure with a variety of unique use cases that continues to shine through the ages.
Source: https://www.forbes.com/