HOW MUCH GOLD IS THERE?
There is currently somewhere between 120,000 and 140,000 tonnes of gold in the world 'above ground'. To visualise this, imagine a single solid gold bullion cube with edges of about 19 metres (about three metres short of the length of a tennis court). That's all that has ever been produced.
Divided amongst the population of the world, there are about 23 grams per person, about 1.2 cubic centimetres each. This equates to about $250 - $350 worth per person on Earth, depending on the current price.
The value of that short tennis court sized cube is about $3.6 trillion. This compares to the US government's sovereign debt of $11 trillion, which until 1971 was part-backed by gold. The US Gold Reserve is just over 8,000 tonnes - which is about 6% of the total gold ever mined. It is worth about $200 billion, or 1.8% of the US national debt.
$3.6 trillion is about one fifteenth of the paper based international bond markets, which themselves, at about $55 trillion, are about two thirds composed of western government sovereign debt almost all of which has appeared, co-incidentally, since 1971 and the declared supremacy of paper money, which was what allowed governments to borrow without caution. The total gold content of the world would pay - at current values - about 7% of the international bond market's sovereign debt. Of course, 75% of the world's gold is not available to governments - being held privately as jewellery, bullion and coin. In fact only about 30,000 tonnes, about 1% of the world's sovereign debt is what is held in central bank gold reserves.
Meanwhile the entire gold stock of the world - including the privately held bulk - is much less than one half of one percent of the underwritten risk in the global financial derivatives markets.
The world has placed absolute trust in paper currency denominated assets. Investors have shunned gold bullion for about twenty years while the notional value of paper based financial assets has exploded.
About 30,000 tonnes of the world's gold [20-25% of above ground inventory] is held in central bank vaults.
Major Central Bank Reserves (2000)
The rest is held by individuals in the form of gold jewellery [approx 70,000 - 80,000 tonnes], coin and privately held bullion [combined at 20,000 tonnes].
90% of the gold above ground has been mined since the start of the California gold rush in 1848. Modern power machinery and chemicals have steadily lowered the price at which gold can be extracted. The average production cost of the world's biggest producer - South Africa - is about $238 per troy ounce. 1997 industry estimates by the Federal Reserve Board suggested an average production cost worldwide of $300 per ounce.
Where it is known about with reasonable confidence and can be extracted economically, un-mined gold appears on the books of mining companies as 'reserves'. There remains as reserves about 40% of the total of gold above ground - i.e. about 50,000 tonnes. South Africa has 50% of the world's known stock of un-mined gold.
Gold is difficult to find in commercial quantities. It also takes time, typically 5 years, and plenty of money to bring mines into production. In this sense, the supply side of the gold equation is relatively constant.
One of the features of this is that boom-times encourage investment which takes a considerable time to work through to production and eventually, to worked out mines. After a boom, when investment decisions may be made on over-inflated expectations of ultimately achievable prices, there is a tendency to subsequent overproduction and poor prices for a considerable period.
The gold price boom of 1979/80 resulted in steadily increasing production all over the world from a stable base of 1200 tonnes annually to a peak of above 2600 tonnes in 1999. All major producing countries except South Africa substantially increased production in this period.
Production then levelled out and started to dip slightly, as gold mines were exhausted and poorer mines shut. Also, the uninspiring gold market encouraged a decrease in exploration which now means there are a lower number of new mines coming into production than is expected to be required by the market.
Nonetheless, for the time being, gold is still being mined and refined at the rate of almost 2,600 tonnes per year. Thus, the world supply of above ground gold is increasing - or inflating - at just over 2% annually. At current rates, the gold supply is growing the under-sized tennis court cube at about 12 centimetres a year. It will reach a full tennis court sized cube in about 20 year's time.
The following table compares kilogram quantities of gold with monetary values, spatial volumes, and meaningful human measurements, to get a feel for the numbers.
The chemical symbol for gold is Au.
Percent Gold = European System = Karat System
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