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About Gold (GC)
Gold is a world produced commodity, with production scattered
across the world. South Africa is the world’s largest producer
of gold, with Australia, Canada, the United States, and Brazil
respectively being the other major producing nations.
The major factors affecting the supply of gold in the world market
are three fold: production costs, reserves, and political climate.
The cost of production of gold is key to the supply of gold. The
recent end of apartheid in South Africa has had a major effect
on the cost of production of South African Gold. The ending of
apartheid increased the wages of mine workers, and the cost of
South African gold. The costs involved in production are a major
influence on the supply of gold, as mining companies tend to produce
more when profitability is high, and cut back on production when
profitability is low.
New mineral deposit finds, once verified, can have a major influence
on the price of gold. Though the lag time between finding a gold
reserve and the actual production of gold can take several years,
news of a large gold find can have a dramatic effect on the price
of gold.
Gold is also a very politically sensitive ore. Political turmoil,
such as wars and high tension, also have a dramatic effect on
the supply and price of gold. Even though most countries no longer
have a gold backed currency, gold is still considered a safe haven
investment, and thus the price is effected. Monetary policy also
has a major affect on the supply of gold, as central banks across
the world are major holders of gold bullion in reserves. Central
Bank selling of reserves has weighed heavily on the gold market,
and should be a reoccurring theme to the supply side of the gold
market for the next several years.
Gold is used primarily in jewelry, though in recent years gold’s
use in electronics has gained importance. Roughly eighty-eight
percent of the gold produced in the world goes towards the manufacturing
of jewelry and coins. Jewelry has become a major investment item
for various third world and developing nations. Not only does
gold jewelry have social appeal, but it also allows people in
these countries to invest in a hard asset that should counteract
the hyper inflation prevalent in many of these countries. China,
India, and many South American countries have been heavy buyers
of gold, for manufacturing into jewelry. Though gold pays no dividends,
gold is considered primarily as an investment material because
it has an implied store of wealth value as an alternative to paper
currencies.
Gold is also used in the production of electronic equipment.
Roughly twelve percent of all gold mined in the world is currently
going to the production of electronic goods, or other industrial
items. Gold is extremely pliable and is an excellent conductor,
making it an excellent raw material in industrial and electrical
applications.
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