Everything You Ever Wanted to Know About Gold

Rock On is a weekly column about the mysterious minerals, metals, and rocks which make up the world in which we live. We look at the history, economics, politics, spiritual vibes, and futures of the hardest things on the planet.

When the Pharaoh Tutankhamun’s life-force left his body, the deceased found his eternal resting place inside a 250 pound, solid gold coffin. At current prices, that quantity of gold melted down into fungible specie would sell 4.8 million dollars. To put that into perspective, Michael Jackson, King of Pop was laid to rest in a gold-plated coffin that cost $25,000; a relative bargain.

Recent estimates place the amount of the world's above-surface gold in the ballpark of 171,300 tons. This figure represents the total quantity of the kingly mineral scraped from the bowels of the earth by prospectors over the roughly 6,000 years that people have been digging it up. Nearly half of that tonnage exists in the form of jewelry, with every iota having undergone successive meltings and transformations throughout history. Conceivably, the gold chain you are wearing could contain the remnants of an ancient ruler’s sacred regalia.

Image: Flickr cc

According to a 2011 U.S. Geological Survey report, only 51,000 tons of gold remain to be extracted from the earth. Total gold production in 2012 was 2,700 tons, which would have a retail value of around 110 billion dollars. To put that into perspective, Google’s total revenues for 2012 were about 46 billion dollars. Which brings up a question in the spirit of comparing the relative values of commodities: why is the annual haul of an inert, primarily ornamental metal like gold more than twice as valuable as the highly actionable data mined from the billions of people using the internet?

The element gold sits at 79 on the periodic table, in between platinum and mercury. As the most widely available non-corrosive metal, its resistance to decay has made it a timeless symbol of immortality. Just like King Tut’s mask was as radiant when unearthed in 1922 as it had been upon his death in the 14th century B.C., a royal hoard of gold currency will remain uncorrupted by moth or rust for eons. This quality makes it an ideal store of value.

In addition to being non-corrosive, gold is the most ductile metal. Apparently one ounce of gold can be stretched into a wire 50 miles long. This makes gold highly useful for manufacturing tiny electronics like computer processors and cellphones.

Use of gold in electronics manufacturing has risen steadily in the past decade, with more than 7 percent of the 2012 haul going into phones and computers. By some estimates, one ton of used cell phones contains as much as twelve ounces of gold (scavengers take note). That said, jewelry remains the largest store of gold, taking up 57 percent of annual production. Investment gold, which takes the form of solid bars, comes in second at 21 percent.

Until 2007, South Africa, which, after Australia, still has the world’s second largest reserves of gold, had been the planet's leading supplier for over 100 years. Dramatic rises in production costs in the past two decades have seen it fall to fifth place, behind Russia, the United States, Australia and the current production leader: China. China mined 403 tons of gold in 2012, even though its total gold reserves represent only about 7 percent of the world’s total. Fueling the dramatic rush for gold in China is the demand for wedding gifts. According to some accounts, grooms “have to hand over several kilos of gold to get the bride to say yes.” Some predict that China is poised to become the world’s leading consumer of gold this year, but currently, the number one gold fiend is India.

All that gold extraction does not come without a price. There are well-documented environmental and social ills associated with mining, particularly in some of the less-regulated parts of the world. Obviously, mining on the massive scale necessary for profitabilty in the modern marketplace is devastating to pristine natural areas. The world's largest goldmine, for instance, the Grasberg Mine in the West Papua province of Indonesia operates in a Vermont-sized zone of virgin forests which is both the largest protected national park in Southeast Asia and a World Heritage Site. The mines there dump 110,000 tons of toxic mine tailings a day into the supposedly protected rivers, and when the mine has run its course in some thirty years, the massive pit it will have dug into the forest will be visible from outer space.

As for social and economic impacts, the history of corporations excavating enormous mines in far-flung regions like Africa, South America and Indonesia is a running tally of inhuman cruelty. For as long as people have been crawling into pits on the hunt for precious metals, profiteers have been condemning countless souls to merciless deaths in dreadful mines. Less than a year ago, South African police opened fire on rioting mine workers just northwest of Johannesburg. It is only the end of Apartheid and the concomitant dwindling of what was virtually slave labor which has forced South Africa to end a century of unregulated mining.

Recently, Indian Finance Minister Palaniappan Chidambaram publicly discouraged Indians from buying gold, calling it an “unproductive asset.” Backing up his statement, Chidambaram enacted a .01 % tariff on non-agriculture commodity derivatives trading, which he hopes will guide people towards more productive non-gold investment. While that .01 % rate seems small, its effect on traders’ margins is designed to cool trade volume and to lower overall demand. China seems certain to take up this intended slack in the Indian gold market—demand shows no weaknesses there, as a summer full of auspicious marriage days approaches.

While it would be easy to dismiss the demand for precious gold jewelry as frivolous, it is more informative to look at the forces that underly our obsession with this “unproductive asset.” Forward thinking economists like Chidambaram would prefer their countrymen to invest in things like stocks and bonds, which promise to divert capital into the hands of industry. While assets like gold tend to sit idle, unchanged for millennia, industry actively converts capital into profits. The thing is, for people in India and China to switch from gold to productive financial instruments, those instruments would first have to earn the trust of the investing public. People buy gold not because they lust after its hue, but because they know that when they have it in their hands, they and they alone can dispose of it as they please and it will retain its essential allure. It is fitting that people the world over still use gold as the quid pro quo when joining in the most universal and intimate covenant—marriage.

So long as human beings invest in real-life entanglements like marriage, the supremely tangible, elemental symbol of lasting value will remain gold. Try giving bitcoin as a dowry and see what happens.