Gold is one of the most valuable precious metals on the planet. With a brilliant yellow luster, gold has numerous unique qualities that cause it to be revered. The metal is scarce, malleable, and highly reflective, making it an ideal choice for high-end jewelry.
Because of its high electrical conductivity and ductility, gold has become an important material for creating electronic components. Examples of electronic components are microchips used in computers.
When compared to other valuable metals, such as silver and platinum, gold is the rarest metal. On the scale of the abundance of elements, gold is the rarest. Since historical times when the Egyptian pharaohs reigned, gold signified association with elegance and wealth.
This fact has made gold become a common possession of the rich in society. The market value of this precious metal has stabilized over the years, making gold a reliable store of physical wealth.
Where Is Gold Found?
Gold is a naturally occurring element on the earth’s crust, in the rock ores. The formation of gold on earth dates back to our solar system's beginning. Due to asteroid collisions, volcanic eruptions, and earthquakes over the years, the deeper layers of the earth’s crust have been disturbed. The disturbance has exposed small fragments of gold veins.
Interestingly, gold is among the few metals that are yet to be created by an artificial alchemist. This makes the metal very limited in supply as only rare natural deposits are available for exploitation.
Gold mining started about 7,000 years ago. Gold mining has increased dramatically due to technological advancements, as additional reserves are identified in various regions across the world. Global gold production stood at 2,470 tons in 2005, a figure that has since increased to 3200 tons in 2020.
As of 2020, the top global producers of gold were China producing 380 tons, Australia with 320 tons, and Russia with 300 tons.
Which Countries Own Gold Reserves?
The volume of gold extracted globally is just a tiny fraction of the actual gold reserves on the planet. The United States Geological Survey (USGS) places the historical volume of gold mined globally at about 196320 tons. The survey estimates that there are one million tons of gold located in the earth’s top crust. The size of the deposits in the earth's core is unknown.
Gold reserves hold about 25% of all the mined gold. Jewelry and non-government entities hold 75% of gold mined on the planet. Gold's price has remained fairly constant over the years. This has led to most countries having special physical gold reserves. The gold reserves serve as a sustainable store of a countries’ riches.
Over time, countries have utilized gold as a currency, making it a significant part of international commerce.
The United States of America
The United States holds the title of owning the largest known stockpile of gold reserves. The reserves hold 8133.5 tons. The reserves are estimated to account for 75% of the world’s foreign reserves. In the advent of the Brenton Wood system, the U.S offered storage to other nations' gold, in exchange for liquid cash.
This caused the ballooning of U.S.-owned federal gold reserves over the years.
In the U.S., gold is mined in the following states:
U.S gold reserves are stored at the Fort Knox bullion depository. It currently stores 4580 tons of gold that is 99.9% pure.
Germany's gold reserve is estimated at 3,362 tons. The country's reserves are spread out across the Bank of England in London, The New York Federal reserve bank, and the Bundesbank. In 2013, Germany undertook a four-year gold repatriation program. The program saw 674 tons of gold stored in foreign reserves brought back to the federal reserves located at Bundesbank in Frankfurt.
The Bank of Italy is responsible for managing the country's gold reserves, which currently stand at 2,452 tons. After the IMF reserves, the Bank of Italy has 2,452 tons of federal gold reserves, making it the world's fourth-largest gold reserve holding facility.
France has gold reserves of 2,436 tons. Most of France's gold reserves are offshore. France comes at fourth place in the list of countries that have the largest gold reserves.
Russia has 2,295 tons. Over the past decade, the Russian government has been a very aggressive gold buyer. The country purchased 224 tons of gold in 2017. The moves were aimed at diversifying the nation’s currency reserves to prevent overreliance on the U.S dollar. As a result of the move, Russia now has the fifth largest gold reserves in the world.
The country boasts Asia's greatest gold deposits. It has a total of 2,160 tons of gold.
What is the Global Gold Demand?
As of 2020, gold demand can be classified into:
- Investment with 46.54% of total gold demand.
- Jewelry with 36.83% of total gold demand.
- Central banks with 8.58% of total gold demand.
- Technology with 36.83% of total gold demand.
Technological advancements have led to the rise in the making of gold-based conductors. The usage of gold in the manufacture of jewelry has increased over time. As a status symbol, gold is used to make watches, chains, rings, and even decorative furniture for the rich in society.
In 2020, about 160 tons of gold were used to make jewelry in the United States. China’s jewelry consumption stood at 491 tons of gold in 2020.
Gold is also considered an investment commodity by the people. This is a common practice that has spread out across many regions across the globe. Some companies sell gold on a monthly subscription basis.
Due to this high global demand, some companies that deal with gold introduced affiliate programs. The programs pay already existing gold buyers on monthly subscriptions to spread the word and get more people to join.
Are Gold Reserves Owned by Private Entities?
Private entities account for a minority of the overall gold reserves globally. Though small in size compared to government-owned reserves, they act as a sign of affluence and a wealth store to the owners. Some owners of private gold reserves include:
The combined gold amount held by Indian families stands at about 24,000 tons. The Indian culture gives a special significance to gold. This significance makes it a common product for use in jewelry-making for various festivals.
The Saudi Royal Family
The Royal Saudi family is popular for its vast wealth and luxurious lifestyle. As a sign of opulence and store of the family’s valuable fortunes, the family’s gold reserves stood at 255.99 tons in 2000. This figure rose to 323.07 tons in 2016.
Financial institutions such as the International Monetary Fund (IMF) also have gold reserves. The gold reserves cement the institution's creditworthiness and also cushion such institutions from economic volatility such as recessions.
The International Monetary Fund's gold reserve holds 2814.1 tons of gold, ranking it number three in total reserves held by a single entity globally.
Gold is also held by the trust and prominent financial institutions such as banks. Some of the institutions with significant gold reserves are:
- SPDR Gold Shares with 1167 tons
- iShares Gold Trust with 523 tons
- Comex Gold Trust with 440 tons
- ETF Securities Gold Funds 306.9 tons
- Xetra Gold 226.9 tons
- ZKB physical with Gold Trust 169.4 tons.
How Is Gold Stored?
Physically vaulted gold is stored in professional vaults held by banks. Investors who go for the option of having vaulted gold acquire physical rights of ownership of gold. On request and upon payment of a withdrawal fee, the investors can pick up physical gold from the vault.
In the vault, gold is mostly stored in bar form. These are small rectangular blocks of pure 99.9% gold. The bars are branded for authentication purposes. Gold can also be smelted into coins.
What is the Gold Price Forecast?
Between the years 2020 and 2021, the price of gold increased from $1,479.13/oz to $1,858.42/oz. The price increase is attributed to the economic volatility at the time that was caused by the coronavirus pandemic. A gold rush was experienced as countries and institutions acquired gold to act as a more secure store of wealth.
Even with the price increase, the global price of gold is projected to head on a downward trend in the future. The prices are projected to get to as low as $1,400/oz as we approach the year 2030.
Gold as a naturally occurring metal has stood the test of time since its discovery. Not only has gold remained relevant to the technological changes, but its value has also remained very stable. Gold's demand is expected to rise throughout time as one of the most sought-after commodities.
With advancements in technology, however, we expect a rise in production as more efficient methods of gold extraction are developed. As a store of wealth, the future of gold seems fairly secure. The amount of gold held in billions globally is bound to increase as more institutions go for gold as a store of wealth.
The value of gold has faced some competition from emerging forms of trade, such as cryptocurrencies. However, the volatility of these new currencies has limited their adoption, making gold a currency to be reckoned with.