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The History of Why Precious Metals Have Been Used in Currency

We, as a species, have always been fascinated by rare and shiny objects — especially those also hard to obtain.   

Gold and other precious metals didn’t end up in our coins as soon as we stopped bartering for goods and came up with currency systems for that reason, though. That may have been part of it, but it doesn’t tell the whole story.   

Archaeologists believe the first-ever coins were made sometime around 2000 BC, an invention we can thank the Ancient Babylonians for. These coins (called, like the modern-day Israeli currency, Shekels) were made of silver. Attempts to standardize the weight and inscriptions on these early silver coins didn’t live up to modern standards, but Hammurabi made a brave effort.   

The earliest truly standardized coins likely appeared in the Lydian kingdom, today’s Turkey, around 650 BC. These bean-shaped coins were made of a fascinating natural alloy called electrum, comprising both silver and gold, and formed in regions rich in both metals. Lydian coins featured a lion-shaped stamp to represent the Royal family.   

The son of King Alyattes, who first “coined” these coins, decided to separate gold and silver content to further standardize the kingdom’s currency. Other civilizations (including the Ancient Greeks) followed suit.  

Why gold and silver, though?  

What Makes Gold So Uniquely Suitable for Currency?   

The fact that gold is rare, but not overly so, and that it’s a finite resource would appear to be one reason why it’s universally considered valuable. Gold is, however, also uniquely suitable as currency for chemical reasons.   

Gold is malleable and easy to work with due to its low melting point. It’s not very reactive, easily preserved over time without much special care, and is not radioactive or otherwise hazardous. In addition, gold is easily recognizable, even if you don’t have any special skills, and it doesn’t tarnish.   

The famous economist Keynes might have described gold as a “barbaric relic,” but although the value of the US dollar is no longer tied to this precious metal, it retains its value today. Gold stands apart, and it’s stood the test of time — from nearly a century BC to the modern era.   

What About Silver?  

Silver is (in many parts of the world, at least) more abundant than gold, as well as easier to mine. Like gold, it’s fairly malleable and easy to work with, but it’s also harder and, therefore, less vulnerable to the effects of wear and tear associated with frequent use and a constant change of hands.  

These factors have made silver particularly suitable for smaller denominations and explain why it played such a critical part in the expansion of trade across the Mediterranean during Phoenician times and in Ancient Greece.   

Fascinatingly, the fact that silver is less common in China has also played a critical role in its proliferation as a currency. Much of the trade between East and West was fueled by silver during the Middle Ages. Europeans used silver to buy silk, valuable and rare ceramics, and gunpowder from China during that era.  

People have historically valued gold primarily as a store of wealth while also enjoying its aesthetic beauty and incorporating it into jewelry and even clothes. Silver is, in some ways, even more interesting — it also has practical value.  

Even the ancients valued silver for more than its monetary worth, as an excellent conductor of electricity and a metal with potent antibacterial properties. In today’s world, silver’s properties make it especially sought-after in the electronics industry. Many of our appliances wouldn’t work as well without it.  

Why Do We Continue to Value Gold and Silver? 

We live in the age of cashless payments and cryptocurrencies. The gold standard has long been abandoned in favor of fiat. If there was ever a time in which gold and silver ought to be a “barbaric relic,” to mention Keynes’ opinion, it’s now.   

Yet, precious metals, including silver and gold, continue to hold value. They continue to draw investors.  

Some would argue that precious metals don’t have any intrinsic value. They’re only worth something because we all say they are. That may be true, but if we’re going to draw an arbitrary line somewhere, gold and silver certainly have more intrinsic worth than concepts like Bitcoin.   

Precious metals are rare, tangible assets that retain value when everything else comes crashing down. That’s why they’re considered safe-haven investments, and that’s why Central Banks count precious metals among their reserves.   

Gold and silver have quite literally been with us since ancient times. We don’t want to be paranoid, but it’s easy to make the case that they would also survive the end of society as we know it. Your Bitcoin won’t be there on the other side of an EMP, and even the money in the bank might be lost to you if the government were to default on its debt and the banking system collapsed.   

The silver and gold bullion in your home safe, though? Those will survive — to barter with, to serve as a store of wealth, or to pass down to future generations.   

That right there? That’s why precious metals have historically been used as currency and why they continue to serve that purpose to this very day.