The scarcity of gold

Written by Peter August, CEO, Melbourne Mint.

Gold has been always been genuinely scarce; if you were to gather and melt all the gold mined throughout history it would be barely enough to fill 3.5 Olympic sized swimming pools. Of this gold, only a mere fraction is freely traded on the market at any given time. 

To quantify this in weight all the gold existing above ground equates to around 165,000 metric tones. Of this165,000 metric tones, 21 percent is held in institutions and wealthy private hands, 25 percent by central banks and approximately 50 percent in ancient artifacts. This leaves only around 4 percent to be freely traded on the market today. Monetary wise, it equates to approximately 330 billion dollars of the 8.25 trillion dollars that exists, Buy Gold Now reports.[1]

And what is freely traded is also on the decline. Since 2001 gold’s price has increased at over 500 per cent, from a low of US$258 to around US 1,272 at present representing an annual compound growth of 14+ per cent. China and India’s growing middle classes are reported to be buying up large quantities of gold. Central Banks are now net buyers of gold as opposed to net sellers and investing is now the principal use of gold. Gold’s long-term upward price trend reflects, in part, its raising demand and increasing scarcity.

What say of the mines and gold production? Even though gold production has become increasingly sophisticated, the days of mining large veins of gold are quickly coming to an end. Rising demand for owning gold has placed huge pressure on the world’s mines and it is heavily speculated that by 2025 gold mines will become depleted of the precious metal.

Gold’s reputation as a store of value has been documented since the beginning of recorded history; its scarcity and primary uses – jewelry and artifacts – driving this value. Today it’s very much the same however increases in demand for bullion by central banks and investors as a means counteract the effects of today’s economic circumstances are further increasing demand and therefore its scarcity.

[1] Shayne McGuire, Buy Gold Now, 2008


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Precious Metals Investment Symposium