The physical properties of gold make it useful enough to have some value, sure. But are those properties, and the uses they enable, sufficient to account for the current trading value? Not by a long shot. Those properties and uses create a floor for gold’s value, the point at which it makes sense to buy it for what it is, rather than because somebody else will think it’s worth more.
Look at diamonds. Their industrial value is low enough that if that were the only use, they wouldn’t be worth manufacturing, as most industrial diamonds now are. The rest of their value is purely psychological. This is documented. The DeBeers family executed probably the greatest PR campaign in history to make diamonds desirable, paying actors to use them in movies, huge ad campaigns, all to create the idea that diamonds were associated with love. Prior to the 1920’s, that idea did not exist. And without that association, diamonds would be worth a tiny fraction of what they are now.
Really, all forms of exchange above barter are founded on a collective agreement of “value.” In that sense, all currencies are fiats. Gold is simply one of the oldest of these collective delusions. Magic pixie dust, it ain’t.
None of which should encourage or discourage people from buying and selling the stuff. There’s money to be made and lost, go to it. But the trading value of gold is as much psychological as that of paper money. Granted, the floor value is higher, as gold is useful for more things than high-rag-content paper is, but that use-defined floor is far, far lower than any valuation that could support a gold-based currency.
