12 astonishing things about gold

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From the Archives : Originally published July 16th, 2012
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Category : History of Gold

 

 

 

 

As gold coin makers, we get to work with one of the most amazing materials in the Universe.

Here are 12 astonishing features we’ve found cited about precious gold:

·         Gold is made in supernovas – massive cosmic explosions that hurl out materials which gather together to form planets.

·         Most of Earth’s gold is buried too deep to be recoverable.

·         Gold nearer the surface is the result of meteorites storms that bombarded Earth after it was formed.

·         The abundance of gold in the Earth’s crust is 0.004 parts per million.

·         The world’s oceans are estimated to hold up to 15,000 tonnes of gold.

·         Since the dawn of humankind, less than 172,000 tonnes of gold have ever been mined.

·         Every ounce of recovered gold would fit into a box of 20 cubic metres.

·         These days, it is not unusual for 10 or more tonnes of rock to be mined to get 1oz of gold.

·         Gold is extraordinarily dense – a cubic foot weighs half a ton, making it almost twice as heavy as lead.

·         Gold is highly malleable and ductile – 1oz of pure gold can be beaten into a sheet measuring nine square metres or drawn into a wire 80 kilometres long.

·         Gold nanoparticles thousands of times smaller than the diameter of a human hair are used in medicine.

·         The average human body contains 7 milligrams of gold.




 

 

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Yes the interest rates as presented here do look less stable than I had imagined... and yet....

* The rates look to be on a declining multi-century trend until the 1960s.
* The 1980's peak in interest rates dwarfs any previous move under a gold standard.

An investor looking to preserve wealth for a long period after WWI would have observed an historical average of somewhere around 6% and a declining historical trend. So investing in a fixed rate near that historical average probably would have seemed prudent at the time.
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How easy is it to physically destroy GOLD or Silver so you have nothing left?
How easy is it to destroy paper?
How easy is it to create paper?
How easy is it to create Gold and Silver?
Can you wipe your butt with Gold or Silver?
Most people wipe their Butt with paper.
Which would you rather have as money?
Gold and Silver will always have some intrinsic value, paper will start fires.
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I will take issue with your last item. The new stuff that's used to print on isn't even paper and burns poorly.
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I think the Perth Mint meant to say a cube measuring 20 metres to a side (8,000 cubic metres) would contain all the world's recovered gold, not a box of 20 cubic metres.
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Yup. Something in the ballpark of an Olympic swimming pool was what I heard.
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3 pools, not 1.

Estimate for oceans taken from Wikipedia and is way off. Most conservative (and reliable) estimate comes from NOAA and is 20 million tons. Some put the number as high as 3 billion tons.
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If there were 3 billion tons of gold in the ocean it would be profitable to extract it. Even at 20 million tons one would only need to process 1% of the oceans in order to extract more above-ground gold than already exists on the planet. That's 8 trillion dollars at market rate. With the existing ocean currents a lot of the "heavy lifting" would already be done, leaving only the matter of extracting the gold as it passes by the system.

The fact that gold was created in a super-nova is no big deal to me. In fact every element higher than iron on the periodic table was created by some dramatic cosmic event long ago. Facts like these do little to make gold more "special" in my eyes. What interests me Vox is why you are so hell-bent on making it less "special". You would have us all believe that gold is as abundant as granite. In fact rarity has very little to do with value. One can purchase metals that are 100x rarer than gold for 1/100th of the price of gold.

If people chose to value something in a particular way, why argue it? What can you possibly gain from undermining some perceived value in anything? Better still, take the argument to where it is more deserved - like the diamond industry or the fashion industry. Surely people that value a tiny stone as equivalent to a year's salary (or even a lifetime's salary for some of the workers who mine those diamonds) must be completely insane right? Or how about a dress that uses $10 worth of materials hanging in shop window in Paris for $50,000? Surely there are better examples where fools are throwing money at something that has far less "real value" than gold? Yet here you are again bashing on gold.

How about illegal drugs? They must be "valued" at millions of times over their intrinsic worth. My personal favourite is the animal parts industry. It rivals the worldwide drug trade in size. People spend absurd amounts of money to obtain a tiny amount of rhino horn, ivory or much worse. To me, these materials have a negative intrinsic value because not only are they worthless, but they represent the rape and destruction of some of this planets most loved species.

