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The Gold Market
The Gold Market - Facts
History of gold
From the first discoveries of gold in ancient times, its beauty and the ease with which it could be worked have inspired craftsmen to use it to create ornaments, not just for adornment, but as potent symbols of wealth and power. The first pure gold coins were struck by King Croesus of Lydia (present-day Turkey) during his reign between 560 and 547 BC and gold coins have continued as legal tender since that time.
It is known that the Egyptians mined gold before 2000 BC and the first coin containing gold was struck in the eighth century BC.
The best estimates available suggest that the total volume of gold mined over history is approximately 158,000 tonnes, of which around 65% has been mined since 1950. Production has been on a downward trend since 2001, due principally to the reduction in exploration budgets that accompanied the low gold price of the late 1990s and the consequent fall in the number of major new gold discoveries. Independent analysts believe mine output will remain relatively flat for the next few years.
Canadian output trebled in the years following the gold price rise, from 51.6 tonnes in 1980 to a peak of 175.3 tonnes in 1991. The Canadian industry is more traditional, with underground operations rather than open pits. The most significant recent discovery in Canada was the Hemlo field in northern Ontario, where three mines today produce nearly 35 tonnes of gold annually.
The potential for the development of future mines is promising, particularly low-grade epithermal deposits on the Pacific ‘rim of fire', in the greenstone belt of South America, in the sub-Saharan Africa (especially Ghana) and in former Soviet states such as Kazakhstan and Uzbekistan. Although the industry faced major challenges in the early 1990s, with a lower gold price and tighter environmental controls, improved prices after 1993 provided new incentives. The period of rapid growth may be over, but with less South African output, worldwide production is expected to remain fairly stable.
Gold as a reserve asset
Central banks have been major holders of gold for more than 100 years and are expected to retain large stocks in future. They currently account for about 20% of above-ground stocks. The process of rebalancing reserve portfolios to adjust to changing conditions since the demise of the gold standard has led to a reduction in the amount of gold held by some central banks in the past ten years. This process may continue for some years to come. But the central banks have affirmed that gold will remain an important reserve asset for the foreseeable future and, importantly, since 1999 have accepted that sales be governed by international agreement.
Investing in gold
For thousands of years, gold has been valued as a global currency, a commodity, an investment and simply an object of beauty. As financial markets developed rapidly during the 1980s and 1990s, gold receded into the background and many investors lost touch with this asset of last resort. Recent years have seen a striking increase in investor interest in gold. While a sustained price rally, underpinned by the fact that demand consistently outstrips supply, is clearly a positive factor in this resurgence, there are many reasons why people and institutions around the world are once again investing in gold. This website provides you with the background to these reasons and describes the defining characteristics of the gold market from an investor's point of view.
*Source: World Gold Council - www.gold.org