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All You Need To Know About Gold As A Viable Trading Commodity



Gold is a chemical element with the symbol Au and atomic number 79, making it one of the higher atomic number elements that occur naturally. In a pure form, it is a bright, slightly reddish yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal and a group 11 element. Of all the minerals mined from the Earth, none is more useful than gold. Its usefulness is derived from a diversity of special properties. Gold conducts electricity, does not tarnish, is very easy to work, can be drawn into wire, can be hammered into thin sheets, alloys with many other metals, can be melted and cast into highly detailed shapes, has a wonderful color and a brilliant luster. Gold is a memorable metal that occupies a special place in the human mind.


What Determines International Gold prices?


There is no clear answer, but recent research shows gold prices are derived from London Over the Counter otherwise called OTC spot gold market trading and COMEX gold futures trading. It means international gold prices are set by the paper gold market, and not by the physical gold market. One should understand that supply and demand for physical gold play no role in setting the gold price in COMEX and London OTC markets.


Other markets such as Shanghai Gold Exchange, Multi Commodity Exchange, and even physical gold markets worldwide are predominantly price takers, that take in and use the gold prices established by the paper gold markets in London and New York. In the international market, Gold could be priced by Grams, Kilo, or ounce. As of the time of making this video, the international price of Gold are as follows: 56 dollars per grams, 56.2 dollars per kilo, and 1,741.86 dollars per ounce.


Now, let’s talk about top Gold producing countries:


Here are further details on the top 10 countries with the largest gold production in 2020, starting with China, For many years, China has been the top producing nation, accounting for 11 percent of global mine production.


However, production fell from 383 tonnes to 368 last year, representing the fourth consecutive year of declines. The downtrend is largely due to tighter environmental policies imposed by the government. For example, stricter control over the use of cyanide at gold mines has forced several operations to cut back production.


Russia has a production capacity of 331.1 tonnes making it the second largest producer of the commodity in the world. A huge majority of European gold comes from Russia, which has been increasing its production every year since 2010.


In 2019, Russia surpassed Australia to become the world’s second largest producer. Interestingly, The Russian government is the largest buyer of Russian gold. The Russian government purchases around two-thirds of all gold produced locally. Australia has a production capacity of 327.8 tonnes making it the third highest producer of Gold. Australia has now posted eight consecutive years of production increases.


The minerals industry produces over half of Australia’s total exports and generates about 8 percent of GDP. Higher production at several mines and the ramp up of projects such as Mount Morgans and Cadia Valley contributed to increased production United States is the fourth largest producer of Gold with 190.2 tonnes. Gold output in the U.S. fell below 200 tonnes for the first time in several years, continuing a decline that began in 2019.


Close to 80 percent of the gold produced in the U.S. is from Nevada. Canada is the fifth largest Gold producing country with 170.6 tonnes. Canada has held the number five spot for four years now, even after mining 12 fewer tonnes in 2020 than it did the previous year. The country’s top gold mine was Canadian Malartic, co-owned by Yamana Gold and Agnico Eagle, which was responsible for producing over 16 tonnes last year. Ghana with 138.7 tonnes is the sixth globally and Africa’s largest producer of gold, beating out South Africa for the first time in 2019, and is also known for its reserves of various industrial minerals.

Industry majors such as AngloGold Ashanti and Gold Fields have shifted their focus from South Africa to Ghana where deposits are cheaper and easier to mine. Brazil is seventh with 107.0 tonnes moving up from the number 10 slot in 2019 is Brazil, which increased its output for the third straight year. Illegal mining activity has risen sharply in the last six years in the heart of the Amazon rainforest. President Jair Bolsonaro has pushed the country to develop the Amazon economically and tap its mineral riches. Uzbekistan with 101.6 tonnes sits at eighth.


Uzbekistan significantly increased its output last year, from 94.6 tonnes in 2019 to 101.6 tonnes, the first time it exceeded 100 tonnes in one year. The Central Asian country is home to Muruntau, the world’s largest open pit gold mine by area.


The project, which also contains huge deposits of turquoise and arsenic, sits atop what many geologists believe could be the biggest gold reserve in the world. Mexico is the ninth with 101.6 tonnes although production fell for a fifth straight year, Mexico remains a competitive gold source. Output rose from just 50.8 tonnes in 2008 to peak at over 131 tonnes in 2015, one of the largest increases in that time span.


