Gold: A Glittering History
CNBC "On-Air Stocks" Editor
Gold has had a hold on mankind since it was first mined in the Copper Age.
Perseus went in search of a Golden Fleece. Croesus, among the first to mint gold coins, amassed so much wealth that the phrase "rich as Croesus" is still used by people who have no idea of his identity. South American Indians called gold "the sweat of the sun." Pizarro and other conquistadors exhausted themselves searching for El Dorado, the city of gold. The Golden Rule is still the most important rule, the Gold Medal is still the highest prize in the Olympics, and the California Gold Rush is one of the founding mythologies of America.
Throughout history, gold has been associated with:
- Integrity: We say someone is "good as gold" or have a "heart of gold" or are "worth their weight in gold."
- Excellence: We say someone is "going for the gold."
- Brilliance: We say it "glitters like gold" or that it "shines like gold."
- Success: We say someone "struck gold," or that it was a "golden opportunity," or that "everything they touch turns to gold" or someone has "the Midas touch."
Integrity. Excellence. Brilliance. Success. You could also associate gold with greed, wrath, pride, and envy—four of the Seven Deadly Sins.
In prehistoric times, payments for goods and services were done primarily by barter, but most items used for barter were not easily transferable.
Gold's glitter, malleability and portability made it attractive as money almost from the time it began to be mined. The economic historian Peter Bernstein notes the Egyptians were casting gold bars as money as early as 4,000 BCE, each bar stamped with the name of the pharaoh Menes.
The main problem with accepting gold and silver as money was making sure of the purity and weight.
That's where coins came in.
About 600 BCE in the city of Sardis,in western Turkey, several kings, but principally King Croesus, began minting gold coins. Sardis sat at the western end of a highway stretching from Egypt to the Aegean Sea to Asia Minor all the way into Persia, Babylon and Asia. Sardis was an important trading center, and the Lydians needed money, something that could be used in payment for goods and services but was also transportable.
They got the gold from deposits on the banks of the Pactolis River, which ran through the city. It was a crude form of gold, called electrum, but it was good enough.
Gold had been used as a medium of exchange before, but Croesus had one big advantage: His predecessors had established a state monopoly on electrum. In other words, the state controlled the supply of money.
Lydia grew rich by exporting its gold coins, and here Croesus added his own contribution. He recalled the electrum coins and melted them down into pure gold and silver coins. He also made sure they were a uniform weight and size.
The result: his coins were accepted immediately throughout Asia Minor and Greece. Gold became money, and it remained so for the next 2,500 years.
Gold And Empires
Every great empire minted gold coins. The Romans minted the aureus for 400 years. The aureus was replaced by another gold coin, the solidus, by Constantine in 309. They circulated for nearly 700 years.
The Byzantines — also minted the solidus. Until the 11th century, the fineness of the solidus was high — 95 percent to 98 percent pure gold. But Byzantine emperors of the 11th century began debasing the coin. At one point it had only a roughly 15 percent gold content.
Very little gold circulated in central Europe during the Dark Ages. Gold coin production did not really resume in Europe until the 13th century when Florence, at the peak of its power, began minting the florin. The dominant coin for large transactions, it was minted for almost 300 years.
The successors to the Byzantines were the Venetians, who amassed power based on maintaining a positive trade balance. They exported dramatically more than they imported, and that difference was covered by gold.
In 1204, Crusaders from Europe, allied with the Venetians, sacked Constantinople and carried off much of the gold and treasures back to Venice. The Venetians were now fabulously wealthy, particularly in gold. Like the empires before them, they minted their own gold coin: the ducat, which became the standard gold coin for the next 400 years.
But the European economy was expanding, and more gold was needed. The supply was about to expand dramatically. Columbus set sail in 1492 to find a new route to Asia. "Get gold, humanely if you can, but at all hazards, get gold," was the legendary instruction of the Spanish King Ferdinand to his subjects.
They got it. First they confiscated gold from the Incas, then they began new production on the backs of the enslaved natives.
The result was an enormous increase in the global supply of gold. For a short while, Spain was the mightiest empire in the world. But within a century of Columbus' voyage, the gold supply began to dry up, and the vast horde that Spain had amassed was wasted in the 16th and 17th centuries on ruinous wars with England, France and other countries.
The Spanish empire had its gold coin: the doubloon, minted in Spain, Mexico, and Peru.