The beauty, scarcity, unique density of gold (no other metal outside the platinum group is so heavy) and the ease with which it could melt, form and be measured made it a natural trading medium. Humanity has always thought of gold as an object of value, even before the invention of currency. People began forming tools with copper and iron tens of thousands of years ago, but gold is the oldest metal that didn't need fire, hammer, or mold to become anything. Iron, copper, and most other metals are found in the form of mineral bodies, which require time and energy to melt.
One of the reasons gold still has value is because people have made it valuable. Gold can be considered more valuable than other metals because people perceive it as more valuable. This belief comes from the psychology of human beings and their desire to accumulate wealth, tangible assets and precious metals, among other things. Soon after, the US dollar became a kind of de facto currency for the rest of the world, since the United States held most of the world's gold reserves.
Pure gold is highly resistant to aging and tarnishing, so most of the gold from the hominid era still survives today and lives on in your smartphones, computer chips and watches. If you invest in a company that mines gold and sells it on the market, it's called “paper” because, technically, you never own any physical piece of the metal. While the gold standard appears to have been largely a failure, the system has advantages. During the gold standard era, anyone could go to a bank and exchange paper money for a certain amount of gold.
In society, some cultures see gold as a necessity, while others do not see it necessary, since paper money can represent many forms of wealth (i). If you've come this far, you'll know that gold has a long history of human obsession that goes back more than 5000 years. They argue that in a modern economic environment, paper money is the preferred currency; that gold is only good as a material for making jewelry. With this monetary system, a person holding a certain amount of paper money could go to a bank and exchange that money for a fixed amount of gold.
Angie Picardo, from NerdWallet, believes that a perfect and current example of the dangers of the gold standard could be seen during the global financial crisis in the eurozone, especially in Greece. Gold doesn't corrode, providing a sustainable store of value, and humans are physically and emotionally attracted to it. The gold standard gave people the assurance that the value of their money did not depend on their country's ability to pay debts, their international position or a thousand other things they didn't understand, but only on their ability to produce gold. When the Spanish conquistadores arrived on their shores in the 16th century, they began to accumulate large quantities between the Amazon River and the Andes mountain range, because they knew that what the colonists were looking for was gold.
This is because as the productive capacity of an economy grows, so does its money supply, but since the money supply is limited by the amount of gold an economy has at any given time, the capacity of an economy to produce more and grow is also limited.