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Since its first discovery many millennia ago, gold has symbolized wealth, power and quality. Gold has long been considered one of the most precious metals in the world. Fashioned into jewelry, it has adorned royalty and society's upper crust. Stamped into coins, it has been used around the world as currency. It serves as a buffer against unstable geopolitical times. It is used in a range of every day applications essential to modern life in fields such as electronic, dental and medical. And its ability to preserve its worth over time has made gold a valued investment, whether in the form of bullion, coins, futures or shares in gold-mining companies.
How does a gold mine work?
The gold-containing ore has to be dug from the surface or blasted from the rock face underground. This is then hauled to the surface and milled to release the gold. The gold is then separated from the rock (gangue) by techniques such as flotation, smelted to a gold-rich doré and cast into bars. These are then refined to gold bars by the Miller chlorination process to a purity of 99.5%. If higher purity is needed or platinum group metal contaminants are present, this gold is further refined by the Wohlwill electrolytic process to 99.9% purity.
Mine tailings containing low amounts of gold may be treated with cyanide to dissolve the gold and this is then extracted by the carbon in pulp technique before smelting and refining.
How much does it cost to run a gold mine?
Gold mining is very capital intensive with typical mining costs varying widely depending on mining type and ore quality. Ores mined at the surface (open cast mining) is considerably cheaper to mine than underground mining at depth. Such mining requires expensive sinking of shafts deep into the ground.
What happens to the gold once it has been mined?
The ore is normally sent to a refinery, which will extract and melt down the gold into a pure 24ct form, normally as bars or ingots.
What percentage of Gold is used in jewelry, industry and Investment?
Around 70% of gold demand is jewelry, 11% is industrial (dental, electronics) and 13% is investment (institutional and individual, bars and coins). Gold jewelry has strong "investment" attributes in all
countries, and in markets such as India and the Middle East is sold by weight at the prevailing daily rate with a supplementary "making charge" which varies according to the complexity of the piece.
Why Invest in Gold?
Historically, gold has been a proven method of preserving value when a national currency was losing value. If your investments are valued in a depreciating currency, allocating a portion to gold assets is similar to a financial insurance policy. In the past year, the climb in the price of gold above $700 per ounce is due to many factors, one being that the dollar is losing value.
Reasons to say "Yes" to gold
- The US dollar is weak and getting weaker.
- Gold price appreciation makes up for lost interest, especially in a bull market.
- The last four years are the beginning of a major bull move similar to the 70's when gold moved from $38 to over $800.
- Central banks in several countries have stated their intent to increase their gold holdings instead of selling.
- All gold funds are in a long-term uptrend with bullion, most recently setting new all-time highs.
- The trend of commodity prices to increase is relative to gold price increases.
- Worldwide gold production is not matching consumption. The price will go up with demand.
- Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
- Several gold funds reached all-time highs in 2006 and are still trending upward.
- The short position held by hedged gold funds is being methodically reduced.
- The recent devaluation of the U.S. dollar has eroded that currency as an international safe haven of last resort.
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