Friday, April 13, 2012

Gold: Basic Facts For The 99%

Some time ago, I learned that, even though I am a big fan of gold, that I knew very few basic facts about gold!  The purpose of this article is to put into one nice little place basic information on gold (and provide links) for the smaller investor.

The density of gold is 19.30 grams / cubic centimeter (19.3 times denser than water).  Densities and brief comments on other metals will be given further below.

Gold is one of the least reactive metals, very few chemicals attack it (from wikipedia):

-- potassium and sodium cyanide (some gold mining uses cyanide to extract gold)
-- mercury (which makes an amalgam with gold)
-- aqua regia (25% nitric acid, 75% hydrochloric acid)

***

Gold Holdings and Reserves

There are approximately 165,000 metric tonnes of gold held around the world (that works out to about 5.3 billion troy ounces -- information on weights and measures will be discussed below).  This figure is accepted by almost all serious gold analysts.  Of that total:

52% is held in jewelry form
18% is held by central banks (or governments)
16% is held in investment form (bars and coins)
12% is held by industry
2% is unaccounted for

The total official gold holdings (December 2010) are about 30,808 metric tonnes.  The top 10 countries/organizations hold the below amounts (tonnes):

Country/Organization:                                          Amount

United States of America
8,133.5
Federal Republic of Germany
3,396.3
International Monetary Fund
2,814.0
Italian Republic
2,451.8
French Republic
2,435.4
People's Republic of China
1,054.1
Swiss Confederation
1,040.1
Islamic Republic of Iran
907
Russian Federation
883.2
State of Japan
765.2

China reportedly bought approximately 40 tonnes recently, and is also believed to be accumulating gold more quickly than they report (Saudi Arabia may also have more gold than they state: 322.9 tonnes).

ETFs and similar hold approximately 2159 tonnes.

There are about 50,000 tonnes "in-ground" verified resources by publicly traded gold mining companies.

The Federal Reserve Bank of New York (FRBNY) holds gold as well.  A small amount of US gold is held there, but not much.  The Federal Reserve holds gold for other countries, who have decided to store it there for security and convenience (about 98% of the gold at the FRBNY is owned by foreign central banks).  The FRBNY holds about 7000 tonnes.  Note that the Federal Reserve (as a whole) owns no (or very little) gold, as the gold was taken from them in 1933, the Fed owns gold certificates worth (nominal) about $11 billion (at $42.22 / oz), these certificates are not redeemable into gold nor are they transferable.

The gold owned by the USA is mostly held at Ft. Knox and West Point, with smaller amounts held at US Mints in Denver and San Francisco (with a very small holding at the FRBNY).

***

Weights and Measurements Pertaining to Gold

Gold is typically measured in troy ounces.  1 troy ounce weighs about 1.097 avoirdupois ounces (the ones we normally use).  1 troy ounce also weighs 31.103 grams.

A metric tonne (or, just "tonne") weighs 1000 kg, or just a bit over 2200 lbs.  1 tonne of gold = 32,150.7 troy ounces.  Above gold holdings and reserves are listed by tonnes held.

A kilo of gold = 32.151 troy ounces

Gold purity is typically measured in "karats" (jewelry mostly) or fineness.  24 kt gold is pure gold, 999 (999 parts / 1000) fine is considered to be pure gold as well.  Gold coins are usually found in 22 kt (916.7 fine) and 24 kt (999 fine).  Older US coins that circulated until 1933 are 900 fine.  Gold is a very soft metal, and so is often alloyed with other metals to make it harder.

