Although gold has always been treasured in and of itself, as a rare metal with unique properties, it was only when nations began to use it as a form of currency that it began to have a measurable and stable monetary value, and became a financial instrument in its own right.
When paper money was introduced (in the form of ‘promissory notes’) it was a promise to pay the bearer in coins, and issuers would only print bank notes corresponding to the amount of gold bullion they held.
In 1900, the dollar itself was pegged to an amount of gold of "twenty-five and eight-tenths grains (1.67 g) of gold, nine-tenths fine” - a ‘gold standard’ that made gold worth $19.67 per ounce.
Getting rid of a gold standard can have disastrous effects on the economy and currency of a state. For example, at the start of the First World War, Germany came off its gold standard.
Left with massive debts at the end of the conflict, the Reichsbank began printing money which was not backed up by gold bullion and gold coins they actually held.
Confidence in the Mark fell, and people began panic-spending the money they had before it lost its value, Inflation skyrocketed, and the economy collapsed. As a consequence, by 1923 an ounce of gold was still worth $20, but 20 trillion Marks.
The most common way that people invest in gold is by buying jewellery – most wedding rings, for example, are traditionally made of gold. Gold jewellery is valued according to the craftsmanship and design of an individual piece as well as by its gold content.
Fashion trends and seasonal variations will therefore affect jewellery prices, above and beyond the variation in the spot price of gold itself.
The durability of gold and its place in our hearts is probably unique among commodities –we actually wear it as well as investing in it. Although the live gold price regularly rises and falls, the overall gold price chart trend has been a steady rise against every currency for over a century, and it is still regarded as the ultimate safe haven for their money by a majority of investors.