Gold: The Top 10 Holders & Producers by Country? and 23 ...
So says Carolyn Pairitz (http://commodityhq.com) in edited excerpts from her original article* posted under the title Investing In Gold: The Definitive Guide.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity ? see Editor?s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Pairitz goes on to say, in part:
The price of the metal is widely followed by many investors, both sophisticated and simplistic. There are a number of different options for investing in gold, including buying up coins and bars of the product, exchange-traded futures contracts, stocks of companies engaged in the extraction and sale of the metal, and both physically-backed and futures-based exchange-traded products. [also read?50 Ways To Invest In Gold].
Physical Properties And Uses Of Gold
Gold metal is dense and soft, and is one of the most malleable and ductile of the pure metals. Those features, along with a resistance to corrosion, make gold useful in applications such as dentistry and electronics. Gold often appears naturally as part of a solid solution that is part gold and part silver-usually more than 90% gold. Gold can be found and mined in many forms, including flakes, grains, or larger nuggets.
Mining for gold is only economically viable if the metal is found in certain concentrations. Thanks to significant appreciation of gold prices in recent years, deposits with gold occurrences as low as 0.5 parts per million may be worthwhile; a concentration of about 60 times that level is needed before gold becomes visible to the naked eye, meaning that gold that appears invisible can often be valuable.
Unlike many metals, demand for gold in industrial applications is minimal. About 50% of new gold mined is mixed with other concentrations of precious metals like copper, silver, and palladium, and are used as jewelry. Since the financial crisis and most recent rush, investments now account for a significant portion of demand as well. Thanks in part to the introduction of gold exchange-traded funds (ETFs) in recent years, demand for gold from individual investors has increased significantly.
Top 10?Holders of?Gold
Central banks of dozens of countries around the world hold gold bullion as a store of value and guarantee to debt-holders Gold is occasionally used in the settlement of international transactions. The largest holders of gold include:
Country
Holdings (tonnes)
% Forex Reserves
U.S.
8,133
77%
Germany
3,396
74%
IMF
2,814
n/a
Italy
2,452
74%
France
2,435
74%
China
1,054
2%
Switzerland
1,040
17%
Russia
874
10%
Japan
765
3%
Netherlands
613
63%
?
Other precious metals, such as silver and platinum, are used more widely in industrial applications such as automobile components. Because a significant portion of gold supply is used as an investment, the correlation between prices and the strength of the global economy may be considerably less than other metals (in certain environments, gold may be an effective equity market hedge).
Top 10 Countries in?Gold Production and Reserves
Gold comes primarily from mining activity, with total global production in 2011?amounting to approx.?to 2,700 tons.? Below is production by country?(all data below is in tons) plus reserves by country:
Country
2010 Production
2011 Production
Reserves
U.S.
231
237
3,000
Australia
261
270
7,400
Brazil
58
55
2,400
Canada
91
110
920
Chile
38
45
3,400
China
345
355
1,900
Ghana
82
100
1,400
Indonesia
120
100
3,000
Mexico
73
85
1,400
Papua New Guinea
68
70
1,200
Peru
164
150
2,000
Russia
192
200
5,000
South Africa
189
190
6,000
Uzbekistan
90
90
1,700
Other
559
630
10,000
Global Total
2,560
2,700
51,000
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Price Drivers
Unlike many investable assets, there are no cash flows associated with physical gold. And unlike many industrial and precious metals, there are few industrial applications for the metal either. As such, identifying the exact reasons for a move in gold prices can be tricky; the metal often reflects investor sentiment, and can respond to indications of inflation expectations, general economic health, and the strength of fiat currencies such as the U.S. dollar.
Below, several of the primary price drivers of gold are highlighted:
Inflation: Gold often acts as an inflation hedge, with interest in the metal increasing when price increases show signs of accelerating.
New Discoveries: As with any metal, the supply of gold can have a significant impact on prices. The pace of new gold discoveries has slowed considerably in recent years, though there are still a number of firms globally engaged in searching for new deposits of the precious metal. To the extent that any major discoveries are made, prices could decline. If discoveries of the metal slow even further, upward pressure on prices could materialize.