***

Specifications of Popular Gold Bullion Coins

gold
total
total
weight
weight
weight
O.D.
width
gold
Coin
(troy oz)
(troy oz)
(grams)
(mm)
(mm)
fine
1 oz American Gold Eagle
1.000
1.0909
33.930
32.70
2.87
916.7
1/2 oz Eagle
0.500
0.5454
16.964
27.70
2.15
916.7
1/4 oz Eagle
0.250
0.2727
8.482
22.00
1.78
916.7
1/10 oz Eagle
0.100
0.1091
3.933
16.50
1.26
916.7
1 oz Krugerrand
1.000
1.0909
33.930
32.60
2.84
916.7
1 oz American Buffalo
1.0000
1.0001
31.108
32.70
2.95
999.9
1 oz Canadian Maple
1.0000
1.0000
31.103
30.00
2.80
999.9
1 oz Australian Kangaroo
1.0000
1.0000
31.103
32.1
2.65
999.9
1 oz Chinese Panda
1.0000
1.0000
31.103
32.05
2.70
999


The American Gold Eagle is 91.67% gold, 5.33% copper and 3.00% silver

The Krugerrand is 91.67% gold and 8.33% copper.  The Eagle is NOT exactly the same ("clone") as is commonly believed.

***

Fake Gold Bars and Coins

There have been two reports (with pictures or videos) of gold bars "salted" with tungsten, one at Heraeus (Germany) and one more recently in the UK.  Both were bars with perhaps 30% tungsten inside.  These bars would weigh slightly less pure gold.  Tungsten is used as its density is 19.25, less than 1% different than gold.

Bron Suchecki of the Perth Mint has recently written (http://goldchat.blogspot.com/2012/04/tungsten-fake-gold-bars.html) that it is likely that there are very few fake gold bars in circulation.  Many circulating gold bars are melted down and/or recycled, and this means that if there were LOTS of these salted bars out there, more would have been found.

There have been NO reports of tungsten filled gold bullion coins.  Tungsten is very hard and has a very high melting point, so it is VERY hard to work with.  It is thought that tungsten salted gold coins will not be a big threat for at least a little while.

There ARE fake numismatic (collectible) gold and silver coins.  They are typically made in China, they make them out of gold and silver, but they are counterfeits of rare collectible coins.

Below are various metals and their densities, the below are of interest because they could conceivably be used to counterfeit gold and silver:


Gold (Au) 19.30
Tungsten (W) 19.25
Platinum (Pt) 21.45 least reactive metal
Iridium (Ir) 22.56 found in meteorites and the "K-T" Layer
Osmium (Os) 22.59 densest metal
Lead (Pb) 11.34 does not "hold a strike"
Silver (Ag) 10.49
Palladium (Pd) 12.02 Canada produces palladium coins
Rhodium (Rh) 12.41 buy at rhodiumcoin.com and kitco.com

The second fake bar was detected by a scrap dealer who weighed a 1 kg bar and saw that was 2 grams too light.  Future counterfeiters could add a tiny amount or iridium (heavier than gold) to make the weight exactly right...  The "K-T" Layer mentioned above is a thin layer of rock from about 60,000,000 years ago that is found worldwide, it is believed to have been deposited by the impact of the large meteorite that struck Yucatan at that time.

Lead is an obvious candidate for faking silver, but lead does not "hold a strike", because lead is so soft.  Lead is so much lighter than gold that lead counterfeits would be spotted very quickly.

***

Gold Information Sources and Commentary

Much of the information came from wikipedia.  Here are some specific places I got information for this article:


Near real time gold price information is available in a lot of places, but the two that I use the most are:

kitco.com

and

24hgold.com

I read about gold at the above two (they aggregate gold articles as well) and the below:

jsmineset.com
jessescrossroadscafe.blogspot.com

and of course:

fofoa.blogspot.com

***

Update!

One of my highly valued readers suggested that I pass along other basic information as below:

Where do you buy gold?

1) At the coin shop (that's where I buy mine)

2) Online there are lots of people selling gold:

  -- tulving.com
  -- apmex.com
  -- many others, the above two are well known.

Help in Spotting Counterfeit Coins

http://www.goldcoinbalance.com  <-- a balance that is cheaper than the Fysch

 http://www.wizardcoinsupply.com/products/scales  <-- for calipers and scales

5 comments:

  1. I don't get it. Where's the nutritional info? /deadpan

    ReplyDelete
    Replies
    1. now that is funny, pmb !
      worth tracking down (-;

      best you dont read Bix Weirs latest, Robert.

      http://www.roadtoroota.com/public/181.cfm

      Delete
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