Yes, perception is what makes any money valuable, paper or physical. Gold is no different.

Gold just has a long history of maintaining value as a money. Paper has had a much shorter and checkered history of maintaining value. In fact, paper money has had a pretty bad history of maintaining value. All of them have eventually failed.

The value of ANY thing people use as money (to facilitate transactions and store value) is based on the faith someone else will find it valuable and accept it in the form of payment for goods or services. What makes gold so well suited and one of the reasons it has lasted the test of time is that it is not teribly useful for other things. (actually it is useful for a lot of things, it is just too valuable to be used in most of them). As Jim Rickards would say its stock to flow is large (the stock or amount available is relatively stable and the flow or amount of newly mined gold is a small proportion of the stock - this is what helps a money maintain its value - the stock doesn't change or increase rapidly or decrease from it being used up).

John