Why is gold so valuable? True, it is shiny, durable, and rare, but it is far less useful than many other
minerals or metals. It is also not like stock in a company, where the value of the stock depends on the
performance of the company. Gold, on the contrary, like any currency, is valuable precisely because people
believe it is valuable. That is, if people were willing to accept seashells for their labor and could use them to
pay for food, fuel, and other commodities, then seashells would become a valuable currency. Thus, the value
of gold depends on the collective belief that gold will continue to be valuable. As long as demand for gold
remains steady, the price will hold steady; if demand is high, it will continue to increase in value. But if people
should someday lose faith in gold, the price of gold could fall sharply.
Why is gold so valuable? True, it is shiny, durable, and rare, but it is far less useful than many other minerals or metals. It is also not like stock in a company, where the value of the stock depends on the performance of the company. Gold, on the contrary, like any currency, is valuable precisely because people believe it is valuable. That is, if people were willing to accept seashells for their labor and could use them to pay for food, fuel, and other commodities, then seashells would become a valuable currency. Thus, the value of gold depends on the collective belief that gold will continue to be valuable. As long as demand for gold remains steady, the price will hold steady; if demand is high, it will continue to increase in value. But if people should someday lose faith in gold, the price of gold could fall sharply.
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