What makes gold valuable? Where does it comes from? And what are its main uses? Read on for the answers, and about the surprising location where more than 20 million tons of gold can be found.
Note: If you are trader or investor, we also have an in-depth guide to gold’s price & price-drivers as well as an introduction to investing & trading gold.
Why is Gold Valuable?
For thousands of years, gold has occupied a unique role in the financial systems of cultures worldwide. Unlike virtually every other commodity, gold has value far beyond its applications in industry.
While business sectors including dentistry, electronics, and jewelry use gold in their products, there is simply not enough commercial demand to explain the very high price markets assign to the yellow metal.
However, the high price is no mystery.
Since the beginning of civilization, humankind has viewed gold as a proxy for money and a safe-haven asset. This has made it one of the most fascinating and misunderstood commodities.
How is Gold Used?
After it is mined, refiners process gold into bars, coins, or ingots called bullion to sell them. Buyers then transform these gold bars into items like coins, jewelry, and electronic components. They may also store gold bars for traders.
As with supply, gold market demand is also international and includes a variety of different industries and traders.
Main Uses Of Gold
Four groups comprise the major demand components for gold:
|Use of Gold||Description|
|Jewelry||This industry fabricates gold into watches, rings, earrings and necklaces among other items. Jewelry manufacturers have been a mainstay of gold demand for centuries.|
|Technology||Because gold conducts electricity and does not tarnish, many industries use gold in their products. Connectors, switches and relay contacts on cell phones contain gold, for example, as do CPU memory chips and motherboards. Gold is also used in salts to treat arthritis patients and on space vehicles to reflect radiation.|
|Private Investors||Individuals and investment funds that want protection from inflation and market crises view gold as a way to preserve wealth. Investment demand for gold manifests itself through the purchases of gold bars, coins, and funds that invest in the metal.|
|Central Banks & Sovereign Wealth Funds||Most central banks and sovereign wealth funds hold gold reserves. Although none of the major world economies has a formal gold standard, many countries including the US, France, Germany, Italy, Switzerland, and China hold substantial gold reserves as a way to instill confidence in their fiat currencies.|
Fast-growing Asian economies, including India and China, have increased their demand for gold in recent years.
Where Does Gold Come From?
Miners extract gold from the ground on every continent except Antarctica.
The supply of above-ground gold is limited, so gold deposits are difficult to find. Plus, extracting the metal from gold mines is an expensive and time-consuming endeavor.
Interestingly, gold isn’t just in the ground.
Ocean waters hold approximately 20 million tons of gold – which amounts to more than has ever mined. However, each liter of seawater only contains about 13 billionths of a gram of gold. Yes, billionths.
There is no getting away from the fact that gold is rare. According to the World Gold Council, the total supply of gold in the world is around 197,576 metric tons – more than the orbiter of NASA’s Space Shuttle.
Top Gold Producing Countries
China, Australia, Russia, The United States, Canada, Peru, Indonesia, Ghana, Brazil, Uzbekistan, Mexico and South Africa are currently the top gold producing countries. For many years, South Africa was the dominant gold producer in the world. It now struggles to maintain its position in the top 10 as geographically larger countries have increased production.
How Much Gold Has Ever Been Mined? If all of the gold that’s ever been mined were to be combined into one large cube, it would measure only 21 meters square. That’s a bit less than the length of a tennis court or five stories on each side.
Where Can You Buy or Trade Gold?
If you want to learn how to trade gold, read our gold trading guide. You can also start your research on where to trade gold with reviews of these regulated brokers available in .
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Here are the answers to some of the most frequently asked questions about gold.
What Are Spot Gold Prices?
The terms spot gold and gold spot price refer to the current price at which you can purchase or sell an ounce of physical gold.
See more on today’s spot gold price with historical price comparisons.
Why do central banks hold gold?
Central banks have gold reserves for several reasons. Gold is one of the most widely-used stores of value worldwide aside from FIAT currencies. Central banks use the metal as a store of value, as well as a guarantee to pay depositors, and as leverage to support national currencies. Many central banks also give out gold loans with variable annual interest rates.
What role does gold play in financial markets?
Unlike other metals with many industrial use cases, gold prices are primarily driven by the belief of it as a store of value. Gold partakes in financial markets as a key metal in mining company shares, through trading instruments like derivatives, and a manufacturing component in a handful of commercial and retail markets.
What does 14k gold mean?
A ring made of 14k gold is 58.3% pure gold mixed with 41.7% of a more durable metal alloy – usually a mix of zinc, nickel, silver, and copper, with a plating like rhodium. Pure gold is 24k. Without additional alloys, pure gold is soft and easily damaged. It is also heavy and expensive.
Are gold prices up or down?
On any given day, gold prices can fluctuate at a moment’s notice. Its pricing trend since the early 1970s has been upward, but this has not been consistent. It reached a peak in late-2011, lost roughly 40% of its value over the following four years, and has risen in the years following that. Take a look at our gold price guide to get more information on current and historical prices.
If you want to learn more about gold trading and how you can trade the commodity, see our gold trading guide. Before you dive in, you may want to check today’s gold price and do some research.
For other precious metal and base metal guides, see our articles on palladium, silver, iron ore, steel, aluminum, and lead.
Credits: Original article written by Lawrence Pines. Additional updates and additions in Jan 2021 by Marko Csokasi with contributions from the Commodity.com editorial team.