Gold has been mined for thousands of years with its appeal enduring through some of the earliest civilisations through to the modern day.
In total around 187,200 tonnes of gold have been mined since the beginning of civilisation, according to the World Gold Council.
As gold is both highly valued and relatively easy to be recycled, the bulk of the metal mined is still around in some form today, be that as part of jewellery or as gold bars in vaults around the world. In fact, if all the gold ever mined was collected in one place, it would fit into a crate of 21 meters cubed.
Gold’s Journey: From the Ground to the Vault
Gold has been highly sought after due to its shiny lustre and later, its role as the global trading currency, leading to hundreds of thousands of people going in search of the metal. Most famously, the California Gold Rush in 1849 saw 40,000 miners rush to the US state in search of the precious metal. Although only a few of the “49ers” ever got rich, this rush marked the start of a surge in global mining activity.
While the US still possesses abundant gold reserves, it has fallen behind China, Russia and Australia on the rankings of the world’s largest producers. In total, just over 3,500 tons of gold were produced in 2021 with China the source of 332 tons, closely followed by Russia and Australia, with 331 tons and 315 tons respectively. A few decades ago, South Africa was a dominant force in gold mining but it has since fallen from the top spot of being Africa’s largest producer, losing that crown in 2018 to Ghana.
As for the mines themselves, the largest is found in the US (Nevada) producing 3.3 million ounces of gold in 2021, while accounting for just under 3% of the global supply. Next was the Muruntau deposit in Uzbekistan with 3 million ounces, followed by Grasberg in Indonesia with 1.4 million ounces. In fact, the Grasberg mine has proven to be one of the most productive deposits ever found, having produced 53 million ounces of gold, as well as 33 billion pounds of copper since 1990.
Global mine supply has remained fairly stable over the last few years and caters for the bulk of global demand for gold, which came in at just over 4,000 tons in 2021. The shortfall is made up by recycling.
Almost half of the gold produced each year is turned into jewellery, with this sector remaining the biggest source of demand. The next largest is as an investment asset with central banks holding vast assets of gold to protect their currencies.
The US holds the most gold with over 8,000 tons, the bulk of it stored at its famous Fort Knox depository, more than double the amount of Germany, the second largest holder, and the International Monetary Fund in third.
Is gold a safe haven for investors?
While central banks hold gold to manage their currencies, the precious metal can also play a role in diversifying individual investors’ portfolios and managing risk. Gold has been a proven store of value, with one ounce of the metal retaining similar buying power over multiple decades.
As gold is not correlated to the movement of equities and other financial markets, it can be used as a hedge against downward moves on stocks and shares, earning the asset a reputation as the ultimate safe haven.
Different ways you can invest in gold
There are a variety of ways in which an investor can gain exposure to gold. In its simplest form, there is physical gold, with a range of investment-grade bars and coins available from mints around the world. Coming soon, Kinesis will offer a new range of minted bullion coins and bars at their online bullion store, at some of the lowest prices in the precious metals sector.
The value of an ounce of physical gold is well known throughout the world with bars or coins easy to buy or sell on a highly liquid market.
Another way of gaining exposure to gold is via the gold miners who are listed on stock exchanges across the world. While the fortunes of these miners are largely led by the underlying price of gold, they also typically offer significant dividends, providing shareholders with a yield.
The Future of Gold
Gold is likely to remain valued for many centuries, while its shiny lustre makes it highly sought after in two of the world’s most populated countries: China and India. Indeed, the trend of the last few decades has seen a shift of physical demand moving from Europe and the US to Asia with Turkey and Thailand also significant buyers.
Where the shift in gold’s role is most likely to be noticed is as an investment asset. While gold has always attracted investor interest as a haven asset, its lack of yield has at times lessened its appeal.
Kinesis Money has created a product that crosses this divide with its KAU coin acting as a gold-backed currency that generates a yield for its holders. This digital gold offering is an investment built for anyone seeking to protect their wealth in precious metals while using their gold as money.
Each KAU is backed by one gram of fine gold stored in fully insured and audited vaults, in the buyer’s name with the coin enabling holders to spend, trade, send and earn physical gold, anywhere in the world.
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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis