Gold cyclopaedia

Bar sizes

In international trade, gold is sold with a fineness of .995, as a 12.44kg “Good Delivery bar”. The gold market accepts gold bars only up to a purity of .9999 (four nines). Investment gold comes in a variety of sizes - all of which have been standardized over the centuries: generally, one gram, one ounce, ten ounce, one kilo (32.15 troy ounces), one-hundred ounce gold bars.


Bretton Woods System

The Bretton Woods System was established on 22 July, 1944 fixing the convertibility of the US Dollar to gold. The US Dollar was settled as the world’s leading currency. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments.

By the late 1960s, however, the Bretton Woods dream of a stable monetary system was collapsing under the strain of US trade and budgetary deficits. The inflation that accompanied the Vietnam War and the Welfare Program led to a significant budget deficit in the US. It resulted in devaluation of foreign currencies and weakening of balance of payments. As a result, President Richard Nixon abandoned the gold standard and ended free exchange of dollar to gold.


Different colors of Ag-Au-Cu alloys


Gold

Gold is a chemical element with the symbol AU and atomic number 79. The metal often occurs in free elemental form, has a bright yellow color and a luster which is traditionally considered attractive. Throughout the ages it has always been highly valued in numerous societies. Gold resists attacks by individual acids, but it can be dissolved by aqua regia (nitro-hydrochloric acid). Carat is used for measuring the fineness of gold. The purest gold’s fineness is equivalent to 24 carat. Gold is weighed at 1 troy oz per unit, each unit of troy oz is estimated = 31.1 grams.


Gold production

50% of all gold ever produced has been produced since 1967
80% of all gold ever produced has been produced since 1910

According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 tons. About 2,000 tons goes into jewelry or industrial/dental production, and around 500 tons goes to retail investors and exchange traded gold funds.

Annual gold world production in metric tons



Worldwide annual gold production 2011


Gold rates

Gold prices are affected by fundamental factors as supply and demand, short-term actions, speculations as well as long-term expectations. Furthermore, inflation, the Eurozone crisis, growing industrial use and geopolitical tensions may also have a significant effect on the value of gold.

Short term gold prices can change at a paid pace, In the long run it is proved to hold its value well as a form of investment in contrast to paper money. Throughout its five thousand year history gold has showed on numerous occasions its function as a stability creating lever. What’s more gold can make up a significant proportion of the various investment portfolios as it’s value will grow due to the factors that have a negative influence on the worth of traditional paper-based investments such as the stock exchange and bonds.

The city of London emerged as a metals trading centre in the late 17th century. In the year 1717, the master of the Royal Mint, Sir Isaac Newton, established a new mint ratio between silver and gold as a first fundament of the gold standard monetary system. The introduction of the London Silver Fixing in 1897 and the London Gold Fixing in 1919 marked the beginning of the market's structure from today. The first fixing took place on 12 September, 1919. In 1971, President Richard Nixon abandoned the gold standard and ended trading of gold at a fixed price. The London Bullion Market Association (LBMA) was established in 1987 with the main purpose to regulate the price of gold and silver.


Gold prices since 1969 in US Dollar and in Euro

Source: World Gold Council


Gold resources

A total of 170,000 tons of gold have been mined in human history, as of 2011. This is roughly equivalent in terms of volume, to about 8500m3, or a cube measuring 20.65m per side. By population it means a consumption of 0.78 troy ounces / 24.3 grams per person.

World consumption:

  • 28.600 t (18 %) of gold belongs to central banks and other financial institutions
  • Countries with the biggest gold resources:
    • USA 8,133 t
    • Germany 3,391 t
    • IMF 2,814 t
    • Italy 2,451 t
    • France 2,435 t
  • 79,000 t (51 %) gold will be made into jewelry
  • 18,000 t (12 %) gold will be found in art treasures
  • 25,000 t (16 %) gold is owned privatly (by investors) – gold bars and coins

Gold rush

A gold rush is a period of feverish migration of workers to an area that has had a dramatic discovery of gold deposits. The term is mostly connected to North America of the 19 century, but gold rushes took place in Australia and South Africa as well.

Thanks to its special qualities and rareness it has started rumors about cities and countries where “the streets are made of gold”. Biblical references to the land of Ophir, a land of gold, may also be found. After the discovery of the New World, stories began circulating throughout Europe about the existence of El Dorado, a legendary city of gold. The city, whose precious stones are found in fabulous abundance along with gold coins, lies on Lake Parime, far up the Orinoco River in Guyana. The "Lost City of Gold" has fascinated explorers since the days of the Spanish Conquistadors.

The advanced state of information and shipping technologies, the era of steam-engines (railway, steamship) and telegraph also encouraged the phenomenon of the gold rush. At the same time, a significant social transformation began. Due to industrialization, workers had to leave their families in order to come to work in the towns and cities where the industries were found.


London Bullion Market

The London Bullion Market is the biggest wholesale over-the-counter (OTC) physical gold market in the world. Since 1919 it has stated the world market price for gold, and since 1897 the world market price for silver. The trade is coordinated by the London Bullion Market Association (LBMA).

LBMA customers are mainly institutional investors, most of the member companies are engaged in trading activities, brokerage, shipping, mining, storage, refining, inspection, and even research. They usually trade with each other and with their clients on a principal-to-principal basis, which means that they bear the full risk. In contrast to open stock exchanges, the OTC market ensures a certain flexibility and reliability of the transactions occurring between two customers.

