Why Gold? (Classic)

This episode explores why gold has been valued as a currency and a store of wealth through the ages, despite its practical uses being relatively limited.

1. Gold's non-reactivity and corrosion resistance make it ideal for long-term storage and use as currency.
2. Its rarity and distinctive appearance facilitate easy recognition and prevent easy counterfeiting.
3. The episode uses an engaging method of eliminating other elements by examining their properties systematically.
4. Historical context is provided, explaining why certain elements were unsuitable for currency due to practical challenges.
5. The practical tests for gold’s authenticity, such as the acid test, underscore its enduring role in economies.

1: Introduction

Jacob Goldstein introduces the topic and historical context of gold’s value. Sally Helm: "Gold has had a shiny quality for thousands of years, both literally and in the marketplace."

2: The Periodic Table Exploration

The hosts and Sanat Kumar review the periodic table to determine suitable elements for currency. David Kestenbaum: "We’re basically going to play periodic table bingo."

3: Eliminating Elements

Discussion on why certain elements are impractical for use as money due to their physical and chemical properties. Jacob Goldstein: "It turns out most of the elements are pretty reactive."

4: Narrowing Down to Gold

Final considerations on why gold, among the few remaining elements, is most suited for currency. Sanat Kumar: "Gold is rare, but not too rare, and easy to test for authenticity."

1. Invest in gold as a stable long-term asset.
2. Use scientific reasoning to assess the practicality of investment assets.
3. Understand the properties of your investments to evaluate their long-term viability.
4. Consider the historical context when evaluating the stability of investment options.
5. Regularly test and verify the authenticity of precious investments.

In the past few months, the price of gold has gone way up – even hitting a new high last month at just over $2,400 per troy ounce.

Gold has long had a shiny quality to it, literally and in the marketplace. And we wondered, why is that?

Today on the show, we revisit a Planet Money classic episode: Why Gold? Jacob Goldstein and David Kestenbaum will peruse the periodic table of the elements with one goal in mind: to learn which element would really make the best money.

This classic Planet Money episode was part of the Planet Money Buys Gold series, and was hosted by Jacob Goldstein and David Kestenbaum.

This rerun was hosted by Sally Helm, produced by Willa Rubin, edited by Keith Romer, and fact-checked by Sierra Juarez. Alex Goldmark is our executive producer.

Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.

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People

Sanat Kumar, Jacob Goldstein, David Kestenbaum, Sally Helm

Content Warnings:

None

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Sally Helm
In the last couple of months, the price of gold has gone way up. It hit a new high last month, just over $2,400 per troy ounce. Now gold has had a kind of shiny quality to it for thousands of years, both literally and in the marketplace. It was once used as currency, think gold coins. And even once we went to paper, a lot of currencies around the world were still backed by gold.

This was the gold standard. And even though we are no longer on the gold standard in the United States, gold is still special.

Hello, and welcome to Planet Money. I'm Sally Helm. Today we're going back in the planet money time machine to an episode where we try to understand, out of all the elements, why gold? What is it about gold that makes people value it so highly? After the break, our colleagues Jacob Goldstein and David Kestenbaum will go through the entire periodic table of elements to figure out which element would make the best money.

Does it have to be gold? Because to me, osmium seems like the logical choice. I'm rooting for osmium, the densest element. You know, David, I'm no scientist, but for some reason, I really got my heart set on lithium. Dude, that is not going to end well.

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Join 70,000 teams who trust Grammarly with their words and their data. Learn more@Grammarly.com dot Grammarly. Easier said done. This message comes from NPR sponsor Yahoo Finance. Think you've done it all when it comes to your financial future, take those investments to the next level with Yahoo.

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Finance. Whether you're a seasoned investor or are looking for that extra guidance, Yahoo. Finance gives you all the tools and data you need in one place. For comprehensive financial news and analysis, visit the brand behind every great investor, yahoofinance.com comma, the number one financial destination. There's this quote that I really love, widely attributed to Warren Buffet.

David Kestenbaum
A quote is, gold gets dug out of the ground in Africa or someplace. Then we melt it down, we dig another hole, we bury it again, and we pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Now, that's a little bit of an overstatement.

Jacob Goldstein
Gold does have a few practical uses. I mean, people like it for jewelry occasionally. It's still used for dental fillings. And it has these uses in electronics, cell phones. It's a good conductor.

But still, a lot of the gold in the world, it's owned by people who aren't doing anything with it. It's just sitting there. And the question I had, I mean, before I was a journalist, I was a physicist, right? The question I had is, why gold? I mean, it's just this metal, right?

David Kestenbaum
We got 118 elements in the periodic table. It's just an atom. It's got 79 protons. That's what makes it gold. But you add one more proton, you got mercury, you add one more, you got thallium.

