What Makes Gold So Special?
Gold has a few properties that no other material combines to the same degree. It is scarce: all the gold ever mined would together barely fill a few Olympic swimming pools. It is imperishable: it does not rust, does not tarnish and does not break, even after thousands of years in the ground. And it is universally recognisable: from Tokyo to New York everyone knows what a gram of pure gold is.
There is another difference that is often forgotten. Gold needs no counterparty. A banknote is a promise from a central bank, a share a promise from a company, a savings account a promise from your bank. Gold is simply gold: it is nobody's debt. That property makes it a beacon in times when promises are under pressure.
Scarce
All the gold ever mined fits in a few pools. The stock grows barely 1 to 2% per year.
Imperishable
Does not rust, tarnish or decay. Gold that is 3,000 years old still shines.
Universal
From Tokyo to New York everyone recognises and accepts a gram of pure gold.
Nobody's debt
No promise from a bank or company that must be kept. Gold is simply gold.
Why Gold Keeps Its Value
Paper money slowly loses purchasing power through inflation: what you buy today for a hundred euros cost a fraction of that thirty years ago. Gold undergoes the opposite. The amount of gold grows only slowly, about one to two percent per year, while central banks can create money without limit. As a result, gold holds its purchasing power remarkably well over long periods.
A classic example: about 31 grams of gold bought a well-tailored gentleman's outfit in Roman times, and still roughly does today, in the form of a good made-to-measure suit. The price in euros or dollars fluctuates, but the underlying purchasing power remains surprisingly stable across centuries.
Gold, the Dollar and Oil
Gold is quoted internationally in US dollars. As a result, the gold price and the dollar rate often move in opposite directions: if the dollar strengthens, the gold price usually falls, and vice versa. Whoever follows the gold market therefore always keeps one eye on the dollar.
That dollar in turn has a special backing. Since the 1970s, oil has largely been traded worldwide in dollars. Every country that wants to buy oil therefore needs dollars, and that sustained demand supports the value of the currency. This link, often called the petrodollar, is a historical and much-discussed correlation, not a law of nature. But it helps explain why the dollar, the oil price and the gold price are intertwined.
Simplified diagram of a historical correlation, not a fixed law.
Why Central Banks Buy Gold
If gold were only a relic of the past, central banks would not buy it en masse. Yet they do exactly that: in recent years central banks worldwide bought record amounts of gold, to make their reserves less dependent on one currency or one country. That structural demand supports the rate and is one of the reasons gold rose so strongly in recent years.
Gold itself yields no interest or dividend. The value is in the metal, not in a payout. That is why many see gold as a form of protection and diversification, not as a savings account that grows on its own.
What Does This Mean If You Have Gold at Home?
If you have gold jewellery, coins or bars, you own something that has proven its value over generations. If you want to cash it in, the good news is that the rate has been historically high in recent years. At De Munter you can sell your gold on location, at the current gold price, and you decide yourself whether and when you sell. We give no investment advice, but an honest, transparent valuation.