Why is Gold So Expensive?

Business Insider is another solid follow on YouTube.  While it may not always be about investments and financial advice, it’s content that answers questions and makes me think.  Any time I can get stimulated by something while I’m waiting in a dental office, riding an Uber, or otherwise siting around waiting for stuff to happen, it’s a great thing.  We have the ability to educate ourselves like never before, thanks to YouTube, the Internet, and of course, earbuds!  We can connect with information and learn on the go, wherever we have an Internet connection.

Today I present a very thought provoking transcript about why gold is so expensive, courtesy of Business Insiders YouTube Channel.

Why Gold is So Expensive as Told by Business Insider

Speaker 1: Gold is the shining embodiment of wealth. Not only is it used to make expensive products but it’s also used to add extra bling to luxurious items from smartphones, to supercars, and even beef steaks. Other metals that are rarer than gold are much cheaper. Why is gold so expensive? Scientists believe gold arrived on earth after the collision of two neutron stars in space forged gold atoms together into meteorites, which crashed into earth about 3.9 billion years ago. Over millions of years, earth’s bubbling hardcore forced gold nuggets towards the surface.

Gold flakes have been found in paleolithic caves estimated to date back roughly 40,000 years marking the first node instance of human contact with the material. What exactly is gold? Gold is a relatively rare metal with lots of versatility. It’s highly malleable, meaning it can be deformed or changed without fracturing the material. What distinguishes it from other useful precious metals is totally unique, bright yellow appearance. These factors give gold many practical and superficial uses on earth.

Speaker 2: If you’re a bride, gold is the perfect embodiment of love and emotion. If you’re an investor, gold’s an excellent portfolio diversification tool. People like to know that they’ve got an element of their wealth which they can feel. Often it looks beautiful, it’s got a wonderful design on it and that adds a degree of emotion to the investment. If you’re a manufacturer, if you’re someone making smartphones or tablets, gold is an element with the symbol Au and the atomic number 79, viewed as the most noble of all of the noble metals. It’s a perfect material for conduct electricity and it doesn’t corrode, it doesn’t rust, so it’s great to have in your product.

Speaker 1: Over many centuries, civilizations across the globe became enamored with the beautiful metal such as the ancient Egyptians. Not only did they use it as a currency, they also buried themselves in gold, believing it to be the flesh of the gods. In fact, King Tutankhamun was laid to rest in three gold-wrapped coffins, the innermost of which was made from sheets of pure beaten gold, which would now be worth over $1 million.

In 1792, the US Congress passed the Coinage Act which established a fixed price of gold to US dollars. Over the next century, gold mining captured people’s imagination during the Great us Gold Rush. The first was in 1799 after 12-year-old Conrad Reed discovered a huge 17-pound gold nugget on his family’s farm in North Carolina. 15 years later in 1849, tens of thousands of perspectives, known as the 49ers raced to San Francisco in search of riches giving name to the San Francisco 49ers football franchise. These gold rushes heralded the start of modern-day gold mining. Despite humans mining gold for millennia, the complexity of this process hasn’t changed.

Speaker 2: Mining is just as challenging and difficult as it’s ever been before. What’s changed probably is the labor intensity in some minds as people have increasingly used technology. Some of the challenges aren’t necessarily associated purely with mine production, they could be associated with the environments within which they’re operating. Licenses that people need to operate, whether it’s a formal license from a government or a social license from a local community. Those are still challenges that mining companies need to navigate and work their way through and that contributes to the complexity of mine production today probably just as much as it did many, many years ago.

Speaker 1: Identifying gold mines is a daunting task. It can take up to 10 years for geologists, chemists, and engineers to examine a potential site. Even then the likelihood of a mine being developed into a productive gold mine is less than 0.1%. Only 10% of these sites contain enough gold to justify further development. Above ground, gold is everywhere, on our fingers, around our necks, and even in our mouths. Gold is used in medicine, architecture, and almost every electronic component.

We even launch gold back out into the universe from where it came not only as a reliable component of spacecraft circuitry but also in the lining of astronauts visors to protect them from the sun’s harmful heat and ultraviolet light. With all that in mind, it might surprise you to know how little gold that actually is here on earth. If you melted down the world’s entire above-ground stock of around 190,000 tons of gold, it would form a 72-foot cube. However, if that was divided up equally for every person on earth, we’d all get roughly an ounce of pure 24 karat gold each. That’s about one and a half thousand dollars worth. How does this volume divide out into different industries?

Speaker 2: If we have a look at the 190,000 tons of stock of gold above ground, the lion’s share of it is in jewelry. Round about 50% of it is in jewelry. The next level down comes to private investment. That could be individuals holding bars or coins or indeed individuals holding shares of an exchange-traded funds. Then you’ve got central bank central bank’s account for round about 17% of that stock of gold so a very significant volume. Then the final element, round about 13, 14% is technology or dentistry.

Speaker 1: Is the future of gold as bright as its surface? New deposits of gold are increasingly hard to come by and increasingly difficult to locate. Geologists have estimated that only 55 tons remains buried away in the earth’s crust. Which means if current global mining rates continued, we could run out of newfound gold in just 20 years. As gold mining continues to slow and the cost associated with mining increase to meet the challenge of extraction, gold could become even more expensive.

Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.