Mexico is an attractive place for mining due to a relatively low cost of regulation. Indonesia is the tenth largest Gold producer in the world with 100.9 tonnes. Indonesia is home to the second largest gold mine and world’s highest, Grasberg, which is operated by PT Freeport Indonesia and has as many as 20,000 workers. The South Pacific country is responsible for mining around 3 percent of global supply.


We know Egyptian pharaohs were buried wearing gold and the extremely wealthy in Ancient Rome donned it too. However, while many people look at gold as a safe-haven investment, gold jewelry remains a very important part of several cultures, often for reasons tied to its value as an investment.


In fact, jewelry represents the greatest demand for gold, followed by retail investment in terms of bars and coins, the net official sector which are central banks, and industrial fabrication. According to Investopedia, India and China continue to retain the top two spots when it comes to buying gold jewelry, according to figures published in the latest Thomson Reuters GFMS Gold Survey report.


Jewelry consumption worldwide accounted for almost 46 percent of the total gold demand for the fourth quarter of 2019. The World Gold Council, a market development organization backed by the gold industry, publishes a similar ranking, and while some of the figures differ, their top gold jewelry consumers ranking closely resembles that of Thomson Reuters and their analysts. In the fourth quarter of 2019, India and China accounted for 57 percent of gold jewelry consumption globally. Jewelry demand from China accounts for more than a third of global demand. India: India is the global leader in gold jewelry consumption. Jewelry consumption in India fell by 32 percent year-over-year in the second half of 2019.


A quarter of the gold jewelry demand for the send half of 2019 was met by the exchange of old jewelry. China: China is a close second when it comes to global gold jewelry consumption. Jewelry related gold demand for China fell in 2019. Full-year 2019 tonnes demanded fell by 8.6 percent, while in the second half of 2019, gold demand fell 9.7 percent year-over-year.


A decline in consumer spending has led to a pullback in gold jewelry consumption in China, said the Thomson Reuters report. The jewelry industry makes up more than 65 percent of the gold consumption in the country. United States: The U.S. came in third for gold consumption in the quarter of 2019, though still well behind China and India. U.S. consumption has slowed due to rising gold prices. Germany: Germany is the fifth largest consumer of jewelry gold in Europe, behind Turkey. The country consumed 5.4 tonnes in the fourth quarter of 2019. However, given the rising prices and economic slowdown, gold demand fell year over year for the country. Major reasons for the decline include the shift away from high-end jewelry toward technology and experience purchases. Top Gold importing countries: Worldwide import purchases of gold totaled 375 billion dollars in 2020, up by an average 26.7 percent for all importing countries since 2016 when gold imports were valued at 295.9 billion dollars. Year over year, the value of imported gold increased by 12.3 percent from 2019 to 2020.


The world’s 5 biggest importers of gold are United Kingdom Switzerland, United States, Turkey, and India. These 5 countries imported 68.8 percent of the global total for the shiny precious metal. From a continental perspective, European countries bought the highest dollar amount of imported gold during 2020 with purchases valued at 202 billion dollars or 53.9 percent of the global total. In second place were Asian importers at 32 percent while 11.6 percent of international gold purchases were delivered to importers in North America. Tinier percentages of 1.7 percent arrived in Oceania, Africa got 0.7 percent and 0.04 percent went to Latin America excluding Mexico but including the Caribbean.


The fastest-growing markets for gold since 2019 were: United States with up to 258.1 percent, Austria with up to 193.1 percent, Turkey with up to 123.5 percent, and Italy with up to 86.4. Top Gold exporting countries: Global sales from gold exported by all countries totaled 395 billion dollars in 2020, up in value by an average 20.8 percent since 2016 when worldwide gold shipments were valued at 326.9 billion dollars. From 2019 to 2020, the value of globally exported gold appreciated by 29 percent.


The 5 biggest gold exporters are Switzerland, Hong Kong, United Arab Emirates, United Kingdom, and United States. These countries were responsible for 45.9 percent of globally exported gold. Among continents, Asian exporters overtook Europe to sell the most gold on international markets with shipments valued at 146.2 billion dollars or 37 percent of the worldwide total. Asian exporters generated 34.2 percent worth of gold exports, while 10.1 percent worth was shipped from North America and 7.7 percent originated from Africa. Gold suppliers in Latin America excluding Mexico but including the Caribbean came in at 5.9 percent, trailed by Oceania with 5.1 percent led by Australia and Papua New Guinea. On this note, we draw the cotton on this topic. We hope it was very informative.

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