Vox, you seem to bypass many absurd miss-valuations that exist in the world today - in industries far bigger than the gold industry (thus affecting far more people and draining far more "wealth" from positive areas of society) - and attack gold at every opportunity. What gives?
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Greetings Dom,

Let me attempt to reassure you that i have never set out to make gold seem less special than it is. More accurately could some of my posts be characterized as attempts to have others not have an inflated notion of the specialness of gold. Leaving aside the fact that specialness is probably a very poor choice of words when discussing inanimate objects, allow me to explain what i mean. What i have done is to challenge some of the contrafactual claims made for gold by some contributors and commenters. For example, there are those who claim that gold is money when it currently fulfills only 1 of the 4 functions of money (a store of value). There are youtube videos aplenty showing people not being able to complete a purchase with a gold or silver coin, but none showing someone unable to buy whatever they choose with American dollars. (Yes, you might be able to "buy" a used car for a gold coin, but that would be barter, not a money transaction and it is quite likely that both parties would consider the cash value of each object before agreeing to the trade.) In other words, dollars are the medium of exchange, not gold and that is the most fundamental purpose of money. Cash, not gold, is also how contractual obligations are settled. And lastly, dollars (or whatever the local currency is) are used as the unit of account, not grams of gold. That is to say, we think in terms of dollars, not gold when we enter a store and ask the price of something. As for being a store of value, yes, gold does fulfill that function (though not always with equal success). However, it is not alone in that regard. People also think of land, stocks, bonds, fine art, diamonds and other things as providing a good store of value without the need to call those things money.... In pointing out that gold is currently nothing more than another asset class, i am not slamming gold. Rather, i am pointing out that reality does not support the position put forward by certain others that gold and only gold is real money. And i believe that having a very firm grasp on what gold really is better enables people to make informed decisions. And of course, i believe that decisions made based upon facts will prove superior to those informed by hyperbole.

What i have consistently claimed is that gold is a hedge against government. When governments act in a fiscally responsible manner, owning pretty much anything else would be superior. But as we do not live in such a time, having a certain amount of ones' wealth in precious metals is prudent; the amount depending upon factors such as where one actually lives and how old one is. Why you would consider that to be an attack on gold is rather unclear to me. What i do attack are positions that do not conform with the facts as well as positions that display a shocking lack of understanding of both history and how capital flows. And i think of those who look at anything in isolation as being incredibly obtuse, for all things are connected.

Before you object, saying that i ignore history which tells us that gold had been used as money for 6,000 years, let me stop you in your tracks. i do not deny that fact. i merely assert that it is meaningless in the world we now inhabit, for it is now paper that is money. That is the reality we are confronted with. History informs us of how previous sovereign debt crises have evolved and watching where capital is going is helpful in understanding where we are in this one.

If there is any area in which i do put down gold, it would be my contention that paper is superior to gold for representing money. That position is based upon my understanding that what we use as money should have as little intrinsic value as possible in order to guard against the fluctuations in value that objects of considerable value undergo as a result of supply dynamics. While it is quite true that paper can be easily abused by government, it has never proved difficult for governments to abuse a gold standard either. To argue otherwise is to ignore history.

Anyway, i trust this has helped to clear that up for you.

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Vox, money is nothing more than what any society will accept in any barter situation. Barter can be the interaction you face when buying something at a market in Mexico, Greece, Spain, India, or any other country where you need to come to terms on how much you will pay to have the merchant hand over what you want. Purchasing from stores is a more formal interaction and the store will limit the item it takes in trade (barter) for its goods to something it can easily place in the bank or use to pay suppliers, employees, utilities, and taxes. I know you feel gold makes for poor money but it is the only universally accepted item that can be used to purchase goods. For instance, if you were to try paying for groceries with US dollars while in Germany you would get a blank stare just as you’d get if you tried using a gold or silver coin. However, if you were to purchase from merchants in a less formal market place you could conclude the transaction with gold or silver and probably pay a little less in terms of overall value that you hand over. This comes from personal experience having traveled and had the opportunity to try various methods of payment. Agreed, the market merchant will be more likely, possibly even eager, to take US dollars in place of the local currency, at times but the reasons for this will change and possibly not exist.

