Last updated on August 13th, 2022 at 12:31 pm
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Gold is a precious metal that practically needs no introduction. It’s been viewed as a valuable commodity since the recording of history. Its discovery essentially drove U.S. expansion westward. It’s still a major player on the investment market.
Indeed, we practically know of gold’s status from the moment we start forming memories. But how did it get this way? Better yet, how do we harness its power as a pillar of wealth?
The Science of Gold
Gold’s association with wealth almost makes it easy to forget that it’s a precious metal, one in the same class as silver or platinum. Yet it’s important to look at its scientific properties, as doing so helps us understand why it’s long been the ultimate status symbol.
Like other precious metals, gold is rare, malleable, and has great density. It also contains properties that make it good for electrical conductivity. Unlike other precious metals, though, gold’s practically is limited. From this standpoint, the bulk of its use is found in dentistry and electronic manufacturing.
Of course, its relative impracticality is a moot point. Gold is an extremely rare precious metal, and it is startlingly lustrous. This one-two punch is the prime mover behind how the world views gold today, as both a symbol of wealth and beauty. These two elements are also constant, meaning that gold’s high-end status is probably never going to go out of fashion.
A History of Gold
Gold’s history is as old as anything this world has to offer. It’s mentioned in ancient stories and sacred texts, from Homer’s “Iliad” to the Bible’s book of Genesis. Historians also point to evidence tracing back to around 3100 B.C. as proof of its power and allure, as the Egyptians used the precious metal as a barometer to define wealth – not to mention a means to separate its status from silver.
Through millennia, gold has been the standard bearer of finance, influence, and the space that connects the two concepts. Ancient cultures like the Greeks built monetary systems around the precious metal. The quest for gold inspired explorers to set sail into the unknown, adventures that led to the discovery of the New World.
In the United States, the discovery of gold through the California Gold Rush hastened the Golden State’s admission into the Union, as many a successful gold miner settled in the San Francisco area and turned that city into a cosmopolitan heavyweight. This admission sparked the county’s inevitable push to heading west and forming the country as we know it today. It can also be argued that this admission also was one of the incidents that led to the Civil War, as California’s provision to enter the U.S. as a free state caused a Congressional crisis between abolitionists and non-abolitionists.
How the Price of Gold is Determined
The power and influence that gold has wielded throughout history are more than enough to justify its status as a desirable and expensive precious metal. However, the modern gold price is not merely set just because of its past. In fact, its price is something that is set rather rigorously every day.
Twice a day, an organization called the ICE Benchmark Administration, or IBA, publishes the results of an electronic auction system called the LBMA Gold Price. This figure is the global benchmark price for gold producers, investors, consumers, and central banks.
This benchmark spurs the adjustment of gold pricing, which occurs in real-time based on financial evaluation of anonymous auction rounds. These auction rounds happen fast – they run every 45 seconds. When all the buy and sell orders from these rounds are within 20,000 troy ounces – that is, a measure of weight that’s been used on precious metals since around the middle ages – the gold price is fixed.
Gold as an Investment
Gold, like other precious metals such as silver and platinum, are traded on the global market as a commodity. It’s a rather popular commodity: In 2016, an average of 19.9 million of ounces of gold was exchanged through the London bullion market each day. This amount roughly translates to $24 billion being traded daily.
There are two key reasons why gold is such a popular investment:
- It preserves wealth
- It provides safe harbor
Gold’s ability to reliably preserve and retain wealth from generation to generation has been proven for centuries. It’s practically impervious to the kind of market volatility and inflation that could cause erosion and decline in paper-denominated currencies. An ounce of gold will continue to be consistent with the cost of daily living as it changes and evolves. The same cannot be said for, say, the dollar or the pound.
This fact dovetails nicely with the second component. Specifically, gold can be a terrific anchor for an investor with a diverse portfolio. Its constancy can remain strong in the long-term even when other parts of the portfolio are falling apart due to severe short-term volatility. In the case of gold, slow and steady indeed wins the race.
Of course, this also means that investing in gold is not something that’s ideal for the day-trader or short-term investor. Gold’s biggest asset as a commodity is time, which is one of the reasons why it’s so effective as a preserver of wealth. If you’re looking at an investment strategy that’s looking to produce dividends in a hurry, look elsewhere.
The Many Ways to Own Gold
While gold may not be versatile from a practicality standpoint, the many ways in which it can be possessed is rather abundant. This means of ownership transcends the realm of investing and can dip into more personal affects.
Some of the ways you can own gold include:
- Gold coins
- Gold companies
- Gold futures
- Gold Exchange-Traded Funds (ETFs)
- Gold Mutual Funds
- Gold Bullion (either bars or ingots)
- Gold Jewelry
In the case of ingots or jewelry, it may be easy to forget that the gold is a rare precious metal that’s of generational value, simply because they’re pretty. Indeed, because gold’s malleability allows it to be shaped into pieces ranging from decoratively elegant to simply cool, its status as a genuine hunk of wealth may get lost in the translation.
What is Rose Gold?
If you’re looking to invest in a piece of gold jewelry – and yes, it is wise to look at gold jewelry as an investment – you may have stumbled across something as rose gold. This pretty substance is a product of gold mixed with various metal alloys; this mixture can create a piece of gold jewelry that creates a reddish/pink hue.
The reason for this mixture is due to the need to fortify pure gold. 24 karat gold is deemed too soft to be fashioned into proper jewelry, which is why you’ll see a small percentage of metal alloys added to your jewelry. Rose gold is just one of the colorful by-products of this process; other popular results from this alloy-kissed mix include yellow gold and white gold.
Rose gold rings have become increasingly popular, and with good reason: there are many practical benefits to owning a rose gold piece of jewelry like a ring. Some of these benefits include:
- Durability – Rose gold rings tend to be stronger than their yellow or white gold counterparts.
- Affordability – Rose gold tends to come with a lower price tag, even though it tends to be more durable.
- More Practical – A rose gold ring doesn’t need special affects like rhodium plating to capture its full effect. This is an element that helps explain their affordability.
There are a couple of downsides to rose gold jewelry. Firstly, rose gold jewelry isn’t as readily available as yellow or white gold, so it may be tougher to find a ring that fits the style you desire. Secondly, rose gold rings are not hypoallergenic. This is because they tend to have copper as part of their alloy component.
Gold Jewelry Maintenance
Since gold is an investment, it makes perfect sense that you’d want to protect your investment by making it look as good as possible. Fortunately, doing so is not a difficult procedure.
Your best course of action is to fill a small bowl with lukewarm water and mild dish soap. Next, soak the jewelry in the solution for roughly 20 to 30 minutes, then brush away the solution with a soft, non-abrasive cloth. Give the jewelry a short rinse with soap-free lukewarm water and dry it off with a clean towel. It’s also wise to leave the pieces to air dry for a spell before wearing them again.
Gold as a symbol of wealth, luxury, and power will never go out of style. While its discovery and use helped to grow civilizations and expand the world, its modern incarnation as a smart, secure long-term investment is an element that makes it an invaluable part of finance worldwide. Of course, on a more personal level, the precious metal has always looked beautiful and will continue to look this way for generations to come. For some, this may always be gold’s most important metric of value.