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Intrinsic Value and the Allure of Gold

  • Timothy D. Terrell,
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So far this year, the price of gold has risen by more than 25%, making it, lately, a far more profitable investment than stocks. In a lackluster economy with a volatile and unpromising stock market, it is beginning to look as though gold might start to repay those intrepid gold bugs who chafed for years while the precious metal fell in price.

Until recently, it appeared to many people that gold was on its way out. Some might even say that gold has been "out" for decades, and only industrial use and a superstitious obsession have kept the price up. About seventy years ago, countries were going off the gold standard left and right in a vain effort to inflate their way out of the Depression. The respected British economist John Maynard Keynes called gold a "barbarous relic," and by the early 1970s the last formal link between the U.S. dollar and gold had disappeared. No nation still mints gold for common coinage. Yet in almost all cultures, at almost all times, gold has been highly valued. Demand for gold persists, outlasting kings and empires, wars and technological revolutions.

What is it about gold that gives it that enduring appeal? Some have suggested that it has an intrinsic value — that unlike other commodities it is valuable in and of itself. For a commodity to have intrinsic value means that there is value apart from that imparted to the commodity by an individual. There is, in other words, a permanent, stable, objective value separate from any human desire or need.

The concept of intrinsic value, however, is problematic. The value of a good clearly varies from person to person and from time to time, counter to what the idea of intrinsic value would suggest. A quart of water has far greater value to a man dying of thirst than to a man who already has a large supply and is merely seeking to fill a vase of flowers. A syringe of insulin has greater value to a person with diabetes than to a person without that disease. The value of a thing is dependent upon the individual and the use he intends to make of it. These valuations may be so different that one person may regard a thing as a "good," while another person views it as a "bad." One person may find a co-worker's perfume fragrant, while another finds it oppressively strong. Value, therefore, is subjective, not objective.

Some Christians might try to avoid this problem by arguing that the relevant value is not the value humans place on a good, but the value God places on a good. Therefore, we should imitate God by valuing things in the same way that He does. S.C. Mooney wrote,

Apart from the doctrine of Creation, the very idea of "intrinsic value" is mystical. If God is denied, and value is not attributed to human decisions, then where does value originate? In reality, silver and gold are valuable because God values them (Gen. 2:11-12). Their value may be considered "intrinsic" in the sense that it does not depend upon the will of men since all value ultimately is determined by the valuations of the Creator. Men are made in the image of God. Therefore, it is basic to our being to value what God values. The purity of this is ruined in sin, but the basic nature and function of the imago Dei remains. God values the "precious metals." That is why they are "precious metals," and that is why men made in His image value them. That is the only explanation that is satisfactory; it is the only explanation that is possible; and it is the only explanation that is needed.1

This observation does not move us very far in a useful direction. Men made in God's image may value gold because God values gold, but may this not be said of anything God has created? God values all of His creation (Genesis 1:31), and the critical decisions we must make are over the value ratios between different parts of creation. These ratios are not revealed in Scripture, and are only occasionally referred to in nonspecific terms (e.g., Matthew 10:29-31). It does little good to say that gold is precious and cows are not. Exactly how precious is gold? How many ounces of gold does it take to equal the value of a cow? The answer to that question depends on the subjective valuation of gold and cows in the mind of the person who must make the decision. That subjective valuation depends on the goals the individual hopes to accomplish with gold and/or cows. The value of a thing cannot be measured except in terms of some other good that a person is willing to sacrifice to acquire it. The magnitude of the sacrifice depends upon the goal that person is trying to achieve, and the contribution of that good toward the goal.

That leads us, next, to determining what goals it is that gold helps us to satisfy. Ultimately, the highest and greatest goals any created being can have are to give God glory and enjoy Him forever. All other goals should be intermediate, contributing in some way to the accomplishment of those highest goals. Therefore, the value a person places on a good ought to be derived from his assessment of its capacity to meet those highest goals. If we wanted to use the term intrinsic value at all, we might use it in this context — giving God glory has intrinsic value, though not everyone may recognize it.

Gold, and every other created thing, is simply a tool, or a means, intended for the accomplishment of those highest goals. Because we are created different from one another, with different abilities, callings, and desires, there are going to be different ways for each of us to use those tools to give God glory. If gold can make our stewardship of the world more efficient by serving as money, or make the world more beautiful by serving as ornamentation, it can be used to give God glory.

At the same time, there are billions of other human beings who do not share the ultimate goals of the Christian, and will therefore have intermediate goals that do not entirely coincide. Consequently, Christians and non-Christians will place possibly different values on material substances. A Strong's concordance will likely have a higher value to a Christian than to a non-Christian. In general, an unbeliever tends to hate what God loves, and would, if consistent, have a completely opposite set of values. However, it is impossible for an unbeliever to live consistently this way, so in fact most goods seem to meet the intermediate goals of both Christians and non-Christians in a similar way. The more basic the intermediate goal, the more likely it is that Christians and non-Christians will place similar values on goods used to accomplish that goal. For example, a hot dog is more likely to be valued consistently across Christians and non-Christians than is a baptismal font. Christians and non-Christians alike share the intermediate goal of suppressing hunger, while many non-Christians view baptism as a quaint but irrelevant tradition.

The remarkable long-run consistency with which gold is valued across time and cultures is evidence, not of the presence of intrinsic value, but of the fact that gold satisfies some very basic intermediate goals. My understanding is that stock in a company that makes staple food or toiletries is more likely to hold steady in a short-run economic decline than, say, stock in a travel agency, because the demand for staple foods and toiletries does not fluctuate as much with income. Gold may be analogous to these goods in the long run, because it satisfies human goals that are unlikely to change much over many years.

Since trade began, people have found that having a substance to serve as money eases the exchange process immensely. Money is, essentially, a medium of exchange, a unit of account, and a store of value. Many things have been used as money — seashells, salt, nails, cigarettes, enormous stone wheels, and of course gold and silver. Historically, gold and silver have been the most widely accepted, and these metals have maintained their purchasing power more reliably in the long run than government-issued paper.

However, this does not mean that we should sell all other financial assets and invest only in gold. Gold undergoes tremendous short-run fluctuations in price, and its utility to the modern investor is primarily its ability to serve as a hedge against inflation and certain other financial risks. For decades, gold has not been as liquid as Federal Reserve Notes and their digital substitutes, though this is rapidly changing. A quick visit to shows the array of gold currency, gold-based ATM cards, and other highly liquid gold investments that are now available.

Too often, Christians have attributed to gold an undeserved mystique, based on the misleading concept of intrinsic value. Understanding that gold is simply another part of God's creation, perhaps unusually well suited for monetary and decorative purposes, should help us avoid the error of relying too heavily on the metal and foregoing more productive alternative investments. At the same time, understanding gold's widespread and continuous historical appeal may justifiably lead to the modern use of gold as a part of a portfolio of financial assets.


1. S.C. Mooney, Money: Symbol and Substance(Warsaw, OH: Theopolis), 1990, pp. 77, 78.

  • Timothy D. Terrell

Timothy Terrell is associate professor of economics at Wofford College in Spartanburg, South Carolina. He is assistant editor of the Quarterly Journal of Austrian Economics and is an Associated Scholar with the Mises Institute.

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