The London bullion market is a wholesale market, where minimum traded amounts for clients are generally 1,000 ounces of gold and 50,000 ounces of silver. Every day it clears 3,000 tons of silver, and between 600 and 700 tons of gold through paper trading.


London Fixing

Gold Fix is a pay-off base of gold deals between LBMA members as well as a base of global rate fixing in the international gold trade.

The price of gold is determined twice each business day by the five members of The London Gold Market Fixing Ltd: Scotia-Mocatta, Barclays Capital, Deutsche Bank, HSBC and Société Générale. The Gold Fixing is conducted twice a day, at 10:30 GMT and 15:00 GMT. The silver price is fixed once a day, at 12.00 GMT. Gold trading hours: Monday to Friday, between 8:50 and 15:00 GMT.


London Good Delivery

There are different types of gold bars in the world; however London Good Delivery bars are the most prestigious.

A standard London Good Delivery bar weighs about 12.4kg (400 troy ounces), and because of its particularly large size is owned primarily by central banks. LBMA bars have to meet strong quality requirements. The production is regulated through the strongest quality regulations. A fineness of 995 (parts per thousand) for gold and a 999 (ppt) silver fineness are required to satisfy good delivery bar requirements. Gold bars have to bear a serial number and a stamp of an approved refiner of the London Good Delivery list, as well as the fineness and the year of manufacture. A further condition of a good bar is also required; it must be free from damages, surface cavities or other irregularities. These international standards guarantee a safe investment form for investors.


Precious metals

Precious metals are rare, naturally occurring metallic chemical elements of high economic value. Chemically, precious metals are less reactive than most elements. They are usually ductile and have a high luster. Compared to other metals their melting point is higher.

Historically, precious metals were important as currency but are now regarded mainly as investment and industrial commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.


  • Gold coins

    Throughout history gold has been used as money for many reasons. In modern times, most gold coins are intended either to be sold to collectors, or to be used as bullion coins as a method of investing in gold. Investment gold coins are popular due to the fact that they belong to the category of investment gold. Gold trading is not subject to tax in EU countries.

    The American Eagle has become the most popular bullion coin in the world, followed by the Wiener Philharmoniker and the Krügerrand (see below).

  • Precious metal bars

    When discussing precious metal bars we are considering a precious metal block, for instance a gold bar, which because of its shape will be called a gold block. Gold bars come in many different shapes and sizes in order to meet the investor’s requirements.

    Bars in many various shapes appeared in ancient times and were used as the world’s earliest cash money. After World War II, the use of gold and silver as a viable currency ended while at the same time it lost its function as a cover of paper money. In the modern age, gold coins and precious metal bars are intended either to be sold to collectors or to investors as a form of investment which holds its value.

  • Silver

    Silver is a chemical element with the chemical symbol Ag and the atomic number 47. Silver is a soft, ductile, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. Silver is mostly alloyed with copper, improving its sturdiness, while the alloy keeps its characteristic whitish silver color.

    It is used to make jewelry, currency coins, high-value tableware and pots, its compounds are also used in photographic film and mirrors. Only its alloys can be poured. Jewelry and silverware are traditionally made from sterling silver (standard silver), an alloy of 92.5% silver with 7.5% copper. The fineness of a precious metal refers to the ratio of the primary metal to any additives or impurities, traditionally expressed as parts per 1,000.


Troy ounce

The troy ounce (oz t) is most commonly used to gauge the weight of precious metals. The prices for gold and silver are worldwide indicated in US Dollar per troy ounce. When the price of gold is said to be US$653/ounce, the ounce being referred to is a troy ounce, not a standard ounce. There are 14.58 troy ounces in one pound. One troy ounce is equal to 31.1034768 grams, in 1 kg there are approximately 32.15 troy oz.

The English troy ounce was officially adopted for coinage in 1527. Troy ounces have been used in the private sector in England since about 1400. Prior to that, various sorts of troy ounces were in use on the continent. 1 US fluid ounce (fl oz) = 29.573529563 mL


World official gold holding

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Country Resources in 1970 / Tonnes Resources in 2012 / Tonnes Gold’s share of national forex reserves (%) 12/2012
1 United States of America 9.839,2 8.133,5 76,1
2 Germany 3.536,6 3.395,5 72,3
3 IMF 3.855,9 2.814,0
4 Italy 2.565,3 2.451,8 71,2
5 France 3.138,6 2.435,4 71,7
6 China 1.054,1 1,7
7 Switzerland 2.427,0 1.040,1 12,1
8 Russia 936,6 9,6
9 Japan 473,2 765,2 3,1
10 Netherlands 1.588,2 612,5 60,7
11 India 216,3 557,7 9,9
12 EU other 502,1 32,2
13 Tajwan 72,9 422,7 5,6
14 Portugal 801,5 382,5 90,0
15 Venezuela 341,2 365,8 68,0
16 Saudi Arabia 105,8 322,9 2,7
17 United Kingdom 1198,1 310,3 15,8
18 Turkey 112,9 288,9 15,1
19 Libanon 255,5 286,8 28,9
20 Spain 442,6 281,6 29,3
21 Austria 634,2 280,0 55,7
22 Belgium 1.306,6 227,5 39,6
23 Philippines 49,8 193,4 12,7
24 Algeria 170,1 173,6 4,6
25 Thailand 73 152,4 4,5
26 Singaporean 127,4 2,7
27 Sweden 177,8 125,7 12,8
28 Mexico 125,2 4,0
29 South Afrika 177,8 125,0 13,2
30 Libien 75,8 116,6 5,5
87 Hungary 64,4 3,1 0,4

Source: World Gold Council


Source: Wikipedia