How was it decided that elements like Gold are worth so much money and that elements like Aluminum are practically worthless?
Answer 1:
The question is almost more about economics than geology.
Prices are not set by any one organization, but are a balance between the cost of producing a mineral (extracting it from the ground and purifying it) and what people are willing to pay for it. Gold is very rare and relatively expensive to produce, so the base price must be fairly high. If lots of people want to use gold and are trying to buy it, they will have to compete with each other for the gold and that will drive the price up. If not so many people want the gold, the price will stay closer to the actual cost of production. Aluminum is much more common in the earth’s crust than gold (8% of Earth’s crust), so it is cheaper to produce. Iron (another cheaper one) makes up 5% of Earth’s crust.
If you want more information on this, I would try asking an economics teacher.
Answer 2:
There are two major factors that go hand in hand to determine the value of different elements:abundance & popularity. Another major factor is work.
Elements that are very abundant such as Aluminum are very cheap. This is because aluminum can be found everywhere. Although Gold is still quite abundant because of its popularity it has become very valuable. There are some elements that are not very abundant and are not very valuable –but as popularity of these elements increases, so does the value. An example of this is Ruthenium.
Now work, a person’s time is of some value so if a lot of work goes into mining or harvesting different elements this adds to the value of these elements as well.
Answer 3:
This answer is going to involve both some chemistry and some economics, so get ready!
The key here is rarity — rare things are more valuable. If you have a friend who collects baseball cards, he can tell you that a Babe Ruth card from 1930 is worth thousands of dollars because there are very few of them around, whereas a Derek Jeter card from 2001 isn’t worth much at all because almost anybody can find one. It’s the same thing with precious metals — gold is a very rare element, so it’s more valuable than common elements such as iron.
Rarity also lets gold work well as a currency. Currencies only function well if they have a relatively stable ‘volume’ (when economists talk about volume, they mean the total amount in circulation). This is why the US Government controls the supply of dollar bills so there are only a certain number in circulation at any given time. If everyone could just print their own money, it would quickly lose value and be a worthless currency (think about it — right now you’d take $10 to mow your neighbor’s lawn, because you can then use that $10 to buy something else. But if you can just print your own $10, you’ll no longer accept dollars as payment for any service you perform). Gold is really hard to come by — you can’t just go dig up a bunch of gold in your back yard — so it has a stable volume and therefore maintains a relatively constant value. We are still mining gold, so the global volume of gold is increasing, but only very slowly.
The other reason gold works so well as a currency is chemical — gold is one of those metals that do not readily oxidize, so gold coins will maintain a constant weight. Iron coins wouldn’t work very well — if you aren’t careful with them, your money will rust away. Copper coins aren’t especially good either, because when they oxidize they will gain some weight (from the extra oxygen atoms). So if the weight of a copper coin will depend on how old it is and how long it’s been sitting out in the air and turning into copper oxide. If you want a currency to be based on the weight of coins (which is really the only option) this is bad news.
So gold is rare, has a fairly stable volume, and doesn’t rust away. This makes it a useful currency and so it was our primary currency for thousands of years (actually until the 1970s when President Nixon stopped the direct link between the value of the US Dollar and the value of the US gold reserves).
You might have noticed that I have used iron instead of aluminum as a counterexample to gold. Humans have only been able to isolate aluminum from bauxite ore relatively recently, so it was not around in ancient times to compete with gold. If it had been, it might have actually fared quite well — aluminum is a very handy metal that is harder and lighter than gold, so it makes better tools and weapons. It’s also not terribly common — most of our aluminum comes from a few mines in Australia, I believe. But aluminum does oxidize (although only very slowly) so gold would still have the upper hand there.
Answer 4:
This is a very interesting question. Gold is relatively rare in the earth’s crust, and particularly because of its value in making jewelry, it has always been worth a lot of money. Aluminum is very common, and is nowadays, easily formed as the pure metal, so it is not very cheap. However, about 150 years ago, the current process of extracting aluminum from its oxide did not exist, and it was actually more expensive than gold. So it is important to recognize that the process by which an element is obtained plays a big part in what it costs.
