The metal gold, with atomic number 79 and the symbol ‘Au’, is one of the oldest metals used by humans. The aesthetic and physical properties have made it one of the most valuable metals in the world. The commodity gold is very malleable and ductile, resists corrosion or oxidation and is found almost always in a pure form. These properties ensured its application in many industries, but none so much as in jewelry. Between 50% and 60% of new gold is used for ornamental purposes, one third is used for investment purposes and the remainder in industries.
The largest deposits of gold can be found in South Africa, where around 60% of all new gold originates. Australia, the United States and Russia are other major producers. It is estimated that all the gold mined in all human history currently amounts to a cube of around 20 meters to a side in volume.
Gold has been the cause of conflicts, wars, exploration and adventures throughout history.
Gold has been known and in use since the copper Age and artifacts have been found dating from the 5th millennium BC. The first known networks of gold-producing areas date from the Eqyptian and Nubian times around 2600 BC. The first primitive gold mines with assessments of the local geology appear around this time as well. The golden fleece, a legend in Antiquity, may refer to using fleeces to trap minute traces of gold from rivers, creeks and waterfalls.
In Roman times, extracting gold on a larger scale developed new methods such as hydraulic mining. The Romans used aqueducts to sluice gold ore in the same way troughs are used today. The largest deposits and mines of the Roman era were in Hispania (Spain) and in Dacia (Balkans). Many methods were described in detail by Pliny the Elder towards the end of the first century AD.
One of the main reasons of the Europeans to explore the Americas were the reports of gold ornaments displayed by the Native Americans. The peoples of Central America and upper South America regarded gold literally as the product of the gods, but in Northern America people lacked these opinions and gave value to objects related to their utility.
For alchemists, producing gold from other metals such as lead, was one of the life-time goals to achieve. Although they have succeeded at creating the philosopher’s stone, it promoted an interest in the interaction of substances and laid the foundation for chemistry.
Gold rushes occurred in the 19th century whenever gold deposits were discovered. Some notable rushes were at the Klondike in Canada and Witwatersrand in South Africa.
The Making of the commodity Gold
While gold is usually found in a pure state, it can also be extracted from silver, copper, lead and zinc. Even seawater contains minute traces of gold, but not enough to be extracted with profit.
The metal gold can be found in two types of deposits: a placer deposit or a lode (also called a vein). The extraction technique used to mine this gold depends upon the deposit type. After the gold is mined, it can be refined with five main processes: cyanidation, amalgamation, smelting, floatation and carbon-in-pulp.
In a lode (or vein) deposit, the gold is usually mixed with another mineral, like quartz. The metal is obtained from the deposit by drilling, blasting and shoveling the gold-rich ore. These deposits are often deep underground and are reached by the miners as they dig shafts along the vein.
A placer deposit is a place where a natural occurrence has ‘placed’ nuggets and grains of gold over a period of time. Usually a river washes gold from a lode deposit towards a deposit location along its bed: usually a bend in the river or the bottom of a waterfall, where it is mixed with sand or gravel.
There are three main methods used to mine these deposits: hydraulic mining, dredging and power shoveling. All these methods rely on gravity as the force behind the sorting procedure.
Hydraulic mining uses a machine which shoots a high pressure stream of water to knock the gold ore out of the deposit. This ore is washed down in sluices or troughs with grooves to catch the gold.
Extracting the ore by dredging and power shoveling use the same techniques as hydraulic mining when it comes to washing down the gold ore, but the ore itself is collected in a different way. Power shoveling is done by machines like shovels and collect large amounts of gold ore. Dredging is done with smaller buckets on a conveyor line.
After the gold has been mined, washed and filtered at the mine, it is shipped to mills to be ground into smaller chunks. These chunks can be ground even further by pulverizing the ore in a rotating mill using steel balls.
In this process chemicals are used to separate the gold from the rest of the ore. The ground ore is dumped in a tank with a solution of cyanide. When [zinc] is added to the mixture, it causes a chemical reaction in which the result is the separation of the gold. The solution containing the gold is then filter pressed to collect the gold.
Amalgamation uses the same process as cyanidation, but with different chemicals. The ore is first washed over mercury covered plated. The mercury attracts the gold and forms an alloy, which is called an amalgam. This amalgam is heated, boiling off the mercury and leaving the gold behind.
