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Gold: The Most Precious of Metals

How gold’s unique physical properties make it a commodity unlike any other

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What’s so special about gold?• Everything from the time it is identified in the ground, to the mining process, to the purifcation

process and how it is used as an end-product make gold the most precious metal.

• This slide show will go into those various categories to show how that is.

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Contents1. Gold mining process

2. Gold purification

3. Uses of gold

4. Gold & the modern economy

5. Conclusion

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Gold mining process• Gold is concentrated in the earth’s crust all over the world

• There is approximately 0.004 grams of gold per ton of the earth’s crust

• Geologists study rock formations and types of rock by taking samples of the earth

• Gold normally found mixed in with many other elements, metals and mineral in rock called ore

• Based on samples, geologists are able to determine where the ore is as well as its composition

• Grade of the ore and size of the deposit dictate type of mining necessary to get to the ore and whether or not it will be cost-effective to mine it

• The higher the grade of the ore, the more cost-effective it will be to mine it

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Probable reserves vs. Proven reserves• Through samples, geologists determine if there are probable or proven reserves

• Probable reserves mean that gold exists, however, the type of mining necessary to get to the ore may not prove to be profitable.

• Proven reserves mean gold exists and engineers have decided that there is an economically viable way to mine the gold.

• These terms appear on annual reports of gold mining corporations and provide the company’s estimate as to the total gold that can be mined.

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Open-pit mining process• Open-pit gold mining is used when the ore is close to the surface of the earth.

• An open-pit mine is basically a massive hole in the ground with roads along the sides

• The extraction process involves the use of explosives and heavy machinery to haul the ore out of the huge mines with huge dump trucks.

• About 25% of the total cost of mining is spent on diesel fuel for trucks to haul ore.

• For each ton of ore hauled out of a mine, it might contain a tenth of an ounce of gold

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Underground mining• When gold is located far from surface of the earth, underground mining may be used

• A.k.a. underground hard rock mining utilizes long winding tunnels, shafts and branches

• Mining process involves setting off the explosives and hauling out the debris from explosion.

• Electricity is very important to underground mining.

• Electricity must be used to pump air into the mine so that the miners can breathe.

• Transportation of miners and hauling out the ore would also not be possible without electricity

• Wind farms and solar energy panels sometimes set up near excavation sites for a cost-effective power source

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Cyanide use in gold mining• Cyanide leaching uses a mild cyanide solution to dissolve and separate gold from ore

• Cyanide use for this process first developed in the late 19th century in Scotland

• Since 1970s it has been primary gold extraction method in commercial gold production

• Ore is pulverized until it reaches a sandy consistency then a cyanide solution is added

• The cyanide dissolves and separates the gold from the ore.

• Further processes of crushing and milling are used before the smelting process

• Smelting refines and converts liberated gold into gold bullion bars.

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Gold Purity• Since the first moment that humans were able to grasp the concept of possession, gold has

been sought after and therefore determining the purity of gold has been extremely important.

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The Fire Assay• A metallurgical assay is a composition analysis of ore and can be used to determine the purity

of gold

• The fire assay was first used by Babylonians over 3000 years ago - still one of the most accurate methods

• process involves taking a sample of melted impure gold from a larger portion of gold or ore

• Sample is weighed precisely and the amount recorded

• The sample along with a given quantity of pure silver is then wrapped in assay lead foil and placed in a furnace in a cupel, a special kind of disposable crucible

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The Fire Assay, continued• All non-precious metals are absorb into the cupel and the precious metal forms into a button

inside the cupel

• The button is removed and heated again in a porcelain crucible with nitric acid solution, which removes the silver.

• The result is a sample of 99.999% pure gold.

• The ozriginal weight of the impure sample is divided into the weight of new pure gold sample, giving the purity of the original sample

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Gold Density to Determine Purity• Gold is extremely dense material with a density of 19.3 g/cm3 or a specific gravity of 19.3

• It is 19.3 times heavier than water, meaning it sinks pretty fast in water.

• If it weren’t for density, gold may not have ever been discovered in streams and rivers, as its high density to water made it easy to spot on the river bottom.

• During the California gold rush prospectors compared how long it took for a piece of real gold and questionable gold to sink in water to determine if the gold was genuine.

• If the questionable piece of gold took a while to fall, they knew they had “fool’s gold”.

• The density of gold basically made it possible to eliminate fancy equipment to determine its purity. 12

Gold Karats& Millesimal Fineness• The karat system - 24 karat gold denotes pure gold

• Millesimal fineness - purity is expressed in parts per 1000.

