Gold is a dense, bright yellow metallic element with a high luster. Gold is an inactive substance and is unaffected by air, heat, moisture, and most solvents. Gold has been coveted for centuries for its unique blend of rarity, beauty, and near indestructibility. The Egyptians mined gold before 2,000 BC. The first known, pure gold coin was made on the orders of King Croesus of Lydia in the sixth century BC.
Gold is found in nature in quartz veins and secondary alluvial deposits as a free metal. Gold is produced from mines on every continent with the exception of Antarctica, where mining is forbidden. Because it is virtually indestructible, much of the gold that has ever been mined still exists above ground in one form or another. The largest producer of gold in the U.S. by far is the state of Nevada, with Alaska and California running a distant second and third.
Gold is a vital industrial commodity. Pure gold is one of the most malleable and ductile of all the metals. It is a good conductor of heat and electricity. The prime industrial use of gold is in electronics. Another important sector is dental gold where it has been used for almost 3,000 years. Other applications for gold include decorative gold leaf, reflective glass, and jewelry.
In 1792, the United States first assigned a formal monetary role for gold when Congress put the nation's currency on a bimetallic standard, backing it with gold and silver. Under the gold standard, the U.S. government was willing to exchange its paper currency for a set amount of gold, meaning the paper currency was backed by a physical asset with real value. However, President Nixon in 1971 severed the convertibility between the U.S. dollar and gold, which led to the breakdown of the Bretton Woods international payments system. Since then, the prices of gold and of paper currencies have floated freely. U.S. and other central banks now hold physical gold reserves primarily as a store of wealth.
Gold futures and options are traded at the New York Mercantile Exchange (NYMEX), division of the CME Group, NYSE-LIFFE U.S., the Bolsa de Mercado & Futuros (BM&F), EUREX, JSE Securities Exchange, and the Moscow Exchange. Gold futures are traded on the Hong Kong Exchanges & Clearing, the Indonesia Commodity & Derivatives Exchange (ICDX), the Multi Commodity Exchange of India (MCX), the Korea Exchange, Shanghai Futures Exchange (SHFE), and the Singapore Exchange (SGX). The NYMEX gold futures contract calls for the delivery of 100 troy ounces of gold (0.995 fineness), and the contract trades in terms of dollars and cents per troy ounce.
Prices - NYMEX gold futures prices (Barchart.com symbol GC) posted their high for 2013 in January at $1,697 an ounce and then collapsed the first half of 2013 and fell to a 3-year low in June of $1,179 an ounce. Fund liquidation pressured gold prices throughout the year as gold holdings in ETFs slumped to a 4-year low by year-end. Another negative for gold was Standard & Poor's move in June to raise its credit rating outlook for the U.S. to stable from negative, which lifted the dollar index to a 3-year high. Gold prices rebounded sharply by $200 an ounce into August on increased safe-haven demand on concern the U.S. might launch a military attack on Syria for its use of chemical weapons although that threat was averted after Syria agreed to give up its chemical weapons. Gold prices fell back into year-end, however, after U.S. lawmakers raised the debt ceiling, Middle East concerns subsided, and as disinflation concerns increased with the U.S. November core PCE deflator up only +1.1% y/y (well below the Federal Reserve's inflation target of +2.0%). Gold finished 2013 down -28% at $1,202 an ounce.
Supply - World mine production of gold rose +1.5% yr/yr to 2.700 million kilograms in 2012, a new record high (1 kilogram = 32.1507 troy ounces). The world's largest producers of gold in 2012 were China with 13.7% of world production, followed by Australia (9.3%), the U.S (8.5%), Russia (7.6%), and South Africa (6.3%).
Gold mine production has been moving lower in most major gold-producing countries such as South Africa, Australia, and the U.S. For example, South Africa's production of 170,000 kilograms in 2012 was down -6.1% yr/yr and that was about one-third the production levels of more than 600,000 kilograms seen in the 1980s and early 1990s. On the other hand, China's gold production in 2012 rose +2.2% to a record 370,000 kilograms. U.S. gold mine production in 2012 fell -1.7% yr/yr to 230,000 kilograms, just above 2009 production level which was the lowest production since 1988. U.S. refinery production of gold from domestic and foreign ore sources in 2012 remained the same yr/yr at 240,000 kilograms. U.S. refinery production of gold from secondary scrap sources in 2012 fell -8.8% yr/yr to 240,000 kilograms.
Demand - U.S. consumption of gold in 2012 fell -10.7% yr/yr to 150,000 kilograms. The most recent data available from the early 1990s showed that 71% of that gold demand came from jewelry and the arts, 22% from industrial uses, and 7% from dental uses.
Trade - U.S. exports of gold (excluding coinage) in 2012 rose +76.2% yr/yr to 710,000 kilograms, a new record high. U.S. imports of gold for consumption in 2012 rose +130.8% yr/yr to 330,000 kilograms, a new record high.
Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.