Money & markets · 5

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.

👴 In one sentence Gold is the money people trust when they stop trusting everything else.

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

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/silver ratio = price of 1 oz gold ÷ price of 1 oz silver → around 15 in the old bimetallic standards; in modern times it has mostly moved between about 50 and 100.

Gold as an investment: pros and cons

ForAgainst
Often rises in crises, when shares fallPays no dividend or interest: the only return is the price change
Protects against a currency losing value over the long termCan fall for decades (1980–1999)
No company or government can default on itStoring 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).

✏️ Check yourself: Why did the Roman denarius lose value, and what is the modern equivalent?
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.