The weird, wild story of humanity’s obsession with gold

In the 1980s Lloyd Blankfein, the future boss of Goldman Sachs but then a rookie gold trader, bought a kilogram of the metal for himself. He describes this in “Streetwise”, his memoir, as less an investment than a conversation piece—albeit one that cost around $15,000 ($50,000 today). When he handed it round at dinner parties, he found it better at prompting awe than speech. “People would become slightly mesmerised,” he writes. “No one ever wanted to let go of it.”

As Dominic Frisby, a financial writer, recounts, gold has captivated human beings since time immemorial. In doing so, it has shaped the course of history. The earliest known artefacts made of it are 6,700 years old, from the Neolithic period, and include crowns, brooches and a “gold phallus cover, with holes for threads to tie it on”. Even then, in other words, gold was already bound up with wealth and power—as it still is today. (The phallus cover, Mr Frisby muses, perhaps indicated “the owner’s status as a leading procreator”.)

The “primal instinct” to covet gold pervades folklore. Greek myths heave with the stuff: there is a golden fleece (sought by the Argonauts), a golden apple (given to Aphrodite) and golden everything (touched by King Midas). Ancient rulers understood the power of this symbolism and put it to good use. When the Lydian empire struck the first coins in the seventh century BC, it made them from silver and gold. Some 200 years later, when Alexander the Great conquered the Persian empire, he carefully secured all its main gold-supplying regions. He then established 26 mints across Europe, Asia and Africa, and ensured that some of the most valuable coins had a gold purity of 98%.

This idea stuck, on and off, for over 2,000 years—and so gold’s history is also that of money. It is therefore unfortunate that Mr Frisby’s grasp of this topic is shaky. He writes reverently of the gold standard, under which governments used to peg their currencies’ value to the metal and for which no serious economist would advocate today. Its well-documented contributions to deflationary and financial crises, including the Depression, go curiously undiscussed in this book. By contrast the author blasts the “pernicious consequences” of the “floating fiat currencies” that replaced gold-backed ones after America junked the international gold standard in 1971. In fact, this switch set the stage for a great economic boom.

Part of the fun of this book is how much Mr Frisby embodies the stereotype of the goldbug as a crank. “Without the discipline of gold,” he writes, governments have grown “fat on waste, war and welfare”, as if these problems were born in the 1970s. Currencies not backed by gold are blamed for rising house prices, immigration and “feelings of hopelessness”. “The connections,” Mr Frisby darkly warns, “are undeniable once you understand the forces at work.” This reviewer must confess to having finished the book unenlightened.

It is nevertheless worth reading, because the author has collected some cracking stories. There is the Spanish King Ferdinand II’s order to the conquistadors to “Get gold, humanely, if possible, but at all hazards, get gold.” There are the gold rushes of the 19th century, which transformed California and Australia. There is the Bank of Norway’s daring—and amazingly successful—mission to keep its gold from the Nazis during the second world war.

It is also worth reading this book because gold still matters a lot. It accounts for over 80% of America’s foreign-exchange reserves. Meanwhile America’s weaponisation of the dollar, through sanctions on the likes of Russia and Iran, has prompted a race for alternatives, whether backed by governments or based on bitcoin. Yet as Mr Frisby notes, even the countries that are keenest on these alternatives, such as China, Saudi Arabia and Thailand, are clamouring to buy gold, too.

So are investors, because of gold’s use as a haven from inflation and political chaos. Both have surged in recent years, as has the gold price: Mr Blankfein’s kilogram would now fetch around $150,000. As a basis for money gold is still, as John Maynard Keynes wrote in 1924, “a barbarous relic”. But as a component in investors’ portfolios, it is as important as ever. ■