Is there really anything that's special about it or something so special that it deserves to be the thing that humans have valued for so long? So today we are going to go through the entire periodic table of elements. For those of you who haven't seen a periodic table since 10th grade chemistry class, it looks kind of like a bingo card. It's this grid with a bunch of squares. Each square has an element in it, a type of atom.

There's a box for each element that exists, one for hydrogen and carbon, et cetera. And it's organized into columns, and the elements in each column have some similar properties. And so today we're basically going to play periodic table bingo. We're going to take the whole table and just try and start crossing stuff off. You're welcome to play along at home, you know, go print out your periodic table and take out a big red pen or something.

So we printed out our own copies, and we went to visit Sanat Kumar. He is chair of chemical engineering at Columbia University. And the first thing you notice about him, his glasses, pink on the top. Regular 1950s style plastic frames, plastic lenses. These are dynamite glasses.

Jacob Goldstein
He bought them in Soho, and he just. He looks like a million bucks in them. He's like the hippest chemistry professor who I've ever seen. So Sanad is perfect for this because he has a chemist's perspective, but he also comes from a place where gold really does have this special status. His grandfather, who lived in the south of India, was fairly well off, had a big house, a big family, and he owned a lot of gold.

Sanat Kumar
Growing up my grandfather had a goldsmith who would work in the back of the house. There were two of them, and they had this little bowl in which there was husk, and they would put a little bit of coal in the middle, and those nice little crucibles, they would melt coal and pour it. It was fascinating to watch that they had these wonderful balances that I wish I had kept because there's these really old fashioned balances that were good down to a milligram. And what was the finished product? What were they making?

Jewelry. More jewelry and even more jewelry.

You understand the concept of dowries and stuff like that. So if you have seven daughters, you got some dowry to take care of. So, in India, gold really is a kind of currency. It was when you were growing up. It is now.

It's more than a currency, it's how you measure. I mean, people talk about putting currency into your pillows, in your mattress, right? This was our analogue of doing that. You buy gold and you had these big safes and you stored them. It was easier to store than putting money into a mattress because money didn't mean a whole lot.

It would burn. Gold wouldn't burn. So they love gold, even to this. Day, Jacob, you know what I say to that? Yeah.

David Kestenbaum
So it doesn't burn. Lead doesn't burn either. Okay. Okay. So let's get to the bingo then, right?

Jacob Goldstein
So we're there with Sinatra, and we pull out the periodic table of the elements, and we start with the column on the far right. The elements in this column have a really appealing characteristic. They're not going to change. They're chemically stable helium, neon, argon, krypton, xenon, radon. Those are the noble gases.

Sanat Kumar
Correct. So they're good in a way, because they're non reactive. They're not going to change. Big drawback, a gas.

Jacob Goldstein
You can have your money in a jar, but then if you open the jar, you'd be broke. I mean, helium is one of those things that'll actually leak away. People actually calculated that if you make a metallic container and left it out there, helium will diffuse through the container and go away. Because the. Because the atom's so small.

Sanat Kumar
It's so small, and it's got very special quantum properties. For some reason, it just, like, is able to rush through metal. So you couldn't even leave it sealed in a container. I mean, that's just bad news all the way around, right? So I'm feeling, like, super safe about my helium money.

Jacob Goldstein
No, don't worry about it. I got it sealed in a metal box with a quantum mechanics now means I'm broke, basically. All right, so if you are playing at home, you can cross out the rightmost column, helium, down through radon. Okay, so rightmost column gone. Now let's jump over to the leftmost column.

It's called group one. A hydrogen is on top. That's a gas. We can cross that out right away. Below that is my pick.

Lithium and sodium. I don't know how many of you played with sodium, for example. It's extremely flammable. That would be bad for a current. That would be very bad.

Sanat Kumar
As you go down the table, it becomes more metallic, but they still are very reactive. So you can start ruling out group one, a, for example, as being the most reactive. And why don't we want a currency to be reactive? Obviously, exploding is bad. Well, lithium is, for example, known very well that you have lithium ion batteries.

And if you expose lithium to air, it will cause a huge fire that can burn through concrete walls. So I had a colleague of mine who works in new batteries, and he had a lithium leak and it burnt its way through 3ft of concrete wall. So that created a few problems. I don't think you want your currency to be sort of doing that in your pocket. All right, so I'll give up on my dream of a lithium standard.

Jacob Goldstein
But when Sanat says reactive, he doesn't always mean it's going to blow up or make a hole in a concrete wall. Sometimes it'll just kind of corrode. And that's one nice thing about gold, is that it stays gold. I mean, you'd think you got gold coins sitting on the bottom of the ocean, they're going to corrode or get all messed up them hundreds of years later, brush them off and they're unchanged. Nice, shiny gold after centuries on the ocean floor.

