Gold & silver: 2,600 years of money
Long before banks and shares existed, gold and silver were money. They still matter today: central banks hold gold as a reserve, investors buy it in times of fear, and silver is essential to electronics and solar panels.
Why gold and silver became money
🪨 Scarce
All the gold ever mined, roughly 200,000+ tonnes, would fit in a cube about 22 metres on each side.
⏳ Durable
Gold does not rust or decay: ancient coins look almost new today.
✂️ Divisible & recognisable
Easy to split into coins of standard weight and to test for purity, accepted everywhere.
A short history
- ~600 BC · The first coinsThe kingdom of Lydia (in today's Turkey) stamps coins of electrum, a natural mix of gold and silver. King Croesus later issues pure gold and silver coins, the origin of "rich as Croesus".
- 1st–3rd century · Rome debases its moneyThe Roman silver denarius started as almost pure silver. To pay soldiers and debts, emperors kept mixing in cheaper metal until, by the late 3rd century, it contained only a few percent of silver. Prices rose sharply: an early lesson in what happens when money is created too easily.
- 16th century · Silver from the AmericasHuge silver mines such as Potosí (in today's Bolivia) flood Europe with Spanish silver. Prices across Europe rise for decades (the "price revolution"), and the Spanish silver dollar becomes a world currency.
- 1821–1914 · The gold standardBritain formally ties the pound to gold, and by the 1870s most major economies follow: paper money can be exchanged for a fixed weight of gold. Prices are stable over long periods, but governments cannot easily create money in a crisis.
- 1914–1933 · War and depressionWorld War I suspends gold convertibility. During the Great Depression countries abandon gold; in 1933–34 the US forbids private gold hoarding and revalues gold from $20.67 to $35 an ounce.
- 1944 · Bretton WoodsAfter World War II, currencies are pegged to the US dollar, and the dollar is convertible into gold at $35 an ounce for foreign central banks.
- 15 August 1971 · The "Nixon shock"The US stops converting dollars into gold. Since then, the world runs on fiat money: currencies backed by trust in governments and central banks, not by metal.
- 1980 · Inflation peakWith inflation in double digits, gold reaches about $850 an ounce in January 1980. Silver spikes near $50 as the Hunt brothers try to corner the market, then collapses on "Silver Thursday" (March 1980).
- 1980–1999 · Two lost decadesAs inflation falls, gold slides to around $250 by 1999: a reminder that gold can lose value for a very long time.
- 2008–2011 · Financial crisisFear about banks and money printing pushes gold to around $1,900 in 2011.
- 2020–2025 · New recordsGold passes $2,000 in 2020, and in 2025, amid heavy buying by central banks and geopolitical worries, it sets new records above $3,000 and then $4,000 an ounce.
Gold price at key moments (US$ per ounce, approximate)
Nominal prices, not adjusted for inflation; points are milestones, not a continuous price series.
What gold and silver are used for
🥇 Gold
- Jewellery: historically the largest source of demand, led by India and China.
- Central banks: hold gold as reserves; they bought over 1,000 tonnes a year in 2022, 2023 and 2024.
- Investment: bars, coins and gold ETFs.
- Technology: small amounts in electronics and dentistry.
🥈 Silver
- Industry: more than half of demand: electronics, solar panels, medical uses (it kills bacteria).
- Jewellery and silverware.
- Investment: coins, bars, ETFs.
- Because of industrial demand, silver swings more with the economy than gold.
Gold as an investment: pros and cons
| For | Against |
|---|---|
| Often rises in crises, when shares fall | Pays no dividend or interest: the only return is the price change |
| Protects against a currency losing value over the long term | Can fall for decades (1980–1999) |
| No company or government can default on it | Storing and insuring physical metal costs money |
Ways to own it: physical coins and bars, gold ETFs (shares that track the price), or shares of mining companies (which add business risk on top of the metal price).
Show the answer
Emperors reduced its silver content to make more coins from the same metal, so each coin bought less: inflation. The modern equivalent is a government or central bank creating money much faster than the economy grows.