Mining and Stock-to-Flow Ratio
So far in their history, human beings are reckoned to have extracted a total of around 190,040 tons of gold. Two-thirds of this amount has been discovered over the course of the past 70 years. Due to the indestructibility of this precious metal, the entire amount ever extracted is still likely to be present and in use in some form. This is reflected by a very high stock-to-flow ratio for gold. In stark contrast to other raw materials, such as grain or oil, gold has a considerable degree of discrepancy between its annual production and the total available stock. 2,600 tonnes are currently being mined each and every year. The stock-to-flow ratio is, therefore, over 70 (stock / flow, i.e. 190,040 / 2600 = 73). Specifically, this means that it would take a total of 70 years for current gold production to double the current levels of available stock.
Physical Gold Versus Gold Securities
Investors often want to invest part of their total assets in gold as this is considered a safe means of storing wealth. Indeed, one can also benefit from the rising price of gold, as well. In addition to gold, other precious metals, such as silver, are also bought for similar reasons. What’s more, in addition to physical gold, there are also various securities on the market that are based on gold. These include gold ETFs or gold certificates. With these, however, the owner of the securities does not automatically become the owner of the physical gold. He or she only participates in one way or another from the price development of gold as its value alters over time.
Bars and Coins
Typically, physical gold is poured into ingots to form bars of different sizes. Alternatively, it is turned into coins of various denominations. Among the various gold bars that are made, there are also so-called coin bars and table bars. Gold coins exist in a wide variety of forms, too. The best known are: the Krugerrand, the Maple Leaf, the Vienna Philharmonic, the Britannia, the China Panda, the Nugget Kangaroo and the American Eagle. These individual coins differ in their properties. Depending on your preference, one or another of these gold coins is suitable for investing in.
Widely used to check the authenticity of physical gold, devices known as spectrometers are the industry standard these days. These are utilised to perform an analysis of X-ray fluorescence to confirm the purity, or otherwise, of the yellow precious metal. With this method, the exact fineness can be determined without any destruction of the gold taking place. This is in contrast to the traditional line / acid method which was destructive. In this way, samples of gold with an unknown composition can be correctly assessed. However, the method offers only a superficial determination of the composition. A holistic approach which, at the same time, offers a non-destructive method of gold analysis, is brought about by a process known as ultrasonic speed measurement. A popular heavy metal that is used for counterfeiting gold bars is tungsten. After measuring the thickness of a bar or a coin, the ultrasound speed of it is measured, which differs by approximately 2000 m/s between gold and tungsten. An ingot filled with tungsten consequently reflects the sound waves used in the process and they interface differently with the equipment. In this way, any counterfeit material that has been deployed reveals itself.
One of the greatest advantages of gold is its total indestructibility. In addition, the precious metal has a high value density. In other words, this makes it possible to store a lot of value in a very small amount of space. Gold is also internationally accepted as currency. This makes the yellow precious metal particularly liquid. The trading margins in the global gold markets are accordingly small. This means that the purchase and sales prices of gold are very close to each other and only gradually grow apart from one another with larger quantities.
A Suitable Approach to Wealth Storage
Due to its indestructibility, scarcity and high value density, gold is one of the most suitable methods available for wealth storage. As such, only appropriate forms of storage should be of the greatest importance. There are basically two ways to store gold. Firstly, physical gold could be stored at home. Of course, this carries with it the risk that the precious metal might be stolen from your own home by burglars. To prevent this risk, storage in a bank or with a provider of storage that is independent of the banking system is a suitable alternative. Swiss Gold Safe offers the latter option. Bars, coins or granules can all be stored here securely.
- Gold is the most famous precious metal and, although it is mainly found on land, it is also in water.
- No other metal has a higher stock-to-flow ratio.
- Anyone who owns physical gold is effectively in possession of the precious metal, unlike gold securities.
- Gold is most commonly held in the form of either bars or coins.
- There are several sophisticated methods for checking the authenticity of gold.
- Due to its indestructibility, its high stock-to-flow ratio and its high value density, gold is one of the most suitable methods for storing wealth in a physical form.