Gold is fundamentally different from other commodities

7 Feb. 2014

Gold is fundamentally different from other commodities

Gold, despite the recent decline in value, is still a prominent investment. Gold is normally only consumed to a very limited extent and is reusable. Almost all the gold (estimate: 172,000 tons) ever mined still exists. A lot of gold exists in coins, gold bars and jewelry. Gold is stored by governments, financial institutions and (central) banks. In this respect, gold differs greatly from other commodities, which are often consumed and therefore have a limited lifespan. Due to the available reserves of gold, the market does not experience the same pressure as other commodity markets with a limited lifespan.

Gold is mined on all continents except Antarctica. This makes it a global commodity. This makes gold less dependent on local markets and economies, which spreads the risks. No region produces more than 20% of total gold mining. Disruption of local production is unlikely to have a significant impact on price. In addition, multiple major disruptions are unlikely to occur at the same time. Gold is reused, so the market is not only dependent on mining.

Gold has been traded as an investment object, but has also been used as a (semi-)currency since 500 BC. For hundreds of years, monetary systems were "guarded" with the help of gold. Today, gold no longer plays a mandatory role in the monetary system, but despite this, 17.5% of gold is in the hands of governments and central banks; to safeguard prosperity and protect oneself from macroeconomic and financial impacts.

Source: World Gold Council

Holland Gold

Go back