Gold: Unearthing the Mining of Money

Gold: Unearthing the Mining of Money

We work with gold exploration companies in Canada & Australia seeking production. Despite the current gold spot price, they feel unappreciated. We explore why.
gold bars and coins

Gold as old as time

Gold has been a symbol of wealth and prosperity for centuries, and its value has stood the test of time. Throughout history, civilizations have been fascinated with gold, and it has been used as a measure of wealth since ancient times. But why has gold held such significance and been considered the ultimate measure of wealth?

Despite prosperity and the recognition of wealth in other forms, gold continues to be part of the storage of wealth and maintenance of value despite uncertain times.

At Projects RH we are working with a number of gold exploration companies in Canada and Australia wanting to go into production. Their journey is not easy and despite the current gold spot price they believe they are not seeing the interest they deserve. Our driver for this article was to understand why globally such companies feel “unloved.”

Gold as a Measure of Wealth: A Historical Overview

  • Lydians and Early Currency (600 BC): The Lydians in Asia Minor were the first to use gold as currency. Their minted coins, made of a gold-silver mixture, revolutionized trade, and commerce.
  • Scarcity and Beauty: Gold’s rarity and aesthetic appeal made it desirable as a symbol of wealth. Its value was determined by weight and purity.
  • Durability and Malleability: Unlike other metals, gold is resistant to corrosion and can be molded into various shapes without losing value. It became ideal for preserving wealth across generations.
  • Sunshine Connection: Gold’s shine, associated with the sun, added to its allure and symbolic value.
  • Ancient Egypt (3000 BC): Egyptians considered gold divine and reserved it for royalty and religious ceremonies.
  • Greek and Roman Use: Greeks introduced gold coins for trade, while Romans established a gold standard, linking currency value to gold.
  • Medieval Europe: Gold remained the ultimate symbol of wealth. The Catholic Church amassed significant gold reserves.
  • Renaissance Exploration: European explorers discovered new gold sources in the Americas, boosting European wealth.
  • 19th Century Global Trade: Gold-backed currencies fueled economic competition. The United States adopted a gold standard in 1873.
  • 20th Century Stability: Despite wars and economic crises, gold remained a stable currency. The Bretton Woods Agreement (1944) solidified its role.
  • Contemporary Significance: Gold retains value, used in jewelry, electronics, and dentistry. Central banks hold gold reserves, and investors view it as a safe-haven asset.

Gold as a Measure of Wealth and Store of Value: A Historical Overview

  • Roman Influence: The Romans standardized gold coins, stabilizing their economy and enabling trade. Europe adopted gold coins during the Middle Ages.
  • Ancient China: Chinese civilization valued gold for jewelry, decoration, and trade. Gold was essential for merchants conducting business transactions.
  • Incas of South America: The Incas revered gold as the “sweat of the sun.” Elaborate gold jewelry and religious artifacts symbolized wealth and power.
  • European Exploration: European explorers encountered Indigenous cultures in Africa, Asia, and the Americas that also prized gold. The transatlantic slave trade emerged due to gold exploitation.
  • Colonial Era: European nations established colonies in Africa, Asia, and South America to control gold resources, reinforcing gold’s status as a measure of wealth.
  • Gold Rushes: Discoveries in California (1848) and Victoria, Australia (1851) sparked global gold rushes, increasing its value.
  • Contemporary Significance: Gold continues to hold its value as a measure of wealth and is considered a safe-haven investment during economic uncertainty. Its demand is driven by various factors such as jewelry, industrial uses, and investment purposes. In recent years, there has been a rise in the popularity of cryptocurrencies, which some argue could replace gold as a measure of wealth in the future.

Where can most of the world’s commercially recoverable gold be found?

The first thing to understand is that gold is a naturally occurring element, meaning it is found in the Earth’s crust and can be mined like any other mineral. However, not all gold deposits are created equal. The amount of gold in a particular area can vary, and factors such as geological processes and human activity can impact the accessibility and amount of commercially recoverable gold. So, where can one find the world’s largest deposits of gold? The answer lies in three main categories: countries, regions, and types of deposits.

Countries with the Most Gold Reserves:

According to the World Gold Council, as of 2020, the top five countries with the largest gold reserves are:

  1. United States – 8,133.5 tonnes
  2. Germany – 3,363.6 tonnes
  3. Italy – 2,451.8 tonnes
  4. France – 2,436.1 tonnes
  5. Russia – 2,299.9 tonnes

The emergence of mountains of gold

Some countries have substantial amounts of gold reserves due to their historical production and accumulation of gold over time.

The United States, for example, has a long history of gold mining dating back to the California Gold Rush in the mid-1800s. It also has large deposits in states like Nevada, Alaska, and South Dakota.

Germany and Italy have historically been major players in the European gold market, with Germany being the third-largest producer of gold in Europe, after Russia and France.

France also has a rich history of gold mining, with deposits in French Guiana still being actively mined today.

Russia, on the other hand, has a vast landmass and is known for its rich mineral resources, including gold. It is currently the world’s third-largest producer of gold after China and Australia.