Allow me to recall a personal experience. PM’s are more stable in many cases and therefore more likely to be accepted. Many years ago while traveling through what was Yugoslavia I was stopped for speeding. They tagged me going 10 Kph over the limit with radar (Radarska Controla). The fine was to be paid on the spot. We had Swiss Franc’s, Deutsche Marks, Lira’s, British Pounds, US dollars, and a few other countries’ currencies but none of their Dinars. The only thing they would accept for this pittance of a fine (about $2.00 US at the time) was local Dinars, or my gold pinky ring. Given that these officers knew very little English, German, or French the conversation took quite a while but resulted in me getting off with a warning. I never thought about it much at the time but looking back it makes a lot of sense. If the police officers were taking advantage of a tourist and wanted a few bucks for their pockets then taking foreign money would be bad idea. It could be seen as “they were bribed”. However Dinars would be in their pockets already and a gold pinky ring couldn’t be traced to anything or anyone. Universal money.

No matter what any government declares to be money the fact is that if people agree to use shells in parallel there is nothing to stop them from doing so. Ultimately we need to pay our taxes in fiat but outside of government transactions we really can conclude a purchase with whatever medium we and the seller/buyer agree on. Of course the governments don’t like that they are not getting their tax cut off the transaction but the reality of life is that a very large percentage of all trade in any country is done on a barter basis and they will never collect on these transactions.

So is gold money, yes. It’s universal money. Silver enjoys this same acceptance. While in Yugoslavia, besides the chat with the local police we also experienced huge inflation. We never exchanged more dollars or Marks then we needed for the day as tomorrow they would be worth 20% – 30% more. In this two week period of time that we stayed in the country, you could still exchange a silver quarter (CDN) for a cup of coffee, croissant, and have enough left over for a tip. I know this because we did it on a few occasions when the café owners knew how to identify a silver coin and it’s worth.

So again is gold or silver money? Yes. These metals are the only universal money. I know there will be many that will try to tout the benefits of US dollars but in many country’s you could actually be tossed out of an establishment if you tried to purchase with US dollars so this invalidates it as a universal money. Are gold and silver widely accepted as a unit of exchange today when conducting business in North America or western Europe outside of market places or personal transactions, no. Does this detract from PM’s being money, no. We can though in recent history find instances of when gold was used as money. When APMEX leased space off of Trump (I recall it was in Manhattan) both parties agreed to use gold instead of fiat to conclude the agreement. A local auto dealer a few years back ran a promotion to accept gold for cars. I’m sure there are many more.

In today’s society when we think of buying something at a store or paying a dentist there isn’t much of a chance we’ll be able to use silver or gold but the problem is we’ve got to a point where we take this same attitude towards every purchase even when it’s not in a formal establishment. Fiat is convenient, folding money is lighter to carry but when an economy starts going bad wait to see how long it takes people to fall back to using a stable money such as PM’s, or if you’re on an island somewhere possibly shells. I wont delve into the world of what will be exchanged in an SLAE, things like ammunition for food, as this is not part of what the discussion is about and is an extreme situation and not part of a more 'normal' every day routine.

Technically any gold or silver coins stamped by a government mint with a $ value are money. Of course the value stamped on the coin is a ridiculously lower value than the metal is worth but the coin is none the less money. I certainly wouldn’t hand over a one ounce gold Eagle or Maple to pay a $50 bill but legally I could. It’s this last item that completely nullifies your attempts to persuade anyone that all gold and silver are not money. You yourself state that you own PM’s as a hedge against government stupidity. This means that you have placed a value upon the metals and expect that some other human will want to accept them in payment or exchange for fiat or something like real estate at some future point. It’s this transaction you expect to happen in the future that again proves that your PM’s will be used as a medium of exchange, money, to conclude whatever business you might wish to undertake in whatever country you happen to be. Gold and silver equal universal money.


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OK I'm getting a better picture now. I have heard you use the phrase "hedge against government" before also. I agree that much of what can be read about gold is untrue, or worse still 98% true with some false misdirection or conclusion.

I think it was Greenspan that said "gold is money in extremis" and I think that is a fair statement. That's happening right now with Iran and Turkey. Gold is THE most liquid asset, bar none. Recognised everywhere - from an Indian peasant farmer to the prince(s) of England. Central banks don't hoard diamonds, or real estate or fine art but they DO hoard gold. Gold may not be money but it certainly is a special kind of "asset", more akin to money than any other thing and perhaps the most successful at its job when used as such.