And it turns out this is a pretty rare quality of elements on the periodic table. So Sanat really gets some momentum going. Now he starts crossing off a lot of stuff, because it turns out that most of the elements on the periodic table are pretty reactive. They like to bond with each other or, you know, some kind of chemical reaction happens when they're around each other. So Sanaq crosses out the left hand column and the next one, and the next one, and five more columns on the right.

David Kestenbaum
I ask him then about these two weird. They're always kind of broken out separately from the main table. And the elements there have some awesome names, like prometheum, einsteinium, kestenbalmium. You wish. There's no kestenbaum nice try, though.

Jacob Goldstein
Nice try. You almost got it passed away. These are referred to as the lanthanides and actinides. And many of them, for example, the actinides, are all radioactive. So these are, again, things that would not make a very good coin because you'd come back a half a second later and it would have half decayed, or you'd come back a year later and 2% of it would be gone or something.

Sanat Kumar
Maybe more than that, but in the process, you'd be dead as well. Okay. All right. You convinced it. We can cross those off.

Jacob Goldstein
Okay, so we've eliminated the columns on the left side, and we've gotten rid of the columns on the right side, and now we've crossed out those rows on the bottom. And I feel like we're converging in this kind of sweet spot at the center of the periodic table. In all, by now, if you're following along at home, we've crossed off 78 elements. We still got 40 left. So, to summarize our criteria this far, if you want something to serve as money, one should not be a gas.

David Kestenbaum
Two shouldn't be very reactive, shouldn't burst into flames or corrode. Three should not disappear through radioactive decay. Also, four should not kill you if you hold it in your pocket. All right. And now Sanat gives us a new requirement.

Jacob Goldstein
A number five. You want the thing you pick to be rare. And here again, there's this very elegant way the periodic table is set up that can help us. As a rule of thumb, rarer elements tend to be more toward the bottom of the table. That, weirdly, is because of stars and supernovas.

David Kestenbaum
Turns out all the elements in the periodic table pretty much are forged in stars or stellar explosions. And it gets very hard to make heavier elements because you basically gotta stick together a bunch of light stuff. So there are fewer of the heavier elements out there in nature. So this gets rid of a bunch of the light stuff toward the top of the periodic table, like, say, silicon, which is the key ingredient in sand. Silicon is the most common thing on earth, I think, after carbon, maybe it's even more than carbon.

Sanat Kumar
I think silicon and iron are probably the two most ubiquitous things on earth, so that makes it have almost no value. I could go to the beach, pick up a bunch of sand and be as rich as anyone else. That, or it would be like hyperinflation, right? Like suddenly, wait, I got all this sand. That was not worth anything.

Well, I think in the end, more than that's one reason. But it's also the reactivity that would come back to play. Another element that's too abundant is copper. It sounds promising. We make coins out of it, but there's this great backstory here.

Jacob Goldstein
Sweden, it turns out, has a lot of copper. And back in the 16 and 17 hundreds, they decided they'd use it as money. But because copper was so abundant, they had to make their coins really big. There's actually one coin worth ten dalers, whatever that means. It weighed 43 pounds.

Sanat Kumar
So I'm going to just knock these set of things are titanium, vanadium, chromium, manganese, iron, cobalt, nickel, copper, zinc. Now we're looking for an element that's rare, but we don't want it to be too rare. And unfortunately, that is why. My favorite osmium, a nice blue gray metal, the densest of all the elements. Osmium gets the axe.

Osmium is probably one of the rarest things around. Why? I have no clue. It apparently comes in with meteorites. Osmium and iridium are found in meteorite rock, and so you can find them, but they're very, very hard to find and very hard to mine for that reason.

Sally Helm
So we shed a tear for osmium, and we are down to just five elements. The final five why does gold win out? And why do its competitors end up on the monetary scrapheap? Also, David and Jacob try to figure out whether this little gold coin they bought is legit. That's after the break.

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Darian Woods
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David Kestenbaum
Ladies and gentlemen, our final contestants are rhodium, palladium, silver, platinum, and gold. And David, this is really impressive because Sinat has just, based on chemical reasoning and the structure of the periodic table, he's ended up with a list of what actually are precious metals. They're rare, they're stable, they don't react, and they're all expensive. Rhodium sells for more than $2,000 an ounce. So from this point forward, though, things get a little tougher.

So silver, which is on the list, has been used as money, but Sanat throws it out because he says it tarnishes. Now, you can polish it off, but the tarnish has silver in it, so when you polish it, you're actually losing some silver. It's not the best choice. So we throw silver out. The way I think about it is that rhodium, palladium, platinum, and gold are the four choices.

