Found this pic on the Monero subreddit....
Nice, but why is gold only partially fungible? I think any element is 100% fungible correct?
Good question.
Here in the real world, gold is only semi-fungible because:
A. Bullion contains a fingerprint of radioisotopes and trace minerals that betrays its origin. No bullion is 100% pure. And 100% purity would function as an identifying characteristic.
B. Larger bars often have a serial number.
C. The possibility of/propensity for whitelisting is non-trivial, because there is a movement akin to the "ZOMG Blood Diamonds" social justice bullshit which seeks to curtail the market's supply of non-kosher "conflict minerals."
D. The particular form factor of gold bullion is not trivially alterable and alterations (IE smelting/refining/repouring) incur thermodynamic and transactional/economic friction. Even in nature, gold nuggets are unique.
Perhaps the best illustration of this is when you try to sell 1oz of gold to your local coin store, and the price depends on whether that 1oz is in the form of an American Gold Eagle, Panda, Maple/Brit/Philly, generic round, shot, or 14k jewelery.
In contrast, the price of 1 XMR is always the same whether it was mined by a Chinese botnet and previously used to pay Hillary's friends in ISIS or freshly mined by Fluffypony and never previously transferred, because there's no way to tell the difference.