Gemsasia Investments

Gold fascinated the people already in ancient times and was valued because of its rarity, longevity and beauty.  Archeologists’ research brought to light that gold was mined in Egypt already 2000 BC. In the 6th century King Croesus let manufacture the first gold coins. The Romans produced their first gold coins 50 years BC.

Gold is a noble metal, which seldom exists in its pure form, but mainly in form of alloys. It has a high density and can not get affected through air, moisture, heat and the most solvents. Gold is well processable and decrees over astonishingly high conductivity for electricity and heat. These characteristics make that yellow noble metal to an important raw material for the industry. The most important application field is the electrical industry. Another important field in which gold is used since more than 3,000 years is the prosthetic dentistry. By far the most important industry though – in which gold is processed – is the jewelry-industry with 75 % market share.

Gold is mined on all continents except for the Antarctic where mining is generally prohibited. South Africa is the main producer with 16 % market share. Other incidences are in the U.S.A. (above all Nevada) with 12 %, in Australia with 11 %, Russia with 6.2 % and Canada with 5.8 % market share. The mining-production of gold was at 2593 tons in the year 2003. From the recycling-process came additional 943 tons. The total supply resulted therefore 3,536 tons. Gold is practically everlasting and is seen again and again in one form or another. The costs for gold-mining are increasing, because it is necessary to dig deeper and deeper to discover new gold-deposits. The basis for the gold price is the fact of exploitation-costs. Older mines which display particularly high costs need to be closed as soon as the gold-price decreases. Thereby again the outputs are decreasing, too.  An amount of 15 % of the yearly production stores in vaults in form of gold coins and gold bars for capital investment-purposes. There is a demand-overhang for gold since years. Increasingly this gap is closed through the disposal of central bank-gold (in the U.S.A.: gold of The Fed); a balance of supply and demand would be unthinkable without the central banks’ vast gold stocks.

In the year 1792 the congress of the United States decided to cover the spent banknotes through gold and silver. With that, gold got a formal role as currency.  Every citizen could switch his banknotes with gold and silver at the central bank.  In 1971 president Richard Nixon abolished the gold-standard. The collapse of Brett Wood’s agreement was the consequence. Since then, the prices of gold as well as the exchange rates are moving – at least theoretically – independent of each other. For that reason the central banks’ still existing substantial gold reserves do not have importance anymore. At best they give a (certainly inexplicable) feeling of security to the citizen. 30,000 tons of gold are stored globally in the central banks’ vaults. The Federal Reserve Bank (The Fed) holds the largest share (ca. 26 %), followed from the Deutsche Bundesbank (ca. 11 %) and the Banque de France (ca. 9.7 %).  If you underlay a gold rate of 400 USD per ounce, the U.S.A. has gold available worth 104 billion USD. The gold’s little importance however is becoming more distinct when you consider that alone the new borrowings for the next year are already 4 times that amount.

The global gold supplies are currently higher than ever in world’s history. Gold is practically indestructible – as against other consumed raw materials. The price for one troy ounce gold surmounted the mark of 1,000 USD in September 2009 and marked so the highest mark in gold’s history. The price of gold more than tripled in the last 4 years. The worldwide supplies still resting in mines are guessed to amount 100,000 tons, whereby about the half of it is supposed in South Africa. Gold correlates mostly negative to the U.S. Dollar: If the Dollar falls, the price of gold often increases. Still, gold is a popular protection – because of its uniqueness and its value – against asset downfall in times of inflation or war.

Most important stock exchange centers: New York Mercantile Exchange Comex Division (recently rebranded CME Globex, after a merger between Chicago Mercantile Exchange and NYMEX)                                       Chicago Board of Trade (part of CME)                                        Tokyo Commodity Exchange.

Price quotation: U.S. Dollars and Cents per troy ounce (oz.)

Contract-cycles: Trading is conducted for delivery 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 60-month period beginning with the current month.

Contract-size: 100 oz.