In the process called floatation, the gold is separated from the ore by using air and chemicals. The ground ore is deposited into a vessel with a frothing agent and causes the mixture to foam. Another agent is dumped into the solution which bonds with the gold and sticks to air bubbles. Air is then blown in the mixture and the resulting gold-coated bubbles float to the top to be skimmed off.
This method also uses cyanide, but instead of zinc, it utilizes carbon to separate the gold. In the first step, the ground ore is mixed with water to a pulp. When the cyanide is added, the gold dissolves. Carbon is then added to bond with the gold and removed from the pulp. In the last step, the gold-rich carbon is placed in a corrosive carbon solution, where the gold is separated from the carbon.
When an even higher purity gold is required, it can be smelted down. Flux, a chemical substance, is added and bonds with contaminations. This slag floats on top of the liquid gold and will be removed after the gold hardens.
Applications of the commodity gold
When one thinks of gold, you automatically think of treasure, crowns and jewelry. Pure gold (24 carats) is not always used, because of its softness and ensuing lack of durability. Alloys with lower caratage like 22k, 18k, 14k or 10k can contain copper, silver, [palladium] or other metals to strengthen it somewhat.
Copper is the most commonly used metal and gives the finished product a redder color. Blue gold can be made by using iron to alloy with the gold, while purple indicates the use of aluminium. When gold is alloyed with silver alone, the jewelry appears to be green-yellow and is referred to as green gold. White gold alloys can be made with palladium or nickel.
Gold is a classic hedge tool against inflation or other economic disruptions. Many owners of gold store it in the form of bullion bars or coins specifically for this purpose. However, the recent financial crisis has convinced some economist not to believe gold serves as a secure hedge tool.
Bullion coins of today’s age are typically minted with fine gold at 24k. The South African Krugerrand, the American Gold Eagle and the British Gold Sovereign are still minted in 22k metal in a historical tradition. The Canadian Gold Maple Lead is the coin with the highest purity gold of any bullion coin at 99,999%.
Gold is highly conductive to electricity and has been used for electrical wiring in high-energy applications. Only silver and copper are more conductive per volume, but gold has the advantage of being corrosion resistant. This has led to the widespread use of gold in electronics as a connection conductor. For example, gold is used in the better quality audio, video and USB cables, although the benefit of using gold over other metals is debatable. However, the use of gold in humid or corrosive environments, or in application with a high cost of failure, remains very common. These applications include spaceflight and satellite communication.
Gold has been widely used in the world as a tool for monetary exchange. This has been done, either by the issue of gold coins, or through gold-convertible paper, by establishing gold standards. With paper, the total value of the issued money is represented in a reserve of gold. But production has not grown in relation to the growth of the economies of the world, so the gold reserves of the world have become only a small fraction of the representation of money. Pure gold is too soft by far for daily monetary use and is usually hardened with copper or silver.
Trading the commodity gold
Gold trading has a unique character in comparison to other commodities as it is almost exclusively obtained as a hedge against possible economic downfalls and political unrests. Gold is primarily traded on the New York Mercantile Exchange (NYMEX), while the benchmark price is set in London, called the “Gold Fixing”. This price is set daily for USD, GPB and EUR and can function as a price for settling OTC contracts and futures.
Gold in contrary to other commodities is not affected by consumption. Nearly all the gold mined in the world is still accessible today. Therefore the demand has a far greater impact on the price than the supply.
The global economy is a strong indicator for future gold prices. In time of international financial crisis, investors tend to purchase gold, which has proven to thrive during economical crisis and provides more security for investors. Similarly the strength of the US dollars can also be used as an indicator for the price of gold. A weakening dollar will drive investors to increase the demand for gold for its security and therefore drive up the price.
Central banks are a major influence in the discovery of gold prices. They currently hold a fifth of all available gold in the world and thus their actions will have an impact on the price of gold. Regulations between these banks can also provide an indication of price movements, as to whether sales or purchases of gold will increase over time.
Gold prices have fluctuated significantly over the last forty years. It rose steadily from around $45 an ounce in January 1971 to touch an intermediate high of $850 in 1980. It fell to below $300 levels in 1985 and to $250 levels in mid 1999 and again in beginning of 2001. It touched all time high of about $1040 an ounce in the third quarter of 2007 and has fallen to around $750 levels this year. Since 2001, gold has tripled in value.