Answer 5:
Rarity is definitely one issue. H2O is not very expensive because there is a lot of it around. Silver and Gold on the other hand, like, say, diamonds are very rare. On top of that, the usefulness of a substance makes its price high. Au (gold) is very useful because it has some excellent chemical properties (very inert) and also its malleable and can be worked as body decoration (rings and bracelets etc.) Diamonds have industrial use because they are very hard and are good abrasives.
So the common elements of rarity and usefulness to humans make for their great worth. Al(aluminum) is all over the place …about 15% of any rock is Al2O3…hence its very common and easy to get.
Answer 6:
The price of metals depends on their value to humans, their availability, and how difficult it is to extract them. Gold has always been valued because it is pretty; it does not tarnish, so you can make statues and jewelry and it does not turn black with age; it is soft so you can mold it, and it melts fairly easily. It has been used in jewelry and worship for thousands of years. Aluminum is more abundant, and lighter than gold, but is getting depleted from the ground, so it’s getting more expensive, but is not considered a precious metal.
Answer 7:
The short answer is because the market says so. Over the course of thousands of years of trial and error, consenting adults engaging in commercial acts settled on it to perform the function of money. Why did people choose gold? Because, over time it was identified as having the greatest liquidity of all possible contenders. A person bringing a relatively illiquid item to market could swap it for gold, secure in the knowledge that he could later use that gold to get whatever he wanted. So for example if someone wanted to get rid of a boat, they could exchange it for gold, knowing that they would be able to reuse the gold later to buy something else.
The element gold was probably chosen for the following reasons:
Rarity. Gold constitutes only about 5 parts per billion of the Earth’s crust. It is also difficult, dangerous and expensive to extract. Anyone who has actually been down a mineshaft knows just how precious a metal it is.
Indestructibility. Gold doesn’t tarnish or decay.
Density. Gold doesn’t take up much space. All the gold mined in human history amounts to about 130 thousand metric tons, an amount which would only fill about a 100 foot cube if gathered in one place.
Malleability and divisibility. You can stretch it, pound it thin, and divide it into multiple tiny amounts.
Controlled expansion. This is the most important quality. Gold can only be produced in limited quantities, currently at a peak rate of about 2,500 metric tons, or roughly 2%, each year. No matter what wars or social programs urgently need funding.
You must also remember that gold is not valuable to all cultures. The Maya had plenty of gold but didn’t value it highly. They used various shells to act as currency.
This year’s volatile silver market could see a positive price rally within the next 12 months, surging 25% from the current value, one UK-based precious metals consultancy said.
Silver prices should see a strong rebound of at least 25% from their current levels of $16.27 to trade all the way at $20.25 within a year, Metals Focus analyst George Coles told Bloomberg on Tuesday.
The precious metal had a very volatile year so far. First, it rallied 17% in the beginning of 2017 and then lost all its gains despite declining mine output and growing industrial demand.
Weaker U.S. Growth To Support Silver
The main reason for the upcoming rally would be disappointing U.S. economic growth, which would translate into slower rate hike pace by the Federal Reserve, explained Coles, adding that this would mean good news for silver.
Markets are currently expecting the Fed to announce the reduction of its balance sheet in September and to hike rates one more time in December.
Another boost for silver could come from short covering by Comex speculators, Coles noted.
Even though silver prices saw a lot of resistance in the past three months, many investors are putting their money into silver ETFs, said Coles, with assets reaching a record 21,211 metric tons, valued at $11 billion.
But, at the same time, Coles noted that futures market remains bearish, as hedge funds hold the first net-short position in two years.
Coles pointed out that these two opposing trends are being supported by two different types of investors — smaller traders bought silver ETFs to diversify their portfolios, while large hedge funds shorted Comex futures.
“This may be a case of the smaller investors versus the big guys,” Coles said. “In this case, the smaller guys may be right.”
Other silver forecasts are less aggressive but are still optimistic. ETF Securities said in its latest projections that silver will outpace gold and reach $18.70 level by year-end and then retreat to $18.10 in the second quarter of 2018.
“Downside risks in both metals will be limited by the gradual nature of Federal Reserve policy changes,” ETF Securities said.
(Kitco News) – One Canadian bank sees potential in the silver, expecting the market to bounce from oversold levels compared to gold, suggesting that if investors want exposure they might want to look at these four companies.