Reserve Demands: Governments and central banks are major buyers of gold, and the behavior of these institutions can have a major impact on the price of the yellow metal. China in particular could have a major impact on global gold prices, since precious metals account for only a minor portion of foreign exchange reserves.
Investment Demand: From one perspective, demand for gold as an investment vehicle is a self-fulfilling prophecy. Because gold can be stored at a relatively low cost and held indefinitely, stronger investors interest in gold leads to higher prices for the metal. Assets in gold ETFs have skyrocketed in recent years, and the increased availability of these products has likely contributed to the rally in gold prices. To the extent that investment demand accelerates, upward pressure on gold prices could remain.
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Investing In Gold
Gold has appeal as an investable asset for several reasons. It can serve as a safe haven, attracting assets when global equity markets show signs of instability. The yellow metal also has appeal as an inflation hedge or alternative to fiat currencies, positioning to potentially appreciate in a wide variety of environments.
There are a variety of options for accessing gold, including futures, ETFs, and physical exposure:
Physical Gold
Because gold maintains an extremely high value-to-weight ratio (a troy ounce is worth close to $1,750), it is possible and feasible for investors seeking exposure to simply buy gold coins or gold bullion. This strategy has the benefit of eliminating the nuances of a futures-based strategy, but may require secure storage arrangements. There is no shortage of dealers in gold coins, jewelry, and other forms of the metal.
As discussed in more detail below, there are also ETFs whose underlying assets consist of gold bullion. These funds offer exposure to spot prices while allowing for economies of scale that can minimize storage expenses.
Gold Futures
Gold futures are traded on the COMEX under the symbol ?GC?.
Contracts are?priced in dollars and cents per troy ounce (one troy ounce ?is equivalent to about 31 grams, and is equal to about 1.1 avoirdupois ounces).
The contract size is 100 troy ounces.
Trading occurs on the CME Globex, CME ClearPort, and in Open Outcry trading in New York.
Gold futures are available during the current calendar month; the next two calendar months; any February, April, August, and October falling within a 23-month period; and any June and December falling within a 72-month period beginning with the current month.
Gold futures are subject to NYMEX position limits.
Gold Miners
Investors can also obtain exposure to gold by purchasing stocks of companies that are engaged in extracting and selling precious metals. Like most companies, the profitability of gold miners depends on the prevailing market price for the products they sell. As such, mining companies tend to realize higher profits when natural resource prices are elevated-especially if significant portions of the cost structure are fixed in nature. Mining stocks tend to trade as a leveraged play on the underlying resource, meaning that the movements in price are often more significant than changes in the related commodity over the short term.
Many gold mining companies also are engaged in the extraction of other precious and industrial metals such as silver, platinum, and copper. However, because gold is significantly more valuable than silver and copper and more common than platinum, it will often account for the majority of revenue and earnings of mining companies.
Major gold miners include:
Barrick Gold Corporation (ABX)
Goldcorp (GG)
Newmont Mining (NYSE: NEM)
Newcrest Mining (NCMGF.PK)
AngloGold Ashanti Limited (AU)
Gold ETFs
There are multiple ETFs offering exposure to gold as well, including both funds that invest in gold futures contracts and funds that invest in physical gold bullion. While the returns generated by these funds will generally be similar-especially in the short term-over longer periods certain strategies may perform better depending on the slope of the futures curve. Gold ETFs include:
Gold SPDR (GLD): This ETF invests in physical gold, meaning that it will reflect changes in spot prices of the commodity.
iShares COMEX Gold Trust (IAU): This ETF also invests in physical gold, and is cheaper than GLD in terms of expense ratio.
ETFS Physical Swiss Gold Shares (SGOL): This ETF invests in physical gold, storing bullion in Switzerland.
ETFS Physical Asian Gold Shares (AGOL): This ETF invests in physical gold, storing bullion in Singapore.
Futures-based gold ETFs include:
PowerShares DB Gold (DGL)
E-TRACS UBS Bloomberg CMCI Gold ETN (UBG): This product is an exchange-traded note, meaning that investors are exposed to the credit risk of the issuer.
Other gold exchange-traded products include:
RBS Gold Trendpilot ETN (TBAR): This product oscillates between exposure to gold and cash depending on momentum factors and recent performance.
