A metal soft as putty, an obsession hard to let go

Mankind’s fascination for gold dates back to time immemorial. It is something we have coveted, toiled for and fought over for generations. Indeed, entire communities have been wiped out over gold. Yet, the obsession remains, as strong as ever.

But, what makes the shiny yellow metal so desirable? The answer lies in part in its physical properties — softness, malleability, imperishability, chemical inertness and extraordinary density — that allow creation of beautiful objects with it and give it the added notional dimensions of eternality, purity, even religious sanctity. But, these very physical properties make it one of the most useless metals, too, points out Peter L Bernstein in The Power of Gold: The History of an Obsession.

By far, what makes gold attractive is the fact that it has always been in short supply — all the gold ever mined, including that lying at the bottom of the seas in sunken ships, will not exceed 1,25,000 tonnes, which is the amount of steel produced in the US alone in a single year.

Bernstein starts with a simple story by John Ruskin about “a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon the ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: “Now, as he was sinking, had he the gold? Or had the gold him?””

That question pervades the entire book as the author traces the uses (or abuses) of gold from mythical times to recorded history; from Moses through the Egyptian Pharaohs, the Greeks, Byzantines and other ancient civilisations to the Gold Rush era and beyond. “They all had gold, but the gold had them all,” the author writes.

While the initial uses of gold were purely for adornment, it gradually became a medium of exchange. Gold coins and bars gained currency, though their acceptable purity kept changing over time, as demand kept rising and supplies were short. Nevertheless, gold was legal tender

Moving from the ancients, the author takes us into the European economies - the Portuguese explorer’s desperate quest, the discovery of gold in the New World and the massive gold imports by Spain, etc. International trade was growing fast, and along with rapid increase in the population and slower growth in the supply of food pushed up demand for gold, but also led to the use of private money, or bills of exchange, to facilitate trade.

Asia, with its spices, tea, silk, and other luxuries became a sponge for European gold and silver. China under Kublai Khan became the first country to mandate the use of printed banknotes. In England, debasement of the currency led to standards for gold coins and ultimately to a currency backed by gold.

Discovery of gold in California, Canada, Alaska, Australia, and South Africa in the nineteenth century fuelled new socio-economic movements, albeit with an increased usage of banknotes. Charles De Gaulle saw it as “a weapon to bring his rivals to their knees,” and “the gnomes of Switzerland and the speculators in the frenzy of the early 1980s fled to gold for an invincible shield against the irrationality of the state.”

All the same, by the dawn of the new millennium, gold has stopped being the centre of the universe. “The last vestiges of the golden fetters (the gold standard) were discarded by Richard Nixon in 1971… Dispossessed from its power over the world of money, gold has been emasculated. Now greed and the lust for power run down different channels.

We have relegated gold to its traditional role in jewellry and adornment, although small amounts of gold fly into space and speed the motion of electronic blips. In an even more novel capacity, 22-carat flakes of gold have been sprinkled atop sashimi salads, roast lamb, and other pricey dishes,” the author writes.

But, has gold’s glorious run ended? Only time will tell. Bernstein signs off where he began: “Gold as an end in itself is meaningless.”