Current top gold deposits: 

  1. The Witwatersrand Basin in South Africa is the world’s largest and most prolific gold-producing region, responsible for producing nearly 40% of all the gold ever mined.
  2. The Carlin Trend in Nevada, USA, is home to one of the largest gold mines in the world, the Goldstrike mine, which produces over 1 million ounces of gold per year.
  3. The Super Pit is in Australia is another major producer, with an annual output of over 600,000 ounces of gold.
  4. The Yanacocha mine in Peru is also a significant contributor to the country’s economy and produces over 1 million ounces of gold annually.
  5. The Muruntau mine in Uzbekistan is believed to be one of the largest open-pit gold mines in the world, producing over 2 million ounces of gold each year.

Types of Gold Deposits

The final factor in determining where most of the world’s commercially recoverable gold can be found lies in the types of deposits. There are several types of gold deposits, but the three main categories are:

  1. Placer Deposits (also known as alluvial) are the result of erosion and transport of gold from its original source and can be found in riverbeds and beaches. These types of deposits tend to contain large amounts of gold, but the gold is often dispersed.
  2. Lode Deposits (also porphyry deposits), on the other hand, are the primary source of most of the world’s commercially recoverable gold. These deposits are usually found in veins or mineralized zones within rock formations and can contain high concentrations of gold. Lode deposits are typically underground and require more advanced mining techniques to extract the gold.
  3. Hydrothermal Deposits are formed when hot fluids carrying mineral and metal ions rise through the Earth’s crust and deposit their contents in cracks and fissures. These types of deposits can contain large amounts of gold, but they are not as common as placer and lode deposits.

The Central Banks

 Central banks across the world hold significant amounts of gold as part of their portfolio, not just for diversification but also as a risk mitigation strategy. These central banks are bound by international agreements that mandate a certain level of gold reserves, with the International Monetary Fund (IMF) recommending a minimum threshold of 10%. This demonstrates the importance of gold not just as a precious metal, but also as a strategic reserve asset for countries.

The US Federal Reserve holds the most at 8,133.5 tons, followed by Germany and Italy. These three countries alone account for more than half of all central bank gold reserves.

From 2010 to 2018, central banks were actively buying gold, indicating its increasing value as a highly desirable asset. However, the trend of gold purchases has taken a setback in 2019 and 2020 with many central banks becoming net sellers of gold for the first time in a decade. But in 2023-24 returned as buyers given the global political uncertainty and the desire to hold less USD.

Despite these challenges, the value of gold remains significant and is expected to continue its rise, particularly in times of political and economic instability. As such, central banks should continue to closely monitor their gold reserves, ensuring that they maintain the minimum threshold and taking advantage of any opportunities to purchase gold in the future.

The Importance of Gold: A Reflection on its Role as the Critical Medium of Value and Exchange

Gold’s historical significance as a critical medium of value and exchange is multifaceted. Let’s explore its key attributes:

  • Durability and Reliability: Unlike paper currency, gold does not deteriorate or lose value over time. Its resistance to counterfeiting makes it a trustworthy form of currency.
  • Portability and Divisibility: Gold’s ease of transport allows for efficient transactions. Smaller quantities of gold can represent significant value, promoting trade.
  • Universal Acceptance: Recognized globally as a symbol of wealth. Accepted in most countries without currency conversion.
  • Intrinsic Value and Scarcity: Limited supply due to scarcity. Serves as a reliable store of wealth during economic uncertainty.
  • Stability: Gold’s price remains relatively steady over time. Governments and central banks hold gold reserves for stability.
  • Enduring Role: Despite digital currencies, gold remains valuable for individuals and nations.

Whether as currency, investment, or prestige symbol, gold continues to shape our economy and society. Gold’s allure persists, making it an enduring asset in our ever-evolving financial landscape.

What was the gold production in 2023 and who were the buyers?

Gold production is expected to reach a whopping 4,950 tonnes by the year 2023, owing to a significant increase in its demand worldwide.

Given the current economic uncertainties, investors of all kinds are turning towards gold as a reliable and safe investment option. Apart from central banks, individual investors and institutions are also expected to be significant buyers of gold in 2024.

Moreover, gold is also seeing a surge in demand from emerging markets such as China and India, which have a strong cultural affinity towards gold. As these economies continue to grow, so will their demand for gold.

The gold market sees an interesting trend as technology becomes a prominent buyer, especially in industries such as electronics, medical devices, and renewable energy technologies.

Non-traditional sources, such as cryptocurrencies and exchange-traded funds (ETFs), also show growing interest in gold.

Major players demand gold, driving up its price. It's a dependable hedge against inflation, popular among investors worldwide. Experts predict its upward trajectory is here to stay.

The Gold Rush: Why the Price of Gold is Soaring, but Gold Producing Companies Aren't Seeing the Benefits

So, why is it that even though the spot price of gold is soaring, the share price of listed gold-producing companies and exploration companies with good prospects do not seem to be reflecting this increase?

Most gold producers have diversified portfolios that include other metals like silver, copper, and zinc. Their profits aren't solely dependent on gold prices. They also use hedging strategies to protect against price fluctuations. This involves selling future production at a fixed price, ensuring a steady income regardless of market conditions.

