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Where Does Gold Come From?

June 25, 2019 by Daniels Trading| Tips & Strategies

According to NASA, the origins of gold lie in outer space. It’s a byproduct of either the collision of neutron stars or supernova explosions. How gold ended up on Earth is another matter altogether, commonly believed to have been injected by a series of eons-old meteor showers. Regardless of the science behind its presence on our planet, three things are for sure ― gold is scarce and valuable, and people will go to incredible lengths in its pursuit.

The Production of Gold

For lack of a better term, the “production” of bullion is a function of exploration, mining, and refinement. Due to its miniscule presence of 5 parts per billion (ppb) in the earth’s crust, gold’s discovery is improbable, and scarcity is all but guaranteed. According to the U.S. Geological Survey (USGS), only around 244,000 metric tons have been discovered over the course of recorded human history. 187,000 metric tons have been harvested, and 57,000 metric tons remain in the ground as known reserves. In total, all of the gold in the world could be molded into a square cube 28 meters on each side.

Because of gold’s rarity and physical utility, humans value it highly. It’s coveted as physical and financial assets, serving a wide variety of purposes. As a result, gold production is a key element of many national economies around the world. As of year end 2017, these 10 nations are the world’s leading gold producers:

Country Metric Tons (Annual, 2017)
China 426.0
Australia 295.1
Russia 270.7
United States 230.0
Canada 175.8
Peru 162.3
Indonesia 154.3
South Africa 139.9
Mexico 130.5
Ghana 101.7

Mining industry experts are torn on which way short-term trends in global production will go. However, almost all agree that the long-term view toward bullion is increasing scarcity. In fact, many of the world’s most prominent gold mines are already showing signs of fatigue. Australia’s Super Pit and Nevada’s Carlin Trend are two mega-producers projected to exhaust reserves in the coming decades.

The Supply Chain Is Not All There Is to Market Price

Any study of gold’s historical market price is a fascinating look at human psychology. For the typical consumer, gold is acquired as a component of a manufactured good, such as jewelry or as decoration. Conversely, investors view bullion as a financial safe-haven and a hedge against the unknown. In both cases, gold’s inherent scarcity locks in a convertible value.

Given constant demand, disruptions to the supply chain can drive gold prices significantly higher. As most industry experts will attest to, fading future production is likely to drive long-term bullish pressure toward the pricing of gold. But, is supply the be-all-end-all to market price? Not exactly. Here are a few factors independent of the supply chain that can influence the price of bullion on both the spot and futures markets:

  • Civil unrest: In times of war, terrorism, or civil unrest, the value of gold has historically spiked unless restricted. In the immediate aftermath of 2001’s World Trade Center attacks, December gold futures spiked $6.30 per ounce before being frozen at $280.
  • Economic uncertainty: Gold becomes especially popular during times of currency devaluation or asset pricing instabilities. During the global financial crisis of 2008-12, gold reached an all-time high value of $1,917.90 in August 2011.

In addition to these factors, institutional acquisitions can also have an impact on bullion’s value. Concerted stockpiling of gold by central banks, governments, and hedge funds can greatly influencing short-term pricing volatility.

Understanding Global Gold

Unless you’re already a precious metals expert, there’s a lot to know regarding the global gold trade. From macroeconomic cycles to regional conflicts, many factors are capable of swaying the value of bullion.

Fortunately for active traders, the gold futures markets furnish participants with many advantages over other modes of investment. For more information on how gold can augment your financial plan, schedule a no-strings conversation with a precious metals pro at Daniels Trading today.

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Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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