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Sunday, May 22, 2011

7 Fascinating facts about gold – and why they matter

Before we get into why they matters, and actually influence gold prices globally, here are seven interesting facts about gold.

1. There are only 165,000 metric tonnes of gold in existence above ground.
Gold is rare. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure 20 metres in each direction. This includes all the gold in museums, all the gold in central bank vaults, all the gold jewelry in the world…and every other scrap of gold in existence.
2. The world’s first international gold currency was created in 564 BC.
King Croesus is credited with the issuing the first true gold coins Their uniform gold content allowed ‘Croesids’ to become widely recognised and traded. That said, they were made of electrum, a naturally occurring pale yellow alloy of gold and silver.
But the point here not their purity, but the fact that he took gold and turned it into money. And it has been money ever since.

3. Almost 41Kg of gold was used in the construction of the US Columbia space shuttle.
That’s a lot of gold! And it isn’t just the shuttles that contains gold. Many satellites carry gold-coated mylar sheets to protect them from solar heat. This reflective gold-coated plastic film protects essential equipment from intense solar radiation and heat.
Satellite microelectronics that relay data back to earth also depend on gold components to ensure reliable, corrosion-resistant and static-free performance.
In other words, gold has become a high-tech resource.
4. Within the global investment world, investments in gold make up less than 1% of the total.
Think about all the money that is invested around the world. As you might guess, the lion’s share is invested in stocks and bonds, globally. But you might be surprised to know that less than one percent of the world’s investments are in gold…whether that be in the form of ETFs or gold bullion.
Why is that number so low? Two reasons. First, professional investors are just not “into” gold the way they are with stocks and bonds. Second, there just isn’t that much gold available. For example, professionals couldn’t allocate 10% of the world’s investments in gold, because there isn’t enough gold out there.
5. The first recorded use of gold in dentistry dates back to 600 BC.
The Etruscans can take credit for the very first use of gold in dentistry. They used it to secure replacement teeth into their patients’ mouths. Gold is still used extensively in dentistry today, because of its bio-compatibility, malleability and corrosion resistance.
Gold is also in demand for the manufacture of certain medications, particularly in the treatment of arthritis.
6. An ounce of gold can be stretched for 50 miles.
Gold is the most malleable and ductile pure metal known. It is so pliable that it can be made into sewing thread. An ounce of gold can be stretched for over 50 miles. It can also be beaten flat into an incredibly thin sheet, just a few microns thick.
7. Approximately 60% of today’s gold becomes jewelry.
In East Asia, India and the Middle East, gold has powerful cultural meaning, accounting for approximately 70% of the world’s gold jewellery in 2009. In this respect, gold is unique. It is only because of our familiarity with gold and its various uses that we don’t find it odd that a single metal is used both as a store of money by central banks, and also as a metal for creating personal jewelry.
So why does all this matter?
Well, there are three points to consider with gold.
One, it is extremely rare. And it is becoming increasingly expensive to get it out of the ground.
Two, once it is above ground, there is competition for it. Much of it goes for use as jewelry, and an increasing amount is being used for high-tech applications and for medicine. That leaves only a limited supply for use as money, or for investment purposes.
Three, because of its limited supply, it will only take a relatively small increase in investment demand to send the price sky high. For example, if the world’s pension fund managers all decided they wanted to increase their gold holdings from under one percent to two or three percent, they would have a huge problem finding enough gold.
It is gold’s scarcity and the sensitivity of its price to even a small increase in global demand that makes it such a remarkable investment opportunity right now.
If you don’t hold any gold right now, I strongly recommend that you get started.

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