If you use paper money backed by a specific commodity, anything storable and valuable would probably work, even if it was bulky.

The amount of gold in the world is constantly changing. Some is lost in shipwrecks at the bottom of the sea, or squirreled away in the tombs of Pharaohs. More of it is mined every day. A large amount is locked up in personally owned jewelry and decorative objects, too valuable from sentiment or workmanship to be used as money. A small amount is consumed in industrial uses, such as false teeth or coatings on astronaut helmets, or electrical contacts in electronic equipment. At any time, we can trade a piece of it for something else. something of real value.

Sure, I know we can’t live by barter alone, but why gold? Wouldn’t anything else do just as well, as long as it was scarce, durable, and impossible to counterfeit?

Gold has a value, but it is heavy and inconvenient to carry around, so we replace it with paper currency that represents an equivalent value of gold. But carrying large amounts of paper currency is insecure, so we substitute checks and bank drafts for that. But that is inconvenient to commerce, so we substitute electronic fund transfers to and from abstract accounts for that. And so on, and so on. Sooner or later, it’s all just accounting, and accounting is easy to counterfeit, easy to lose track of, and dependent on elaborate administrative systems and institutions.

The Indian civilizations of the New World valued gold as a decorative and ritual substance. It was hard to mine and to smelt, so it had a value, you had to pay a miner (or enslave one) to get it for you. But it was not a medium of exchange (although I’m sure supply and demand set its value equivalent in other goods and services, like corn, hours of skilled labor, or a well-crafted obsidian axe-head). For the Andean and Meso American empires, gold was just another commodity, like yams or potatoes.
They got along fine without adopting it as a medium of commercial exchange.

But the Spaniards had other ideas altogether….

I can actually look at the bar serial numbers on the internet.

Anybody doing paper stuff or fractional stuff is nuts.

There are a lot of schemes going on around the world to prop up systems that just plain burned more money than they had. I don’t know how long they can keep breaking up the superstructure of the steamboat to keep the boilers burning.

As I said elsewhere, protect your assets.

To properly address the issue would require a rather long post documenting the past several thousand years of using precious metals as a system of settling trade agreements. Everytime I start to respond I find myself going off on one of many possible tangents.

And I’m busy looking for the stuff, currently helping a firm with reclaiming old mine tailings, which are now ore grade deposits just sitting there, so I can’t dedicate the time to a lengthy response.

There is much weirdness in the gold market: huge short positions, fractional reserve gold leasing, derivatives, hedging, and demand for physical delivery… There are many financial schemes that are stressed to the point of un-ravelling, and it concerns me.

An elevated gold price keeps me employed. A price that is rising too fast tells me something is going really wrong. Correction is good at this point to bring the curve back down to the long term moving average.

The ten year chart:

Prime among them that some banks are pushing the price down to salvage themselves. Another idea is that a lot of people who are in bad positions in stocks are selling their gold to cover them.

I’m not an investment wizard. I have some gold funds, but for the long haul. The people playing the market in real time (“catching the knife”) are nuts.