In a report Tuesday, analysts at RBC Capital Markets said Pan American Silver (NASDAQ: PAAS, TSX: PAAS, Wheaton Precious Metals (NYSE: WPM, TSX WPM, Hochschild and Coeur Mining (NYSE: CDE) offer the most potential in a rising price environment.
The analysts noted that since the gold/silver ratio peaked at a recent high of 78, inflows into silver-backed exchange-traded funds have accelerated, and are up 5% since the start of the year.
“Since the gold/silver ratio peaked at 78 on July 7, total silver ETF holdings have increased by over 12 [million ounces] and we have now added nearly 30 Moz since the start of 2017,” they said. “We view the acceleration of inflows into physical silver ETFs as a positive sign fundamentally, and expect ongoing inflows as we enter a seasonally strong period for precious metals during Q3 ahead of the Indian festive period in October.”
While down from its recent highs, the gold/silver ratio is still relatively elevated by historical standards, hovering above 76 with gold futures last trading at $1,241.40 an ounce and silver at $16.25.
RBC also sees silver as a contrarian play as speculative positioning is the most bearish it has been since August 2015. They added that this bearish positioning comes as prices appear to be “troughing.”
Finally, they said that they expected the silver price to remain supported as demand continues to outweigh supplies.
“We expect silver to remain in a physical deficit over the next couple of years with limited new mine supply, strong ongoing growth in photovoltaic demand, and a forecast rebound in electrical consumption, offsetting moderation in coin/bar demand,” they said.
RBC analysts said they expect silver prices to average the year at $18.28 an ounce, rising to an average of $19.25 an ounce in 2018.
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This Might Be The Newest Threat To Gold – Heraeus Ignore the noise and focus on the U.S. dollar when it comes to gold, says one precious metals expert.
Gold is a barometer for the U.S. dollar, Miguel Perez-Santalla, sales and marketing manager at Heraeus Precious Metals, told Kitco News.
“People are looking to other indicators – the Fed, Japanese yen, euro – to see if anything impacts the dollar and vice versa, gold,” he said in a telephone interview. “The global currency is still the U.S. dollar. And while the greenback remains the primary mode of exchange, gold will be measured by its value. So the U.S. economy and how it is affected by other countries is where the focus is.”
After nearly breaching the $1,300 level in June, gold prices cooled off and are now trading at around $1,219 level. Meanwhile, the U.S. dollar index saw some gains in mid-June, climbing above 97.00 level and then again in the beginning of July. Now, it is trading around 95.75.
A key element to keep in mind when looking to the future is the underlying physical demand for gold, Perez-Santalla noted, adding that the metal may be up against a new threat right now.
Major support comes from gold’s demand as jewelry and one of the biggest dangers to gold’s global demand are things like the iPhone or any other new smartphones, he explained.
“For Christmas, anniversaries or other holidays people used to buy a significant piece of jewelry that was made with gold, but now it is all about the newest iPhone or tablet,” Perez-Santalla said. “The day people stop having demand for gold as jewelry, we could have a loss of interest. So, forward 200 years and you could extrapolate a moment where people don’t buy gold jewelry anymore. But, I don’t see it happening though.”
The main reason to hold gold is simple – it is an insurance against the “unknown,” while stability is the worst factor for gold’s short-term outlook, according to Perez-Santalla.
“Stability and the impression of an improving economy gives less impetus to own gold. There will be people who get disenfranchised with gold and don’t see the opportunity. Especially, with the Fed raising interest rate,” he said.
But, the Federal Reserve moving to raise rates at least one more time this year, doesn’t have to be bad news for gold, he added. “The next hike is already priced into the market and once it happens, we might see a bump in metals prices.”
Overall, Perez-Santalla is still bullish on gold and sees the yellow metal touching $1,300 this year. To him, gold is a must-have in every portfolio because it is a hedge against any type of crisis that might hit.
“Gold is the insurance option of the wise investor. In other words, you have to buy some gold and keep a balance in your portfolio for the eventuality of the unknown circumstance. Every 15-30 years, there is always some calamity that impacts overall portfolios,” he explained. “You do pay a premium for gold, sit on it and it doesn’t pay you back right away. But, if you hold it over a long term, it does perform and do its job.”
In the end of the year, the market is likely to see a lot of traders rebalancing their portfolios and adding gold because of lower prices, which will boost the metal, Perez-Santalla added.