FactorShares 2x Gold Bull/S&P 500 Bear ETN (FSG): This ETN offers leveraged exposure to the spread between gold and the S&P 500 on a daily basis.
Leveraged gold ETFs include:
PowerShares DB Gold Double Long ETN (DGP)
PowerShares DB Gold Double Short ETN (DZZ)
PowerShares DB Gold Short ETN (DGZ)
ProShares Ultra Gold (UGL)
ProShares UltraShort Gold (GLL)
VelocityShares 3x Long Gold ETN (UGLD)
VelocityShares 3x Inverse Gold ETN (DGLD)
There are also a number of ETFs that provide exposure to gold indirectly through investments in stocks of companies engaged in the discovery, extraction, and sale of the metal. These ETFs include:
Gold Miners ETF (GDX)
Pure Gold Miners ETF (GGGG)
Junior Gold Miners ETF (GDXJ)
Global Gold and Precious Metals Miners Fund (PSAU)
Gold Explorers ETF (GLDX)
MSCI Global Gold Miners Fund (RING)
Daily Gold Miners Bear 3x Shares (DUST)
Daily Gold Miners Bull 3x Shares (NUGT)
Resources On Gold Investing:
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*Source of original post: http://commodityhq.com/2012/investing-in-gold-the-definitive-guide/
Editor?s Note: The above post may have been edited ([ ]), abridged (?), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article?s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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5. The Single Best Reason to Own Gold Is?
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6. GOLDRUNNER- INVESTORS BEWARE! PART I- PRICE AND VALUE DIVERGE WITH AGGRESSIVE DOLLAR PRINTING
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7. GOLDRUNNER: INVESTORS BEWARE! PART II PRICE AND VALUE DIVERGE WITH AGGRESSIVE DOLLAR PRINTING
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8. My Rationale For Owning Gold
Gold is not a solution to investing problems. It is an insurance policy against an inflationary explosion. The higher the probabilities of inflation, the more gold I hold. [Let me explain.]
9. Take Note: Gold and Silver are NOT an Investment!
Gold and Silver are not an investment! Let me repeat that. Gold and silver are not an investment! Gold and silver are (excuse the pun) the most ?solid? form of money you can possess. Yes, these two precious metals are money!?Don?t fear owning gold my friends. Fear not owning gold and silver, especially if you are a saver. [Let me explain.] Words: 795
10. Does Gold?s ?purchasing-power-protection? Price History Suggest Gold is Over-priced?
The spectacular rally in the gold price over recent years [has] many observers asking if the precious metal has not moved ahead of its fundamentals?[and if it] has not entered speculative bubble territory. [To address that concern] I have calculated the purchasing-power-protection price of gold for the 43 years from 1970 to 2012 and compared it to the average market price for gold in every year [along with some background of events unfolding over each decade during that time period which should prove] useful as a framework for how to think about the [current] dollar-price of gold. [I think you will find it most enlightening. Take a look.] Words: 3973
11.If You Don?t Think Gold IS a ?Safe Haven? Then You Don?t Know the Meaning of the Term!
It would seem that there is a considerable lack of understanding about what the term ?safe haven? actually means when it comes to gold. Let me explain just what it means ? and does not mean. Words: 740
