I agree that the physical use of gold does not explain its price by itself. Two things though: First of all, the physical use of gold is undeniable, and it's pl

I agree that the physical use of gold does not explain its price by itself. Two things though: First of all, the physical use of gold is undeniable, and it's plausible that a sort of "bubble" -- perhaps not quite the right term given how stable that bubble is -- bootstrapped from this physical value. Second, from what I understand, the first gold coins that were intended as currency were made of gold precisely because gold was already valued for other reasons. I do know that historically speaking, the value of gold coins was usually unrelated to the price of their gold contents, so it is true that they played the role of an IOU. However, (a) there is a reason why governments chose gold rather than a different material (psychology based on the pre-existing value of gold), and (b) throughout the ages, gold was also used as a payment-commodity in trade. That latter use is probably overstated by the goldbugs, but it would be wrong to dismiss it entirely.