![]() ![]() Of the four precious metals, gold and silver have the longest history of monetary use. These four are commonly referred to in the investment community as "precious metals." We can also remove solids that are brittle, corrosive, or hard to work with.Īfter eliminating these 20 elements from consideration, that leaves just four elements: gold, silver, platinum, and palladium. Liquids or gases are not very practical, so we can throw those out as well. If an element is radioactive or toxic, then it is clearly removed from the competition. If scarcity is so important, then why shouldn't one of the more scarce elements be a better form of money than gold or silver? As you can see from the exhibit below, 20 of the 24 rarest elements have problems that prevent them from being money. You will notice that the precious metals are not the scarcest elements on the planet. For details, please see Exhibit 2 on the next page. Please note that abundance is measured in parts per million. While there are some differences between various scientific studies on the subject, for the purposes of this analysis we will use the list found in the CRC Handbook of Chemistry and Physics, 92nd Edition 2011-2012. So instead of grouping the elements by atomic number, we need to re-sort the elements from most abundant to least abundant. ![]() So which of the elements in the periodic table would be the best form of money? In order to answer that question, we need to first determine which elements are the most rare. It must be durable: This eliminates many elements that are brittle or corrosive. It must not be harmful: Many of the elements are radioactive or toxic, which would preclude their use as money. It must be a solid: While it is theoretically possible to have a gas or a liquid be money, it is not very practical. It must be scarce: This eliminates most of the 100+ elements. Practically, however, there are limitations on which elements can serve as money and which can't. Theoretically, any of the elements could serve as money. As you will recall from your high school or college chemistry class, here is the typical way that most of us are taught to think about all the different elements in the universe:Ĭouldn't any of the elements be used as money? Not really. Therefore, let's review the periodic table. Since most non-element commodities have shortcomings as money, the need for perfect uniformity and divisibility leads us to evaluate the elements for their utility as money. In order to keep this short, however, the focus will be on gold. Many of the concepts also apply to the other precious metals - silver, platinum, and palladium. Why did this happen? Was it solely due to tradition - or are there compelling reasons why precious metals have been used as money? Over the next few pages, I will attempt to explain some of the science behind gold as money and as an investment. ![]() Over the course of many centuries, silver and gold served as the money of choice in major economies around the world. Precious metals have been reliably used as money for thousands of years. For those that have legitimate doubts about the value of gold, this paper is an attempt to address some of those doubts. Many believe that gold is useless as a commodity and are sceptical of its alleged monetary value. Sometimes the debate is fierce, and few investment topics evoke as much passion and controversy as gold - especially among professional investors. There is frequent debate about the valuation of any asset or asset class. ![]()
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