May 15, 2024 • 18min

Why Gold? (Classic)

Planet Money

In this episode, Planet Money hosts Jacob Goldstein and David Kestenbaum explore the question of why gold has been so highly valued as a monetary and investment asset throughout history. With the price of gold recently hitting new highs, they set out to systematically evaluate the entire periodic table of elements to determine which one would make the best money.

Why Gold? (Classic)

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Key Takeaways

The periodic table of elements provides a framework for evaluating which element would make the best money, based on criteria like stability, rarity, and ease of testing.
After systematically eliminating reactive, radioactive, and too-abundant elements, the precious metals of rhodium, palladium, platinum, and gold emerge as the top contenders.
Gold ultimately wins out as the best monetary element due to its relative rarity, stability, low melting point for easy minting, and distinctive appearance that allows for easy testing of purity.
The "acid test" for gold, where a drop of acid is used to verify purity by the reaction, dates back to ancient Greece and is still used by modern jewelers today.

Introduction

In this episode, Planet Money hosts Jacob Goldstein and David Kestenbaum explore the question of why gold has been so highly valued as a monetary and investment asset throughout history. With the price of gold recently hitting new highs, they set out to systematically evaluate the entire periodic table of elements to determine which one would make the best money.

They enlist the help of Sona Kumar, chair of chemical engineering at Columbia University, to guide them through the periodic table and assess the properties of different elements against key criteria for an ideal monetary asset.

Topics Discussed

Gold's Special Status in India (5:47)

Sona Kumar shares memories of growing up in India, where his grandfather had a personal goldsmith who would melt and pour gold jewelry in the home.
Gold was seen as a form of currency and wealth storage, more stable than paper money which could "burn." Families would accumulate gold, especially for daughters' dowries.
This cultural reverence for gold as a precious, durable asset is in contrast to the view of gold as just an arbitrary, useless metal from a Western perspective.

Eliminating Reactive and Radioactive Elements (6:27)

Sona and the hosts systematically go through the periodic table, crossing off elements that don't meet key criteria for a good monetary asset.
Noble gases like helium are eliminated because they are gases, not solids.
Highly reactive elements like lithium and sodium are ruled out because they can burst into flames or corrode easily.
Radioactive elements like the actinides are discarded because they would literally decay away over time.

Rarity and Abundance (11:13)

Sona explains that rarer elements tend to be found lower on the periodic table, as they are harder to produce in stars and supernovas.
This rules out very abundant elements like silicon (the main component of sand) and copper, which Sweden once tried to use as currency but the coins became impractically large.
The hosts lament having to eliminate their favorite, the dense element osmium, because it is simply too rare to be a practical monetary metal.

The Final Five: Precious Metals (12:25)

After the elimination process, the final contenders are the precious metals: rhodium, palladium, platinum, silver, and gold.
Silver is ruled out because it tarnishes over time, causing a loss of material when polished.
This leaves rhodium, palladium, platinum, and gold as the top candidates.

Why Gold Wins Out (16:46)

Gold has several key advantages over the other precious metals:
- It has a relatively low melting point, making it easier to mint into coins and bars compared to the extremely high melting point of platinum.
- Gold has a distinctive, recognizable appearance that makes it easy to test for purity using a simple "acid test."
- Gold can be found in nature, often in streams and rivers, whereas platinum requires more advanced mining and smelting techniques to extract.
The "acid test" for gold purity, where a drop of acid is used to verify the gold content by the reaction, dates back to ancient Greece and is still used by modern jewelers.

Verifying the Gold Coin (18:56)

The hosts visit a New York jewelry district shop to test a gold coin they had purchased, using the traditional acid test method.
The jeweler, Hank Mendelsohn, demonstrates how he tests every piece of gold he buys by scratching it on a stone and then applying a specific acid to verify the purity.
This simple, low-tech testing process allows buyers to easily authenticate the gold content, which is critical in an industry prone to fraud.

Conclusion

Through their systematic exploration of the periodic table, the Planet Money team concludes that gold is the clear winner as the best monetary element. Its combination of rarity, stability, low melting point, and distinctive appearance that enables easy testing of purity make it the ideal choice historically and in the modern era.

While other precious metals like platinum and palladium have their own merits, gold's unique properties and the long history of its use as currency and a store of value give it a clear advantage. The episode highlights how the structure and organization of the periodic table itself provides a framework for evaluating the suitability of different elements for monetary purposes.

Ultimately, the episode reinforces why gold has maintained its special status and value for millennia, even as the global monetary system has evolved away from the gold standard. The simple "acid test" for verifying gold's purity is a testament to its enduring importance as a trusted, tangible asset.