Since the stock markets began, gold has gained a reputation to have a negative correlation to stocks and a positive correlation when compared to inflation. However, gold’s history as a financial asset and store of value began long before this.
Gold coins were minted and used as currency as far back as 550BC, but gold was known as a sign of wealth long before its use as a currency. Treasures containing gold have been discovered from as early as 4000BC, so the precious metal has been notorious for its relevance to power and wealth for many millennia.
However, it was not until the late 1800s when gold gained its value in contemporary finance. The majority of nations adopted the gold standard, which involves fixing the value of their currency to the price of gold. Since, the gold standard has been dropped and readopted in many countries until it was finally replaced by freely floating fiat currencies in 1971.
The price of gold remained relatively stagnant until the 2008 financial crisis, when the price of gold rose from around £15 to £30 a gram in the following years. This spike in price was in response to the adoption of quantitative easing (QE) by central banks. The justification of gold’s appreciation in value follows the general logic that QE creates inflation, and gold prices generally rise alongside inflation.