Due to the coronavirus epidemic, exchanges are in a fever. However, the price of gold has grown significantly since December 2019 and is now at a new record level. This is not surprising, because in turbulent times, gold has always been considered the best investment. But still, why is it so valued?
How does gold come about?
During the Big Bang, hydrogen and helium (with one and two protons in the core) arose from which the first stars were formed. Many other elements form inside stars, because they are giant thermonuclear reactors where atoms of light elements fuse to form heavy elements. But for elements heavier than iron (26 protons), their energy is not enough. They occur during supernova explosions or when neutron stars merge.
The latter is necessary for the formation of gold (79 protons). In 2017, this process was first confirmed by scientists. After the laser-interferometric gravitational-wave observatory (LIGO) recorded gravitational waves from the merging of neutron stars, several optical telescopes were able to measure the power of the resulting kilonova, which has a lower brightness than a supernova. This astronomical event happened 130 million years ago.
The elements formed during the merger of neutron stars absorb part of the light, as evidenced by dark lines in the light spectrum on the monitors of measuring instruments. The measured absorption spectra indicate the presence of elements. In 2019, the European Southern Observatory (ESO) was able to identify strontium, but scientists assume that this is how gold also originated.
Where does gold come from on Earth?
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According to our current understanding, planets arise from thickened dust clouds. Dust cloud elements originate from merging stars and from supernovae. That is, the gold that is now on Earth did not originate here. Therefore, it cannot be simply made, as the medieval alchemists tried to do.
It can be assumed that due to the high density, gold in the liquid state sank into the core of the Earth. But in the course of volcanic activity, it rises to the surface again, therefore, gold deposits are often found in areas with increased volcanic activity. Possible sources of gold can also be meteorites, which bring raw materials to the Earth's surface.
How is gold mined?
Although large nuggets are found from time to time, most of the gold is contained within the rock as small particles. The largest gold deposits are located in South Africa, Australia, Russia, China and the United States. In industrial mining, rock in mines is blasted and crushed. Then, gold is extracted from it using a solution of cyanide or mercury and purified. This creates toxic waste - hydrocyanic acid, cyanide dust and mercury residues, which leads to great environmental problems.
The amount of gold in circulation now is estimated at about 190 thousand tons, most of which is jewelry. Gold is also found in dentures and electronic devices. Gold can be smelted and reused as much as necessary.
Why is gold so valuable?
Gold is a stable element found in nature, mostly in pure form. It is not radioactive, does not decompose or rust. But our concept of value, according to which gold is superior to other metals with similar properties, has more historical roots.
The spectacular color and comparative ease of processing made gold attractive to our ancestors. Last but not least, the desire to possess this precious metal and the gold rush in the 19th century secured a mythical veil for gold. And the labor intensity of gold mining plays an important role in its high cost.
Former militia fighters work in gold mining in the city of Ica Barrier.
Although modern currencies are no longer tied directly to gold reserves, central banks continue to hold large gold reserves. Private investors also view gold as a reliable means of protecting savings from crises. True, at the same time you need to put up with the fact that the profit received from such investments is negligible. “But as a real asset, gold can be used to preserve the value of savings in the long term,” says Josef Zechner of the Vienna University of Economics.
How is the price of gold formed?
Like any price in the market, the price of gold is regulated by supply and demand. The supply is driven by gold mining, where development continues to deepen and therefore the industry faces significant socio-economic challenges. The proposal also arises from the sale of gold reserves and the recycling of gold items. “The supply is also influenced by the small number of gold deposits,” says Tsechner.
Demand arises primarily from the jewelry industry. In addition, there is a growing interest in investing in gold during crises. Despite price fluctuations, experts believe the value of gold is quite stable. This means that one gram of gold at today's prices can buy the same amount of goods as 100 or even 1000 years ago.
In addition, with the growth of people's well-being, the demand for gold increases as a status symbol and a means of investing capital. A fifth of all global gold turnover today is in India.
What does gold matter?
Besides the fact that gold was used for minting coins, already in ancient times it served to demonstrate wealth and power. From the Egyptian pharaohs to modern jewelry lovers, it has never lost its magical appeal. The Magi brought the baby Christ gold as a gift, the monarchs wore golden crowns, the European colonial powers were interested in the possession of gold deposits in Africa.
In addition to value, gold in our society represents luxury, high quality and stability. This can be seen in expressions such as "black gold", "golden ratio" and "gold standard". Salt, once so prized that it was used as a means of payment and contributed to the prosperity of cities such as Salzburg and Hallstatt, was called "white gold."
Friederike Schlumm