• 24 Karat gold is equivalent to 990 millesimal fineness or higher.

• Pure gold is not usually used for jewelry because it is too soft

• Gold used in jewelry normally alloyed with other metals such as copper and silver to make it stronger.

• Highest purity for gold used in jewelry is normally 18 karat or 750 fineness.

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Industrial and Technical Uses of Gold• It is arguably the most useful metal because of its many unique properties

• It is extremely malleable, it can be pounded, hammered, melted down and cast in extremely detailed shapes.

• So malleable that one ounce can be drawn into 80 km of wire.

• A great conductor of electricity and heat

• It is basically indestructible

• It does not rust

• It can easily be alloyed with other metals14

Electronic Devices & Computers• Solid-state electronic devices use gold because it does not tarnish and conducts electricity well

• Cell phones, calculators, GPS systems, other smaller electronic devices.

• Gold is used in edge connectors to mount microprocessors and memory chips onto the motherboard of computers

• Each cell phone contains around 50 milligrams of gold = about USD cents 50 worth of gold.

• Over 1 billion cell phones produced a year results in a lot of lost gold

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Dentistry• Gold is one of the most widely used metals for dentistry because it does not rust and it can

look nice.

• Pure gold is too soft

• Normally gold alloys are used for crowns, fillings, bridges as well as caps.

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Healthcare• Sometimes used to treat arthritis with injections of a solution of sodium aurothiomalate or

aurothioglucose.

• Radioactive gold isotopes are implanted in parts of the body to treat certain cancers.

• Treats Lagophthalmos, in which the person is unable to close their eyes properly.

• Small bits of gold sewn into the eyelids to weigh them down

• Gold salts can be injected into patients to reduce swelling, bone damage as well as to relieve joint pain and stiffness.

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Aerospace• Gold is used in the circuitry of the space ships because of its dependability as a good

conductor of electricity.

• Gold coated polyester film is used throughout the space ship because it helps stabilize the temperature of the ship in space.

• Gold is also used as a lubricant between mechanical parts of the ships

• Under intense radiation pressure gold can serve as a lubricant between parts.

• Lubricants used on Earth are ineffective in space as radiation outside of Earth’s atmosphere evaporates them.

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Glass making• Gold used as a pigment to tint glass

• Also used as an insulant.

• Gold on the glass keeps the heat out by reflecting the radiation from the sun outward in summer

• In the winter gold reflects the internal heat inward

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Gold and the modern economy• Although gold shares some characteristics with other commodities, it certainly stands

out from the rest.

• According to the World Gold Council, “Gold is less exposed to swings in business cycles, typically exhibits lower volatility, and tends to be significantly more robust at times of financial duress.”

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Gold vs. Other Commodities• The laws of supply and demand, also known as the fundamental drivers, tend to affect

commodities heavily.

• Fundamental drivers exposed often and influenced by risks such as geopolitical issues, wars, disease, and weather

• These risks impact commodity prices heavily - most commodities are subject to some or all of these risks.

• Gold is not exposed to the same risks from the fundamental drivers, especially supply.

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Gold vs. Other Commodities Pg. 2• Gold can be reused, energy and agricultural commodities are usually one-and-done.

• the stocks of annual flows ratio is much higher for gold than other commodities.

• Gold production is geographically diversified, it can be mined anywhere in the world

• Recycling of previously used gold makes it much less susceptible to production shocks and shortages

• Because of these characteristics, the price of gold is primarily influenced by demand.

• Gold not exposed to business cycle as much as other metals, not used as much in the industrial and technological sectors

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Liquidity, depth, breadth of bullion mkt• The gold market is very liquid

• Also extremely large even when compared to not only other commodities but other currencies and debt markets.

• In 2010, it is estimated that global trading volumes were between $63 billion and $211 billion, larger than many sovereign debt markets.

• This gives you an idea of the scale of the gold market around the world.

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Gold as a Monetary Asset• Gold’s history as a standard of value in monetary systems has left a lasting legacy and

relevance in today’s international monetary system.

• Central banks still hold substantial international reserves of gold for national wealth preservation and as a hedge against economic instability.

• At times of economic and political uncertainty, gold preserves wealth as a safe haven.

• As the value of currencies fall, gold demand increases and the price increases with it, preserving wealth for when economic volatility subsides.

• It is a hedge against rising inflation 24

Gold preserves its purchasing power• 40 years ago one probably could have bought nice suit or an

ounce of gold for USD 35.

• Today 35 dollars would not buy a suit, but an ounce of gold bought 40 years ago, if sold today, could probably buy a pretty nice suit.

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