Before the 19th century, gold was used for a very important purpose: money. Money is a commodity just like any other, and some things make better monies than others.
What are some characteristics of a good money?
It's divisible. 1 oz. of gold is equal to two 1/2 oz. of gold. Two halves of a diamond are not equal to the intact whole.
It's fungible. Gold coins of the same weight are, for all intents and purposes, the same. The same cannot be said of diamonds or oil.
It resists deterioration/decomposition. (Self-explanatory).
Its rarity/weight/volume characteristics are manageable. You can buy an iPad with a reasonably sized gold coin. The same could not be said of bushels of wheat, lead, stone, oil, etc.
It is relatively easy to identify. This provides anti-counterfeit measures out of the box.
I'm not a gold bug (I own zero gold... not even jewelry), but I do appreciate that it makes complete and total sense that it was used for money for thousands of years. Should 1 oz. of gold be worth $1500? I don't know; I don't follow the market. I do know that gold is extremely valuable due to how well it serves as a medium of exchange, and due to that fact alone.
tl;dr Gold has intrinsic value: it makes a good medium of exchange.
What are some characteristics of a good money?
It's divisible. 1 oz. of gold is equal to two 1/2 oz. of gold. Two halves of a diamond are not equal to the intact whole.
It's fungible. Gold coins of the same weight are, for all intents and purposes, the same. The same cannot be said of diamonds or oil.
It resists deterioration/decomposition. (Self-explanatory).
Its rarity/weight/volume characteristics are manageable. You can buy an iPad with a reasonably sized gold coin. The same could not be said of bushels of wheat, lead, stone, oil, etc.
It is relatively easy to identify. This provides anti-counterfeit measures out of the box.
I'm not a gold bug (I own zero gold... not even jewelry), but I do appreciate that it makes complete and total sense that it was used for money for thousands of years. Should 1 oz. of gold be worth $1500? I don't know; I don't follow the market. I do know that gold is extremely valuable due to how well it serves as a medium of exchange, and due to that fact alone.
tl;dr Gold has intrinsic value: it makes a good medium of exchange.