system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why does the price of gold and silver matter?
gpt
Both Gold and Sliver have some common qualities. They exist. They can be verified to be what they are, so they are virtually impossible to counterfeit. (The original "touch stone" as a means of determining gold's validity is a huge piece of technology in its day.) Neither will "go bad" or be eaten by vermin so it's got an endless shelf-life. And up until recently there was very little real use for either metal, so nobody was going to riad the coinage to make it into food.

So gold and silver were great for _being_ money. Imagine if money were made out of actual food, like rice cakes were coins. Someone could easily eat the currency and then the money would go missing.

So mony _as_ _money_ has to have a whole bunch of particular traits, and yet we don't like those traits.

So we moved to the checkbook. It's a pain in the arse to haul a million gold coins somewhere. But hauling some paper that says "give this guy a million gold coins" is way easier.

So as the amounts of money grew the need for paper money, or bonds, or writs, or bank drafts grew.

So now in the big depositories, they'd shift coins or bars or whatever in response to drafts. None of the actual "coined gold" needed to ever leave the vault. It's just moved from pile A to pile B as directed.

Out in the real world, first the gold rush, then the silver boom, lowered the confidence in one of gold's (and then sliver's) traits. That being rarity. When you've got what may be a seemingly inexhaustible supply of gold showing up and potentially making gold as common as tin, well you don't want your money to be based on gold... so you switch to the second best of "sliver". Then that happens again, and the sliver mines are spewing out the stuff, so you decide to just stop using either one directly.

But then the gold rush and the silver boom each end before the price is really wrecked, so you go back to trading the stuff for the same reasons it was good to make it into money in the first place. But the price of gold and sliver are no longer tied to a currency.

So the "pound note" in england was a note for "one pound of sterling silver" then one day you stopped being able to ask for your pound of sliver because it stayed "a pound" but it became a pound of nothing in particular. It became a promise of uncertain value.

So most currency now days is paper money, or base coins (random alloys of metal that look good but are worth less than the amount pressed into their face). When you get a dollar it's worth a dollar but what's a dollar worth.

So now days gold and silver have real industrial uses, and it's value beyond that is illusory. But were society to collapse then the things that made gold good at being money still apply. A gold coin weighing a quarter ounce will be worth a quarter ounce of gold wherever you take it even if the "money number" on the front doesn't apply. (For example a $20 gold coin "Krugerrand" currently sells for a lot more than $20.)

So gold and silver have become the default measuring sticks for certain things, and that utility _is_ it's value.

Honestly, though, the deeper you look into economy and finance the more you realize it's just a giant reputation lottery. All money is a promise that someone will want it from you as much or more than you wanted it from me.

The corner cases get really odd. Like "Tally Sticks": split chunks of wood that was used for taxes. The taxed lords would buy the sticks, then ship the sticks. If brigands tried to steal the sticks the only place they had any value was to turn in as taxes for landed gentry. So the value of that currency was hugely specific.

Look deep enough and the answer to most questions about economy and money come back to the answer "because we said so". Why are there stock options? "because we said so". Why is gold valuable? "because we said so". As long as the people from whom you wish to get a good or service are one of the "we" then the transaction will work.

It's surprisingly arbitrary now days, but in the old times it was vital for long distance trade in an age without fast or reliable communication.