“This is gold, Mr. Bond. All my life I’ve been in love with its color…its brilliance, its divine heaviness.” Auric Goldfinger, from the 1964 James Bond film Goldfinger.
Let’s jump right in and talk about what gold is, where to find gold, why gold is rare, the history of gold, and what the future of gold could look like.
Here’s what gold technically is: gold is a chemical element with the atomic number 79. This number means that there are 79 protons at the nucleus of a gold atom. This dense, malleable metal requires pressure and a significant release of energy to form. Gold is widely thought to be developed in the hearts of stars when they go supernova or when the dense remnants of stars collide. The resultant explosion disburses gold into space with other elements. These elements were formed into asteroids which in turn collided with the Earth. The bulk of the gold from these impacts was then pulled to the Earth’s core, where it remains unrecoverable by man.
Where to Find Gold
As we stated above, gold is from space. Interestingly, gold is also almost everywhere. Vast, untouchable gold reserves are at the center of the Earth, and gold is in the seawater covering over 70% of the Earth’s surface. This gold is not easily recovered from the seawater and, while ubiquitous, appears in such diluted form that it is not economically viable to attempt recovery.
Proven gold deposits appear on every continent in the crust of the Earth, except for Antarctica. The Southernmost continent has no proven reserves, but most of its land remains untouchable due to snow and ice. It, therefore, remains to be seen if Antarctica has deposits of the yellow metal.
Gold is found in streams where small particles and nuggets have broken off more extensive deposits due to running water. This alluvial gold tends to gather in areas where the weight of the gold stops progress with the flow of water. Gold is also found in rocks and throughout the crust of the Earth in veins. Gold is also found both in purer form and naturally alloyed with other metals like copper or silver.
The largest gold deposit in the world is in the Witwatersrand Basin, South Africa, where gold was discovered in 1886. Other notable gold-producing regions include California, Nevada, and the Klondike in North America and large swaths of Australia. The largest gold mine in the world is the Olimpiada Mine, located in Russia. Other sizable mining operations occur in China, Indonesia, and Papua New Guinea.
What Is Gold?
As stated earlier, gold is an element, number 79 on the periodic table. Gold is one of the more dense natural metals and is easily workable, and can be pounded thin enough to see through. The precious metal has been known to humans for nearly 6,000 years. The Egyptians believed it to be the “breath of God.” The Aztecs believed it to be the “sweat of the sun.” Gold was used in the religion of the Egyptians and the Aztecs for their sacred objects and as a form of adornment. Gold is both a noble metal and also a precious metal. This element is incorruptible and inert.
Technological Uses of Gold
Overwhelmingly, gold is used in technology for two primary reasons: it does not corrode, and it is an excellent electrical conductor. Since gold can be pounded thin, made into the smallest wires imaginable, and used in very thin plating applications, it is primarily used in electronics, computing, and nanotech. One significant plus for gold and for humanity is that gold from these sources is easily recycled.
The Use of Gold in Jewelry
Gold, as we stated above, is easy to form into symbols, objects, and shapes. This feature of gold coupled with its attractive color and untarnished appearance is why we use gold as jewelry and have used it for thousands of years. The appearance of gold has inspired religions and cultures, conquistadors, explorers, prospectors, and kings throughout history.
The Role of Gold in Money and Investments
The first gold coins were hammer struck in Lydia, present-day Turkey. Before this time, gold was used as a barter item and as a store of value.
Gold coinage was struck, clipped, melted, and re-struck for millennia all over the world. In the 19th Century, in response to gold Rushes in Africa, Australia, and the United States, vast amounts of gold coins were struck. Eventually, paper money was issued that was exchangeable for gold coins simply because the paper was easier to carry.
Webster’s Dictionary defines the Gold Standard as “1: a monetary standard under which the basic unit of currency is defined by a stated quantity of gold and which is usually characterized by the coinage and circulation of gold, unrestricted convertibility of other money into gold, and the free export and import of gold for settling of international obligations.”
Put in other terms: in the United States, a gold dollar coin was a specific weight of gold bullion. Twenty gold dollar coins equaled the same weight as a twenty-dollar gold coin: the value of the gold is derived in dollars from the weight of the gold, and that value remains static in dollar terms. The rate is fixed. The standard rate also applies to international currencies that are on the gold standard. The relative values of the currencies remain fixed based on the price of gold remaining static from country to country. A gold standard system does not treat gold as a commodity with a fluctuating value. In a gold standard, GOLD IS the basis of the value, and the relative values of international currencies are fixed based on gold.
Britain left the gold standard in 1931 to attempt to print its way out of the global Depression. The U.S. left the gold standard domestically in 1933. The value of gold in dollar terms went up by 40% overnight for U.S. citizens following the famous gold confiscation of Executive Order 6102 and subsequent international devaluation of the dollar.
In the case of the United States, gold is held at Fort Knox and by the Federal Reserve as an asset. To retain this gold—and the economic power that goes with it– the U.S. finally left the vestiges of the Gold Standard in 1971. Between 1933 and 1971, foreign powers could exchange their U.S. Dollars for a fixed amount of gold (this is why the international devaluation of the dollar was necessary). Think about foreign governments getting one of those gold dollar coins mentioned above for every paper dollar. Nixon closed the “gold window” (the ability of these foreign governments to exchange paper for gold), effectively ending the post-World War II monetary order (called the Bretton Woods Agreement) and ushering in the current fiat currency era.
The gold standard is limited by the physical mining production of gold and the existing reserves. The modern monetary world is, in some ways, predicated on the ability to print dollars at will..
About 45% of annual gold production is used as a held asset by central banks or as a store of value for private citizens.
Why Is Gold Rare?
The vast majority of gold mined in the last 6,000 years remains with us today in the form of coins, bars, jewelry, some technology and industrial applications, and medical and dental uses.
All of the gold mined from the first gold mined through today would fill a square box with approximately 20-meter sides. This small quantity illustrates that gold is a rare atom. Even when the conditions are correct with the impossible heat and pressure from a supernova or two colliding stars, not much elemental gold is made.
As we stated earlier, the Earth’s gold supply is largely unrecoverable to humans as it is in seawater or at the Earth’s center.
For 6,000 years, the demand for gold for jewelry and adornment, for money, for a store of value, and any other use has outstripped the supply. Understandably, gold is as expensive as it is.
The Future of Gold Is Bright
“Statista informs us that the actual global breakdown of gold use in 2019: jewelry 48.5%, investment 29.19%, central banks 14.84%, technology 7.48%.”
It is doubtful that gold will ever be used as a standard for money again. Modern banking is predicated on the ability to create currency with the movement of a decimal point. These bankers would find the constraints of a limited money supply far too constricting. They do, however, regard gold as an asset to be held to give their currencies credibility if not legitimacy.
It is likely that given the demand for gold as a store of value, for jewelry, and as a banking asset to be held in reserve, along with the superior properties of conductivity and resistance to tarnish and corruption, that this highly versatile element will see continued demand and a shining future.