The attraction of gold is as old as history. Since ancient times, gold has been the object of dreams and obsessions. Western literature is full of characters who kill for gold or hoard it, from King Midas in the ancient Greek myths, to Fagin in Dickens' Oliver Twist. These characters go to evil extremes to get or keep their gold and they get the punishment they deserve. Most people would not be willing to go to such extremes, of course, but they would not question the assumption that gold has ...

The attraction of gold is as old as history. Since ancient times, gold has been the object of dreams and obsessions. Western literature is full of characters who kill for gold or hoard it, from King Midas in the ancient Greek myths, to Fagin in Dickens' Oliver Twist. These characters go to evil extremes to get or keep their gold and they get the punishment they deserve. Most people would not be willing to go to such extremes, of course, but they would not question the assumption that gold has lasting value above and beyond any local currency. Societies change over time, customs and currencies evolve, but gold remains. A wedding ring, for example, must be gold, and so should any serious gift of jewelry. In fact, giving and wearing gold is still a mark of prestige in our post-industrial society, though gold is no longer valued as it used to be thousands of years ago.

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.

Another factor that has affected the price of gold has been the increasing difficulty in acquiring it. Today, most of the gold left in the grounds is in microscopic pieces mixed with rock. To get it, miners must dig up tons and tons of rock, and then spray it with chemicals to separate out the gold. For one ounce of gold - a wedding ring, for example - the mine processes about 30 tons of rock. This is already a costly operation. But there are also hidden social and environmental costs. The mining and processing of gold is ruinous to the environment and to the health of people living nearby. Most of these mines are in poor regions where the people have had little voice in whether there should be mines and how the mines should be run. The large multinational mining companies simply bought the land and opened the mines. However, as people and governments begin to realize the extent of the damage caused by the mines, the situation might change. Indeed, if the mining companies ever have to pay the full environmental and social costs of mining gold, the price of gold is likely to climb yet higher.