Additionally, gold mining has high production costs and may not be profitable despite high prices. Creating new production takes time with no guarantee of sustained prices.

So, what does all this mean for investors? Is it a good time to invest in gold producing companies? The answer lies in understanding your investment goals and risk appetite. While investing in gold-producing companies may not necessarily guarantee high returns in the short term due to the factors mentioned above, it can still be a viable long-term investment option.

Furthermore, with the increasing demand for renewable energy sources and electric vehicles, there is expected to be an increase in demand for metals like copper and silver, which are often produced alongside gold. This could potentially benefit gold producing companies that have a diversified portfolio and are also involved in the production of other metals.

The Gold Rush: Exploring the Disconnect Between Spot Price and Share Price of Gold Exploration Companies

Despite the surge in gold's spot price, there seems to be a disconnect between this increase and the share price of listed gold exploration companies traded on major stock exchanges like the TSX, ASX, AIM, LSE, CSE, and Frankfurt Stock Exchange.

Gold exploration companies' share prices may not reflect the spot gold price due to their focus on exploring and developing mines rather than producing gold. Lack of revenue and time lag can make determining their value challenging for investors. Financing is crucial for these companies, but securing it can be difficult, even with high gold prices.

The cost of exploration and development for gold mines has increased. This can include expenses such as labor, equipment, and permits, which makes profit increases less significant for exploration companies despite an increase in spot price. This can lead investors to remain cautious and not drive up share prices.

This hesitation could be due to various reasons, such as market volatility, economic uncertainty, or a preference for investing in more established and profitable companies. Various external factors, such as political stability, regulatory changes, and global economic conditions, can also affect share prices. For example, if a country with a significant amount of gold reserves experiences political turmoil or implements stricter regulations for mining, it can negatively impact the share prices of gold exploration companies operating in that region.

COVID-19 has disrupted global supply chains and delays in exploration and development projects have also had an impact.

Physical gold and gold ETFs may be a more attractive investment option, diverting potential investments away from gold exploration companies and leading to lower share prices.

What is the medium and long-term outlook for the price of gold and producing gold companies?

Despite the history, market sentiment is impacted by the fact the price of gold has fluctuated dramatically over recent years. This leaves investors wondering what the future holds for this precious metal and the companies that produce it.

The Current State of the Gold Market

First, what is the current state of the gold market? In 2020, gold saw a significant increase in value due to the uncertainty caused by the COVID-19 pandemic. As investors turned to safe-haven assets, the price of gold reached an all-time high of $2,332.80 per ounce on 15 June 2024. Many may consider it has reached a peak for this cycle.

Factors Affecting Gold Prices

The price of gold is influenced by various factors, including economic conditions, global events, and market sentiment. The key factors are:

  1. Economic Conditions
  2. Interest Rates
  3. US Dollar / US Economy
  4. Geopolitical Events
  5. Political instability
  6. Supply and Demand

Medium-Term Outlook for Gold Prices

The medium-term outlook for gold prices is largely dependent on the outlook of the global economy and the US dollar. The global elections, inflation, interest rates, wars, military spending, fear of or actual recession and political tensions are factors pointing to ongoing price increases.

Long-Term Outlook for Gold Prices

The real driver is the desire to buy and hold. For some investors, the spot price is not critical as they hold gold for other portfolio reasons.

Impact on Producing Gold Companies

The performance of producing gold companies is closely tied to the price of gold. As the price of gold increases, these companies tend to see an increase in revenue and profitability. However, this also depends on their production costs and efficiency.

The Key is the Medium-Term – new investment.

In the medium-term, producing gold companies may face some challenges with rising production costs and potential supply chain disruptions due to the pandemic. However, in the long-term, if gold prices continue to rise faster than costs, these companies may see significant growth and increased investor interest.

Where to Invest in Gold Exploration and Production?

The top destinations for international gold investment are:

  1. Australia
  2. Canada
  3. United States
  4. South Africa
  5. Ghana
  6. Peru

When it comes to investing in gold exploration and production, there are several factors to consider choosing the right destination.

  1. Political Stability
  2. Mining Regulations
  3. Infrastructure
  4. Geological Prospects
  5. Labor Cost

In 2023 production is estimated to have been applied as:

1.Jewellery 46%

2.Central Banks and Institutions 23%

3.Coins, Medals and Tokens 9%

4.Electrical and electronics 5%

Is it Time to Invest in Gold?

Despite the majesty of gold, it is like most investments with the production and investment decisions being based on the medium-term outlook as new production is likely to take 5 years from decision to delivery. The current demand, if sustained, will see new investment in exploration and development for production. The early movers will take more risk but will be rewarded if they are right.

At Projects RH we are working with a number of exploration companies seeking to move into production. None wish to give too much of the company away and all feel they are currently undervalued. We are seeing interest from jewelry manufacturers to move upstream and not require a fully refined product.

Do you believe it is now time to invest in gold exploration and development companies?

By Paul Raftery, CEO of Projects RH. We are happy to receive questions of comments at  



Stronach, G.; “The world might be about to hit ‘peak gold’. Here’s what that means”, The Australian Business Review. 13 June 2024.

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