1. It is needed for industrial/electronics purposes.
2. It is internationally recognized as being valuable, regardless of culture. That is, cultures as diverse as India, China, England, Russia, pan-Arabic (i.e. non-Jews in the Middle East) have all viewed gold as having value, and that over at least 1000 years of recorded history each.
3. It does not corrode or rot the way paper money does. In Israel they recently found some Byzantine-era gold coins, aside from the obvious numismatic/collector value they still retain value for the gold itself.
4. Gold does not require a government to enforce its value. It's value is innate or intrinsic to the thing itself. As such if a government falls or decides to modify the value of a paper dollar (as Mexico, Argentina etc. have done in the past) then the value changes. Gold that you have in your pocket cannot have its value modified by a government order.
Only items 1 and 2 represent sources of gold's 'value'.
Item 3 is simply a property of gold (which you may or may not find advantageous). For instance, the same thing can be said about granite. It does not rot like paper, but that has nothing to do with it's value as a currency.
Item 4 is simply an extension of item 2. The reason a single government cannot control the value of gold is because all the other government's of the world don't go along with it. This is great if your government is somewhat careless with it's money supply, but doesn't have anything to do with 'intrinsic value'.
Regarding 1, using gold as a currency drives up the costs of using it for industrial/electronics purposes, just like using granite as a currency would drive up the price of countertops. But the fact that gold has a practical use does impart it with some value.
However, the value of gold as a currency is entirely due to Item 2. Gold is worth something because everyone agrees it is worth something. It would be interesting to see how this came about. I'm willing to bet gold's value originated in it's scarcity (and the exclusivity of showing it off), but obviously it has nothing to do with anything 'intrinsic' to gold. It's just as likely that an accident of history would have revealed some other rare metal that royalty desired to show off, which would have imparted 'value' on this metal instead of gold.
The reason gold holds value today is entirely historical. People value it precisely because people have always valued it.
Source: http://news.ycombinator.com/item?id=410830
1. It is needed for industrial/electronics purposes.
2. It is internationally recognized as being valuable, regardless of culture. That is, cultures as diverse as India, China, England, Russia, pan-Arabic (i.e. non-Jews in the Middle East) have all viewed gold as having value, and that over at least 1000 years of recorded history each.
3. It does not corrode or rot the way paper money does. In Israel they recently found some Byzantine-era gold coins, aside from the obvious numismatic/collector value they still retain value for the gold itself.
4. Gold does not require a government to enforce its value. It's value is innate or intrinsic to the thing itself. As such if a government falls or decides to modify the value of a paper dollar (as Mexico, Argentina etc. have done in the past) then the value changes. Gold that you have in your pocket cannot have its value modified by a government order.