Understanding the Factors Behind the Expensive Nature of Gold

Introduction:

Gold, a precious metal of great value and stability, has captivated human interest for centuries. Its high price can be attributed to several key factors that make it a sought-after asset. In this article, we will explore the reasons behind the expensive nature of gold.

Scarcity and Rarity:

One of the primary drivers of gold's value is its scarcity. Unlike more abundant metals, gold is relatively rare in nature. Its limited supply contributes to its allure and can lead to higher prices in the market.

Durability and Versatility:

Gold possesses exceptional durability, remaining untarnished and resistant to corrosion over time. This unique quality makes it highly desirable for various applications, including jewelry, coins, and decorative objects. Its ability to withstand degradation adds to its intrinsic value.

Store of Value:

For centuries, gold has served as a trusted store of value. It is considered a reliable investment and a hedge against inflation and economic uncertainties. During times of market volatility, investors often turn to gold as a safe haven for their wealth, driving up its price.

Industrial Demand:

Apart from its use in jewelry and investment, gold plays a vital role in numerous industries. Its exceptional conductivity and resistance to corrosion make it indispensable in electronics, dentistry, aerospace, and other sectors. The demand from these industries further contributes to its market price.

Cultural and Historical Significance:

Gold's significance in culture and history cannot be overstated. It has symbolized wealth, power, and prestige across civilizations. These cultural and historical associations enhance its desirability and impact its value in the market.

What Does Gold Mean to Different People?

Gold is metal with a bright-yellow appearance which is highly malleable, it can be deformed or changed without fracturing the material. Gold can mean a sign of love, An Investment, a Stock for Gold mine shareholders, a store of value, a currency or medium of exchange in the form of gold coins…

Alistair Hewitt: “If you're a bride, gold is the perfect embodiment of love and emotion. If you're an investor, gold's an excellent portfolio-diversification tool. People like to know that they've got an element of their wealth which they can feel. Often, it looks beautiful, it's got a wonderful design on it, and that adds a degree of emotion to the investment.

And if you're a manufacturer or if you're someone making smartphones or tablets, gold is an element with the symbol Au and the atomic number 79, viewed as the most noble of all of the noble metals. It's a perfect material for conducting electricity. And it doesn't corrode; it doesn't rust. So it's great to have in your product. “

History of GOLD

Over many centuries, civilizations across the globe became enamored with the beautiful metal, such as the ancient Mali and ancient Egyptians. Ancient Mansa Musa the Richest King in Africa(from Mali) who gave away gold coins along his way to Meca, which caused Hyper inflation in the Countries where he and his convoy were passing through. Ancient Egyptians, not only did they use gold as a currency, they also buried themselves in gold, believing it to be the flesh of the gods.

In fact, King Tutankhamun was laid to rest in three gold-wrapped coffins, the innermost of which was made from sheets of pure, beaten gold, which would now be worth over $1 million.

In 1792, the US Congress passed the Coinage Act, which established a fixed price of gold to US dollars. Over the next century, gold mining captured people's imagination, during the great US gold rush. The first was in 1799, after 12-year-old Conrad Reed discovered a huge, 17-pound gold nugget on his family's farm in North Carolina. Fifty years later, in 1849, tens of thousands of prospectors, known as the 49ers, raced to San Francisco in search of riches, giving name to the San Francisco 49ers football franchise. These gold rushes heralded the start of modern-day gold mining. Despite humans mining gold for millennia, the complexity of this process hasn't changed.

Hewitt:” Mining is just as challenging and difficult as it's ever been before.

What's changed, probably, is the labor intensity in some mines, as people have increasingly used technology. But some of the challenges aren't necessarily associated purely with mine production. They could be associated with the environments within which they're operating, so. And licenses that people need to operate, whether it's a formal license from a government or a social license from a local community. I mean, those are still challenges that mining companies need to navigate and kind of work their way through. And that contributes to the complexity of mine production today, probably just as much as it did many, many years ago.”

Mining Process

Developing a Mine takes a long time. It take about 10 years to 20 years to develop a Mine and It takes 30 years to operate the Mine. The 20 years is for Geologist and Engineers to do research of the mine. This add up as cost mining gold. It is also harder to mine gold when the mine is operational which also make the price of Gold to keep going up. It is only about 0.1% likely for a potential mining site to be developed into a Gold productive mine after the research. And only about 10% of the potential mining places researched are worthy to be developed into a full operational mine which is profitable. This is why gold is expensive.

Hewitt:” If we have a look at the 190,000 tons of stock of gold aboveground, the lion's share of it's in jewelry. Around about 50% of it is in jewelry. The next level down comes to private investment. So, that could be individuals holding bars or coins, or, indeed, individuals holding a share of an exchange-traded fund. And then you've got central banks. Central banks account for around about 17% of that stock of gold, so a very significant volume. And then the final element, around about 13%, 14%, is technology or dentistry.”

Conclusion:

The expensive nature of gold can be attributed to a combination of factors. Its scarcity, durability, and versatility make it a unique and highly sought-after metal. As a reliable store of value and with diverse industrial applications, gold maintains its appeal and market demand. Understanding these factors helps to appreciate the enduring allure of gold and its impact on its price in today's global markets.