Gold is a real good being (nearly) universally desired as a thing of beauty in the arts and in jewelery or other ornamentations, as a conductor of electrical currents, an industrial metal with various uses, and so on. It is not consumed, destroyed, or corroded by the elements. Gold is an economic good, plain and simple. And it has historically been accepted as a medium of exchange and a store of value, which qualities make it is one of the most non-specific goods, since as a medium of exchange, it can be used at some stage in the production of everything else.
“But,” you protest, “Gold is hard to come by! It must be mined from deep within the earth, and at no small expense.“
As the old adage goes, sometimes you have to spend money in order to make money.
I maintain that the production of gold is the production of wealth just as the production of an automobile or a keg of beer or an airplane flight or a hot lunch or a double-cappuccino is the production of wealth, in spite of the fact that manufacturers, brewers, airlines, restaurants, and coffee shops fail the market test all the time! One of the entrepreneur’s distinguishing characteristics is the willingness to bear more risk than the average man. As some people will lose money on their respective speculations, likewise, some prospectors will not find a new lode; do not allow yourself to be fooled by the red herring of entrepreneurial error.
We do not cry over the restaurant which just went out of business. We do not say that society has become poorer when it shuts its doors for good. Like other failed business ventures, it created value for the suppliers, the laborers who created the supplies, the employees who worked there, and the patrons who dined there — if only for a short time. It simply didn’t create enough value to satisfy the opportunity costs of those who ventured money on it. When the venture fails, its holdings will be sold at residual value. The discounting of non-homogeneous capital goods, fixtures, equipment and the like, permits someone else to acquire them at a discount, effectively freeing up labor and capital to be put towards a more productive (and hence, wealth-enhancing) use. The only person who has lost money is the entrepreneur who failed in his attempt to satisfy the market. The restaurant was not a “waste of money,” it was an entrepreneurial error.
And so would be a gold mine which yields insufficient quantities of ore.
Because gold is a good, it can be said that, so long as people continue to desire it, the production of gold (i.e., allocating scarce resources towards its location, extraction, and refinement) is therefore the production of wealth.