Sanat Kumar
You would come down to take that. Gold, you thought you were special, but you're not that special. I mean, I'm imagining some parallel universe now where the US had fights about whether we should go off the rhodium standard or where medieval kings had chests of palladium. They were fighting wars over. I like the idea of medieval kings and chests of palladiums, but there are a couple of sort of historical problems here.

Jacob Goldstein
A big one is that palladium and rhodium weren't even discovered until the early 18 hundreds. Yeah, that's fine. But that still leaves you with platinum and gold. And platinum turns up in streams just like gold. So it could have been platinum.

It could have been platinum. But say you're in ancient Egypt or whatever you want to make your platinum coins, you're going to need some kind of magical furnace from the future. Can we look at what's the melting point of platinum? I can certainly look at its high melting point of platinum is 1772 degrees centigrade. Yeah, Jacob, that's over 3000 degrees fahrenheit.

David Kestenbaum
In fact, we visited this guy in the jewelry district who told us that melting platinum is a real pain. You have to use this special crucible, which you can only use once, and it's really expensive. Gold, it turns out, is much easier to melt into bars and coins. Just by chance. It melts at a much lower temperature that you can get just by burning coal.

Jacob Goldstein
And one other pretty compelling historical argument here for picking gold over platinum. One thing you want for your element, that's gonna serve as money. You wanna be able to test it. So if someone says, hey, trust me, this is money, you wanna know you're not getting ripped off. Platinum looks like a lot of other stuff.

It's kinda silvery in color, and gold really looks special. It looks like gold. And it turns out gold is something that's actually pretty easy to test. This is something we went and saw with our own eyes.

David Kestenbaum
We went back to visit Hank Mendelsohn in the New York jewelry district with our coin. And I said, how do we know this isn't a fake? You sold it to us. I want you to test it. And he did this really simple test.

He took out a black stone and some sort of pumice. This is what we do. What you hear there is Hank taking our coin and scraping the edge against the stone, and it leaves this gold smudge. And then he goes fishing around in his desk drawer. You have this drawer in your desk, and you're kind of scrubbing around, and there's all these bottles with clear liquid.

Jacob Goldstein
What are all these different liquids in the bottles? It's some form of acid. So here, this is 22 carats. So let's see what happens here. So what he's got is this little bottle.

David Kestenbaum
It's a particular strength of acid that he can use to test to see if the gold has a purity of 22 carats. And he puts a drop of it on the stone where he scratched our coin, and the smudge stays there. So that means our coin is 22 karat. But then he picks up this gold pendant, which he says is 14 carats. It's less pure.

Jacob Goldstein
And he does the same test. He scratches it, and there's a smudge, and he puts the acid on it. But the result is really different this time. It just turns and, oh, wow. It totally just vanished.

Hank Mendelsohn
So, yeah, so it's the, you know. So I do a scratch this on every piece of gold we buy to make sure that it's gold. And it's a very treacherous business. You buy wrong, you're making two or 3% here. You buy one thing that's not gold, you can lose a whole day's worth of profit.

David Kestenbaum
So you don't need fancy equipment. You just got a stone here and some acid. Little bottles of acid. That's right. That's what everybody does.

Hank Mendelsohn
Even the small jewelry store in Mompas store. This is what they use. So you've heard the expression acid test. This is the kind of thing that expression is referring to. And apparently there are writings dating all the way back to ancient Greece about using a touchstone to judge the purity of gold.

Jacob Goldstein
Basically, you rub the gold against the stone, and by looking at the smudge it leaves, you can tell how soft the gold is and how pure it is. All right. All right. So I was really at the beginning of this thinking that gold was kind of arbitrary, but it turns out you can make a pretty strong case for it. Gold is stable.

David Kestenbaum
It's non toxic, is rare, but it's not too rare. It's easy to test, and you could find it just sitting in rivers, this beautifully colored golden thing.

Sally Helm
Planet money actually did a whole series on gold where we bought a bit of gold, like a little bit bigger than the size of a nickel, and we learned all about gold and how it worked. If you want to check out the whole series, the link is in our show notes. Next time on planet money. There's a dirty little secret about the Internet. A lot of the software that the Internet runs on is written by small teams of unpaid people, sometimes just one person.

And this system might have led to one of the most audacious hacks in cybersecurity history. This was incredibly well orchestrated. I think somebody should make a movie about this. I mean, I'd definitely watch it. I'd watch it in IMAX, we dive into the story of how the XZ hack went down and what that tells us about the story, strange economics of how most modern software gets made.

Our rerun today was produced and fact checked by Willow Rubin. It was edited by Keith Roemer. Alex Goldmark is our executive producer. I'm Sally Helm. This is NPR.

Thanks for listening.

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