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GOLD
“Fever” is a word that crops up a lot next to gold. Indeed, the prospectors that emigrated en masse to California from 1848 to 1855, and worked the gold fields of Australia in the 1850s and 1880s, were all a little wild about the yellow metal. With gold having hit the $US1000/oz mark early in 2008, it would seem not much has changed. Although the technology has improved well beyond the old pan-and-sift model, and large corporations have replaced the grizzled prospectors of yore, the dream of striking it rich in gold is as strong as ever.
Gold characteristics and uses
Gold, which has the chemical symbol Au, is extraordinarily versatile. An ounce of gold can be beaten into a sheet covering nearly 30 square metres and drawn into a thread more than 80 kilometres long. It can be compacted so that, if all the 150,000 tonnes of gold mined throughout history were gathered together, it could be contained in three or four family homes.Gold has superb thermal and electrical properties, with a range of industrial uses. It does not react with air or most other substances, so it does not corrode or tarnish. Its reliability makes it ideal for electrical applications, as well as in dentistry and medical applications and in jewellery.
Gold mining and production
There are five main methods of gold mining.
Gold panning. This is the traditional method, first employed in the 1800s and still used today around the world. Pans are used to sift through water, mud, dirt and sand to find nuggets of gold that may be hidden in the debris.
Suction dredging. Material is pulled up from the bottom of a lake, stream or other body of water, and is then sorted through to recover pieces of gold. While this is a relatively new method, there is concern that suction dredging may have an adverse effect on aquatic life.
Hard rock mining. Most of the gold in the world is recovered via hard rock mining. Drills, pick axes and other equipment are used to remove gold from the rock.
Sluicing. A sluicing box is used to separate gold from the gravel found in a river. The box is placed in the current, where it catches gold and other materials while the water and small particles flow through. Sluicing is efficient only on a limited scale and therefore is used by individuals and small mining houses.
Metal detection. Metal detectors are popular among beachcombers and amateur gold prospectors. This method involves walking around a given area with a handheld metal detector and headphones listening for disruptions in the signal that indicate the presence of metal. The individual will then dig in that area to find the source of the signal, which could be gold or another metal.
Gold regions and mines
World production of gold peaked in 2000 after a period of low prices and diminishing reserves. Global mine production in 2009 is expected to rise to 2600 tonnes, which will be a slight increase on previous years. Jewellery fabrication will absorb most gold produced, as it accounts for around 70% of global demand for the metal.China, Australia, the USA, Peru, Russia and Canada are all significant gold producers. For a long time South Africa was the leading gold miner, at times responsible for up to 60% of world production. Though it remains a dominant producer, power outages throughout the country have adversely affected output, which has decreased by 20-30% in the past five years.
The largest known gold deposit in the world is at the Grasberg mine in Indonesia, which also holds significant copper and silver. Operated by Freeport McMoRan, the mine has reportedly been involved in environmental and human rights violations.
In the United States, Nevada is by far the top gold-producing state in the country. For the past six years, Nevada has averaged over 200,000kg of gold mined per year (far ahead of the next closest states, Alaska and Utah, which average only around 14,000kg per year). In Nevada, the gold mining industry is responsible for over 45,000 mining jobs for local residents.
In 2007, several companies began production of new mines, including Newmont in Ghana and in Nevada, Barrick Gold in Nevada, and Sino Gold in China. China also announced the discovery of one of the largest gold deposits in Asia and BHP Billiton upgraded the resource estimate for its Olympic Dam mine, the largest gold resource in Australia.
Around 70% of global output comes from developing countries, notably Ghana, Mali, Tanzania and Uzbekistan. In many of these countries, the gold mining industry can aid development of infrastructure and the economy.
Gold prices
Gold prices are currently in one of the longest growth cycles in market history. Despite some dips due to shaky market conditions, the price of gold has steadily risen over 84 months, a boom period that began in the spring of 2001. Many older investors liken this growth period to the early 1970s when gold prices rose a stunning 419% in 42 months.Having briefly hit the $US1000/oz mark early in 2008, the gold price dropped back to around $US800/oz at the end of the year. The gold price is inversely correlated to the US dollar so when the US dollar is weak, as it is now in the sub-prime fallout, the gold price is strong.
Gold is seen to be the most secure of investments in uncertain economic times. Where people do not have access to liquid markets or even bank accounts, gold has consistently proven to be the most valuable asset to own. For individuals, gold jewellery is a store of wealth as much as it is a beautiful adornment. Banks also ensure they keep substantial reserves of gold.
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