12. Why, Pray Tell, Would I Want to Own Gold??
<img title=?gold and currencies? src=?http://www.munknee.com/wp-content/uploads/2012/04/gold-and-currencies-90?65.png? alt=?gold and currencies? width=?90? height=?65? data-lazy-src=?http://www.munknee.com/wp-content/uploads/2012/04/gold-and-currencies-90?65.png? data-lazy-type=?image? /><img title=?gold and currencies? src=?http://www.munknee.com/wp-content/uploads/2012/04/gold-and-currencies-90?65.png? alt=?gold and currencies? width=?90? height=?65? data-lazy-src=?http://www.munknee.com/wp-content/uploads/2012/04/gold-and-currencies-90?65.png? data-lazy-type=?image? />
<img title=?gold and currencies? src=?http://www.munknee.com/wp-content/uploads/2012/04/gold-and-currencies-90?65.png? alt=?gold and currencies? width=?90? height=?65? />
Comments I have made that ?when this [financial crisis] finally ends the big winners are apt to be the ones who have lost the least purchasing power. Keeping score in nominal dollars is likely to be meaningless. Gold tends to hold its purchasing power regardless of what happens to fiat currency.? have prompted questions about a) how to achieve such purchasing power with physical gold when this stage is reached, b) how to go about buying things with gold coins and c) how gold would be utilized under the assumption that a barter system would develop when dollars become worthless. [Let me explain.] Words: 700
13. A Look Back at the Performance of Gold vs. Stocks in Times of Crisis
We are in the midst of turbulent times, and it seems inevitable that things can only get worse. Most investors are of the opinion that gold is one of a very few areas of safety?however, when we look at historical charts, it is obvious that gold doesn?t always behave in the way we would expect. [Let me explain.] Words: 541
14. Physical Gold and Gold Stocks Should be in Your Portfolio ? Here?s Why
Do you own enough gold and silver for what lies ahead? If 10% of your total investable assets (i.e., excluding equity in your primary residence) aren?t held in various forms of gold and silver, we?think your portfolio is at risk. Here?s why. Words: 625
15. Egon von Greyerz: Once Gold Reacts to Global Money Printing Binge It Will Go Exponential
We are all focused on the short-term and that?s natural, but let?s step back and look at the longer-term picture?We know the debt levels are too high today?but, because less than 1% of world financial assets are in gold, we have yet to really see the gold market react to the massive global money printing binge of the last 10 years. Once the gold market starts reacting to all of this, that?s when gold is going to go exponential. It doesn?t matter whether investors are buying gold at $1,600 or $1,800, it?s irrelevant in the long-run. What?s important is they are invested in physical gold in order to preserve their wealth. [Let me explain why.]
16. A Message to Newly Minted (or Potential) Gold Bugs
I was taught years ago that ?gold is not about price? gold is about value.? Be measured, be balanced and don?t make more of it than it is. Gold is just a tool, an anchor to sound money; to value.? [Let me explain.] Words: 1120
17. Richard Russell: The Last Currency Standing Will Be Gold
Inflation is the central banks? method of avoiding the pain of austerity. Inflation is the current economic narcotic that is used by modern nations. It?s the old ?beggar thy neighbor? system, and it will ultimately result either in all out hyperinflation and a collapse of the fiat currency system or a corrective deflationary crash. Either way, the last currency standing will be gold.
18. Fiat Money: Exactly What Is It? Why Is It Such A Scourge?
Considering the fact that you can fool some of the people some of the time but you cannot fool all of the people all of the time, is it any wonder millions, both through the Tea Party demonstrations and now the Occupy Wall Street Movement across the country and elsewhere around the world, are protesting the abysmal scourge that fiat currency has brought upon us as a result of that fateful day back on July 25th, 1965. To appreciate the significance of that historic day we must fully understand what fiat currency is and why such a concept is about to implode and this article does just that. Words: 1372
?Gold Bullion Or Cash? is a well produced, high quality, educational short video that uses music, images, facts and quotations to show how gold has been a proven store of value throughout history and an important diversification today.
20. Gold is Not an Investment ? Gold is Money ? and Here?s Why
<img src=?http://www.munknee.com/wp-content/plugins/bj-lazy-load/img/placeholder.gif? data-lazy-type=?image? data-lazy-src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? alt=?" data-lazy-src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? data-lazy-type=?image? /><noscript><img src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? alt=?" data-lazy-src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? data-lazy-type=?image? /><img src=?http://www.munknee.com/wp-content/plugins/bj-lazy-load/img/placeholder.gif? data-lazy-type=?image? data-lazy-src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? alt=?? /><noscript><img src=?http://www.munknee.com/wp-content/themes/Transcript/images/thumbs/archive.jpg? alt=?? />To fully understand gold?s role in an investment portfolio, we need to adopt a new mindset, a gold mindset which is, simply put: gold is not a bad investment, and gold is not a good investment. Gold is not an investment at all ? gold is money.
21. Buy Gold to Protect Your Wealth ? Not As Speculation! Here?s Why
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