(Sorry if the question is oddly formulated). Like any student who took an intro class to the history of the americas, I've heard that the search for precious metals and most notably gold was one of the biggest motives of european colons coming to the continent, and that it made Spain a very rich kingdom.
But how exactly was gold valuable ? Was it used to make coins (at the risk of creating inflation) ? Or to make jewelry that was then bought by wealthy people ?
I just don't understand why gold was considered so valuable, as opposed to materials such as wood or iron/steel that were used to make a variety of items, or even spices (maybe gold had a practical use I'm missing).
A reply to /u/WhaleTrooper
Perhaps a previous post may answer some of your questions. But you should be thinking of silver, which became the basis of Spanish wealth from the Americas, even if Columbus sold them on the prospect of mountains of gold.
In the 16th - 17th centuries, precious metals and precious goods were the basis of trade. The inflow of silver from Spain in the 16th and 17th centuries was useful at a time the Chinese had turned their backs on paper money, which was abused by the Ming government. Another popular form of currency was the copper coin, but this suffered from counterfeiting and production issues, so the government and major traders preferred silver. A major policy in favor of silver was the tax reform called the "single-whip reform", which attempted to consolidate various forms of taxation and thus requiring even more silver as currency.
But it was not all just because of government policy (or government failures). The silk industry was booming, and the arrival of the Europeans further fed this boom. Although Manila was always a small port compared to other ports in the region, it was very important to the Spanish. It comprised a major export from China to Manila. Conversely, silk traders became dependent on Spain's silver. The times that the Manila Galleons failed to make it to Manila from the Americas spelled disaster. The Spanish peso was so well-known in China that there was popular demand for the face of a Spanish king even in coins brought by other European powers!
A short time later, during the so-called mini ice age, silver shipments became unreliable at a time that much rice cultivation was being substituted for silk. This led a double-whammy so to speak, as there was no silver to pay for the silk, at a time that silk and rice production both had declined.
To quote my colleague /u/ParkSunJung , it's as if China had set on a currency for which it has little control over the supply. So it became vulnerable to the supply of silver from Spain, at a time that its alternate supplier Japan was declining in silver production.
Over the longer term, the imbalance between European nations' unwillingness to pay in silver and China's unwillingness to pay for comparable value of European goods led to the Opium war, but that's a century or two away depending on the period of your interest.