I don't confuse the massive oil-fuelled growth in the world's past 40 years as the result of some "freeing up" of the world economies under a paper money system. That growth would have happened any way, mostly due to industrialisation, science and innovation, skill concentration and other movements in society over that time. Paper money merely facilitated that to happen a little faster, if at all. Many could argue that the quality of life obtained after 40 years at the paper game is basically the same as when we started, despite all the leaps and bounds of technology and industry.

But I do agree that in today's world gold is not money. Not really... but even money is not money - cash only makes up a small portion of the world's "money". Most of it is a digital record in a bank. If we are going to entertain notions like gold contained in the sea then we should also entertain possibilities like the sun giving us a hiccup and causing a massive EMP shock to wipe out huge portions of these digital records of money. The world's financial systems can get a big "reset" at any time, regardless of central banks, politics, markets or war.

I was actually born in 1971 - that year gold officially ceased to become "money" as a common medium of exchange. My mother was born in the 40s after WW2. She was told she would *never have to work a day in her life*. Her grandfather had amassed a rather large fortune in England and invested it into a very long-term fixed interest rate fund of some kind back after WWI. To cut a long story short, gold was denounced as money, paper came in and the meagre interest accrued by the fund was being overtaken by inflation in a big way. By the time my mother got her inheritance it was enough to cover a 15% deposit on a mortgage for a 3 bedroom house. So much for never having to work a day in her life. As it turns out she's had a wonderful life as a teacher and is well respected, but that's beside the point.

For somebody like me, who has known nothing but paper as money and knowing this story how is it that I can see value in gold? Well it is precisely this story that draws me to gold. Think about it. A wise business man with a fortune gained by a lifetime of good skills, sharp wit and savvy business sense. The fact that he placed this money into a fixed-term fund for some 50 year period is testimony that INTEREST RATES WERE STABLE AND LOW under the gold standard that existed at that time and had existed for what must have seemed like forever. The world I live in is all over the place, we get 20% interest one year and 5% the next but almost ALWAYS more than under gold. It's a rollercoaster of ups, downs and free-falls with no stability and little to trust. The only reliable truth being that if you don't play the game you're bound to lose. They've up'd the stakes and cranked the treadmill to a blistering pace.... where a lifetime of wealth can be eroded away to almost nothing in less than a lifetime.

What I cannot believe is the level of complacency about the subject. The good citizens of the United States fought for their freedom in a civil war against the British Empire and won. This happened (correct me if I'm wrong) due to the English wanting to impose on them a 1% tax on TEA. Yet today most of the world is content to accept much greater ongoing loss due to fiat money abuse without so much as lifting finger. It is this complacency that scares me the most at times.



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To your claim that interest rates were stable and low under a gold standard, the historical chart featured in the provided link should serve to disabuse you of that particular notion. http://www.ritholtz.com/blog/wp-content/uploads/2012/01/Long-Term.png
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Some fact checks on the article.

20 cubic metres of gold weighs 386.4 tonnes. A box 20 x 20 x 20 metres is 8000 cubic metres, which would be 154560 tonnes of gold. A pure gold cube weighing 172000 tonnes is just under 20.74 metres on each axis.

Common open pit mine ore grades are running under 1.5 g/t, in Australia at least. This means that 20 tonnes of ore (rock) need to be mined for 1oz of gold. Given the common strip ratio of 7:1, it is not unusual for 140 tonnes of rock to be mined in order to recover 1oz of gold.

With gold and the ocean, it depends if you are referring to in the ocean or under the ocean. The average gold concentration of sea water is thought to be around 4ppb (four parts per billion). This equates to four grams per cubic kilometer of sea water. Given that the ocean's volume is approximately 1.3 billion cubic kilometers, that give 5.2 billion grams of gold. That is 5200 tonnes.

As to how much gold is under the ocean, that is another question that is more difficult to answer accurately.
Latest comment posted for this article
Some fact checks on the article. 20 cubic metres of gold weighs 386.4 tonnes. A box 20 x 20 x 20 metres is 8000 cubic metres, which would be 154560 tonnes of gold. A pure gold cube weighing 172000 tonnes is just under 20.74 metres on each axis. Commo  Read more
KalSteve - 7/22/2014 at 12:29 AM GMT
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