Nothing has innate value. The value of something is not *in* the thing itself, whether bread, or TVs, or gold, or whatever.
The value is subjective to human minds. The reason we attach value to something is because we expect we can use it to satisfy our wants, or to remove a feeling of dissatisfaction.
"If nobody liked gold tomorrow, would it be worthless?"
"It seems as if gold is held up as some great standard, but why?"
Because in fact everyone estimates that the likelihood that everyone else will stop liking it, is very small.
What gives gold its great value is that everyone wants it, for two main reasons. Firstly, because it is beautiful or useful in itself, for example, as jewellery or for industrial purposes, dentistry, whatever. This first use is as a *commodity*.
Secondly, it has been for centuries the market's first choice as *money*. Moneyis the most generally accepted medium of exchange. This means that when we get something for use as money, we are getting it to give away later in exchange for something else. Money arises because of the limitations of barter. Instead of trying to swap my oranges directly for your armchairs, instead we each first swap what we have for whatever we think will be most acceptable to other people; then we swap that for what we want. That's how money arises. It is, in other words, the most generally acceptable commodity. In different times it has been shells, or tobacco, or gold, or banknotes.
Gold has certain qualities which make it excellent as money:
- firstly it's desirable in its own right, as a commodity
- it cannot be increased at whim, unlike paper money which is always going down in value - ie buying less and less
- high value per unit weight = portable
- easily divisible.
Sure if nobody wanted it, it would be worthless. But which do you trust more: politicians' promises, or gold? There's your answer. Everyone else is the same.