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Page Contents

  • Chemical qualities
  • Abundance
  • Extraction and Purification
  • Density
  • Weights and Measures
  • Psychological qualities
  • Relationship to modern money
  • Chemical qualities

    As everyone knows gold is a chemical element so it can only be found, not manufactured.  It is largely inert, which means:- (i) It is almost totally immune to decay, (ii) it is not very useful in any industrial/chemical processes which use it up and (iii) it is easy to store cheaply for long periods. 

    It is also remarkable for its rarity, density, softness, and its very good electrical conductivity.

    Gold finds a small number of industrial uses arising from its physical qualities. It is used in dentistry and in the manufacture of some electronics which require high quality non-corrosive contacts.  However together its practical uses are numerically insignificant.  Gold's principal use is decorative - i.e. in the production of jewellery.


    It is extremely rare. According to all geological experience it is found only in low concentrations in rocks [footnote].

    Its average concentration in the Earth's crust is 0.005 parts per million.  The technology of extraction is expensive primarily because the process always requires the manipulation of large physical quantities of ore for small results. The energy required to heave, grind and process ore is itself valuable and places a lower limit on the quality of ore which can be profitably worked.

    At different points concentration of minerals within the earth's crust varies from their average, and it is those variations which produce workable ores.  Iron, for example, accounts for an average 5.8% of the content of the Earth's crust.  It needs to be concentrated by natural variations to about 30% to be considered an ore, indicating a required geological concentration of about 5 times. A lower grade gold ore would contain something like 5 grams per tonne (5 parts per million).  So gold ore needs to be concentrated by about 1,000 times above the average to become viable.

    The process of gold concentration happens both above and below the surface of the Earth.  On the surface there is alluvial gold which has been concentrated by the effects of running water, for example in rivers.  Because of its extreme density gold will readily fall out of suspension as water slows down.  So where a river cuts through gold bearing rock, and then slows down as it hits a flatter/wider river bed, gold will concentrate in a 'placer' deposit, allowing extraction of gold particles by panning and the modern day industrial equivalents.

    Underground gold veins or 'lodes' are produced in association with various metallic deposits, often including sulphides and pyrites.  Gold concentration may occur as other minerals are leached away over a long period. Ore of sufficient yield is very rare.

    Extraction and Purification

    Because of gold's inertness some 80% of gold within ore is in its elemental state.  There are several processes for extracting, and then purifying it.

    Amalgamation is a mercury based process which works because of gold's willingness to be dissolved by mercury.  The mercury is applied on an ore, picks up the gold, and the resulting amalgam is distilled, with the mercury being boiled off to remove it.  Mercury is highly toxic and therefore environmentally sensitive, making the industrial plant to perform this type of extraction expensive.

    The most important process for gold extraction is cyanidation.  Sodium cyanide solution in the presence of air causes gold to enter into solution.  Good quality ores give up their gold under cyanidation in what is called vat leaching.  Lesser quality ores require heap leaching, which involves huge piles of ore being repeatedly re-sprayed with the cyanide solution over a prolonged period.

    Relatively raw gold is purified in two main ways.  The cheaper first stage of purification is the Miller process which uses chlorine gas and reaches purification of 99.5%, and then there is the more expensive Wohlwill process which electrolyses gold to purities of 99.99%.

    Note that London Good Delivery Bars - the main trading unit of bullion - are specified at 99.5% pure.


    A litre carton of gold weighs 19.3 kg, so it's nearly 20 times heavier than water.  It is so distinctively heavy that solid gold offers its own immediate qualitative verification in the hand.  Gold’s heaviness is also important in that it means large amounts of gold can be stored in relatively small spaces, like bank vaults, in which the same value of gold can be stored in one hundredth of the space which would be required for silver. 

    In fact a one tonne cube of gold would have edges of around 37 centimetres - a bit over a foot.  It would store value of well over $12 million in very little space.

    Gold weights and measures

    By tradition gold is quoted and traded in troy ounces, these having been adopted by the U.S. Mint for the regulation of coinage in 1828. Unlike 'normal' pounds and ounces there are 12 troy ounces to the troy pound rather than 16.  But a troy pound weighs less than in imperial pound ( 0.82 British/US pounds). 

    Cutting through all that nonsense a troy ounce is approximately 0.031kg or 31 grams. 

    The following gives an approximate conversion between traditional and metric weights.

    Troy ounces Kilograms Grams
    1 0.031104 31.104
    12 0.37325 373.25
    32.150 1.000 1000

    This table converts prices in troy ounces to prices in kilograms.

    $ per troy ounce $ per kilo
    $250 $8,038
    $260 $8,359
    $270 $8,681
    $280 $9,002
    $290 $9,324
    $300 $9,645
    $310 $9,967
    $320 $10,288
    $330 $10,610
    $340 $10,931
    $350 $11,253
    $360 $11,574
    $370 $11,896
    $380 $12,217
    $390 $12,539
    $400 $12,860
    $420 $13,503
    $440 $14,146
    $460 $14,789
    $480 $15,432
    $500 $16,075
    $520 $16,718
    $540 $17,361
    $560 $18,004
    $580 $18,647
    $600 $19,290

    Psychological merit

    One of gold's important properties is psychological. Most people readily associate gold's distinctive colour with wealth, and many even consider the colour beautiful - possibly because it is so closely associated with money. This gives it an immeasurable advantage over other tangible and portable stores of wealth.

    The jewellery trade is a permanent and global marketing initiative for bullion, and has for thousands of years gone hand in hand with un-worked metal in promoting gold as a store of material value. It creates a significant barrier to entry for any rival material and contributes to the security of gold, in bullion form, as a form of money.

    Relationship to modern money

    Throughout civilisation gold has been used as money, but the two are less closely related now than has been normal through the last 3,000 years.

    Modern currencies (like many older forms of money) can have their supply expanded by diktat, usually by a government or a central bank.  All modern money is subject to government in this way, which means that the value of savings is decided, to an extent, according to a political agenda.  Modern savers are exposed to any economic or political crisis which could cause money to be over-issued, so their long term prosperity depends on the reliability of the political mechanisms for imposing monetary scarceness.

    Historical precedent indicates it is not always in politicians' interest to keep money scarce.

    Because of its rarity gold reliably imposes scarceness, which is what occasionally makes it useful as money.  Whether or not a physical manifestation of money - in the form of bullion - is a desirable thing is open to debate at any given time.  But if a monetary material of reliable scarceness is desirable then gold is still as appropriate as ever.  The investment question concerning gold is not whether or not it reliably imposes scarceness, which it does, but whether or not such reliable scarceness will in the future be required by savers.

    Because the significant majority of people currently believe that our governments and our central banks have sufficient skill to manage the supply of money gold’s use as a monetary material has waned, especially over the last 70 years. This is a regular pattern.  Gold will quietly slip into the background when paper money becomes widespread because, as the famous Gresham's Law [footnote] says "bad money drives good money out of circulation". But part of the mystery of money concerns gold's cyclical re-appearance, which the following pages will aim to explain.

    Next gold FAQs section - 'Is Gold Money?'

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