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As gold spot prices continue to skyrocket (around $4,500/oz at the time of writing), it begs the question: Why is gold rare? Why is it so valuable? And why has it always been considered valuable?
To understand gold’s rarity requires an ancient history lesson. Indeed, it requires looking past earth itself to the cosmic origins of the molecules that would eventually form what we know today as gold. Let’s explore why gold is rare – and what it means for the future of precious metals enthusiasts.
Gold is rare because it is extremely difficult to form. Gold forms during extreme cosmic events, like neutron star collisions and supernovae. Gold atoms require immense energy to form, and only form during intense and rare cosmic events.
The gold we have here on earth is found at a very low concentration. Gold is found in the earth’s crust at a rate of around 4 parts per billion, or around 0.000000004%. As you can imagine, locating and extracting gold in significant quantities is extremely difficult.
It’s believed that there are larger concentrations of gold deep in the earth’s core, but those stores remain inaccessible to humans (at least with current technology).
So, in short, gold is rare because it’s formation itself is extremely rare, requiring rare cosmic events. And the gold which did reach earth during the early days of our planet is primarily located in the earth’s core, far out of our reach.
Rarity does not automatically make something valuable. So why is gold valuable?
Interestingly, gold has always been valuable for much of human history. Even when little was understood about the rarity or scientific origins of gold, humans have long been attracted to the shiny metal.
Some factors relate to gold’s physical properties. It’s shiny, resistant to corrosion, malleable, and has a distinct yellow luster that is visually appealing. This combination of properties made gold attractive on a basic level, and led to its use in jewelry, ornamental decoration, and symbols of status and wealth.
The malleability and tarnish-proof nature of gold made it popular in ancient civilizations, simply because it was easy to work with. And its durability reinforced its allure. Unlike silver and other rare metals, which tarnished with time, gold retained its luster naturally.
Today, gold remains exceedingly rare. Estimates put the total amount of mined gold at around 10 billion troy ounces. For context, all the gold ever mined would fill up merely a 82×82 foot cube – or about the size of a small office building. Put another way, a large container ship could easily carry all the gold that has ever been mined on the planet in a single load.
Today, gold remains rare – but what does that actually mean? Here are just a few examples:
As global wealth surges, individuals, businesses and governments are always seeking assets to park capital in. Some have the goal of capital preservation, while others seek aggressive returns. Regardless of the stated goal, gold’s rarity gives it a unique place in the global financial system.
