Dynamics of gold as precious metal


By Ebenezer ASHLEY (PhD.) & Nana Ekua AGYEPONG-BOATENG

One of the metals discovered in human history with sparkle, popularity, nobility and immense value is gold. It is often argued, the glittering pace of gold is unequalled in the world of precious metals.

This precious metal is believed to have elegance; extremely soft in its pure form and corrosion resistant. Due to its softness, gold is often hardened by adding other metals including silver, copper, zinc, palladium and nickel. Experts described this process of combining metals as an alloy.

The corrosion resistance of gold is improved through an alloy; and the higher the proportion of other metals, the harder the gold alloy becomes. However, this process reduces the original colour of gold while the additional metal tints gold to different shades (Bullion By Post, 2021).

Gold comes in varieties. These include yellow gold, pure gold, gold layers, coloured gold, rolled gold, gold-filled, electroplated gold, vermeil gold and gold plating (Hustedt Jewelers, 2021). Yellow gold compares very strongly with pure gold; the former is derived from the mixture of pure gold with zinc and silver. This combination or alloy makes yellow gold stronger and helps it to maintain golden colour, but not as shiny as pure gold.

Yellow gold alloy is ranked by the carat system. This system helps to measure the ratio of pure gold to other metals. Highly-rated yellow gold suggests the presence of more gold, which makes it more elegant-looking, fragile and expensive.

Unlike jewelleries made from pure gold, jewelleries manufactured with yellow gold are not easily bent out of shape; they are scratch-resistant and more durable. The foregoing qualities render yellow gold jewelleries wearable on daily basis, implying they render yellow gold ideal for manufacturing watches, engagement and wedding rings; and timeless jewelleries that could be bequeathed to generations. Jewelleries manufactured with yellow gold alloy are comparatively more affordable because they are not manufactured with 100% gold.

Pure gold is noted for its unique features. It is fragile in nature, has rich yellow colour and made up of 100% gold metal, which is the reason why it is sometimes called 24-carat gold. Pure gold has dominated manufacturing of royal jewellery throughout the ages. It is possible for one to scratch pure gold with the fingernail or bend it out of shape with the fingers.

Due to its fragility, pure gold, in contemporary periods, is reserved for plating or manufacturing of gold decorative sheets, known as gold leaf. These decorative sheets tend to be very useful in the manufacturing of indulgent alcoholic drinks or show-stopping desserts (Hustedt Jewelers, 2021).

Varied gold layering techniques allow jewellery manufacturers to enhance the brilliance and elegance of gold ornaments; the elegance attracts the attention of jewellery lovers to the “neglect” of the price tags. The foregoing implies gold layers inform the decision of jewellery consumers to purchase jewelleries more than the prices affixed on them.

Coloured gold or yellow gold alloy is often used in gold layering techniques. This increases their resistance to surface scratches and bending. Since gold layering techniques do not employ pure gold in the manufacturing process, the end products are relatively less costly and affordable (Hustedt Jewelers, 2021).

Coloured gold is not too distinct from yellow gold. However, in the case of coloured gold, metals other than silver and zinc are mixed with pure gold. The final colour of coloured gold is influenced by the different metals that are combined with pure gold. The most common types of coloured gold are rose gold and white gold. Hustedt Jewelers (2021) described rose gold as a coloured gold alloy with unique rosy pink hue. It is manufactured when pure gold is blended with copper.

World Gold Council (2021a) described pink gold, the synonym for rose gold (Peridot, n.d.), as an alloy that is derived from the mixture of more copper with pure gold in the manufacturing process.

The appearance of white gold is pale silvery, which is similar to sterling silver or platinum. White gold is derived from pure gold and white metal. Examples of white metal combined with pure gold in manufacturing white gold include platinum, manganese, nickel or palladium (Hustedt Jewelers, 2021).

However, World Gold Council (2021a) identified nickel is the other metal that is often included in the alloy composition of white gold. The foregoing notwithstanding, it is possible for silver, copper or zinc to be added in the alloy composition. The blend of pure gold with zinc, copper and silver helps in the creation of green gold, a less common coloured gold alloy.

A more common composition of green gold alloy is pure gold blended with silver and zinc (Hustedt Jewelers, 2021; World Gold Council, 2021). Akin to yellow gold, coloured gold is ranked based on the carat system. The quality mark on a piece of jewellery derived from coloured gold indicates the percentage of pure gold contained therein (Hustedt Jewelers, 2021).

Rolled gold is another form of gold layering technique, common in the manufacturing of watches. Generally, rolled gold is created with thin sheets of gold blend secured to a brass core. It has lower gold content and similar to gold filling, albeit rolled gold only requires half of the gold mixture by weight. Jewelers’ brass, a mixture of zinc and copper covered in two or three layers of gold blend is normally used in the manufacture of gold-filled jewelleries.

Stick of the gold blend layers to the jewelers’ brass is facilitated by heat and pressure. Gold-filled jewelleries could come in the forms of double-clad or single-clad. Double-clad gold-filled jewelleries have gold finish all over the ornaments whereas single-clad gold-filled jewelleries have gold finish on the side that shows out. Mostly, 14- or 12-carat gold are used in manufacturing gold-filled jewelleries. Information on the hallmark of a piece of gold-filled jewellery must include its weight, which is typically 5% gold blend (Hustedt Jewelers, 2021).

Electroplated gold-layering is modern technique applied to the manufacture of jewels. This contemporary gold-layering technique relies on electrical conductors to charge the base metal; and this process is called electroplating. The charged base metal is subsequently submerged into a solution of ions that is positively charged; and the latter become attracted to the negative charge of the base metal.

A gold layer is formed when the positively charged ions become attached to the base metal. Electroplated gold jewels are relatively cheaper, though this gold-layering technique increases the speed of manufacturing or production of jewels. The gold blend layer created by this technique is believed to be very durable (Hustedt Jewelers, 2021; World Gold Council, 2021).

Vermeil is another form of gold with distinct features. It is manufactured entirely with precious metals and very affordable. Vermeil gold jewelleries are derived from the application of gold alloy layer over sterling silver base. In the United States of America (USA), the gold layer of vermeil gold jewels is stronger and thicker than most gold layers, owing to an existing law. The minerals law of the United States stresses the need for vermeil to contain at least two microns of gold mixture.

Hustedt Jewelers (2021) noted, only gold-filled jewelleries have superior gold content to vermeil gold jewelleries. The premium materials used in the manufacture of vermeil gold jewelleries tend to reflect on their final prices. Comparatively, prices of jewels made from vermeil gold are cheaper than those of pure gold, but higher than prices of jewels manufactured with other gold layering techniques.

In the gold processing and selling markets, the terms gold-dipped jewellery and gold-plating jewellery are used interchangeably to explain a common concept. That is, jewelleries derived from the application of gold mixture to brass or another base metal. The volume of gold contained in gold-plated jewelleries is less than either rolled gold jewelleries or gold-filled jewelleries.

The gold content of gold-plated jewellery normally measures up to one-tenth of the gold blend by weight of gold-filled jewellery. The popularity of gold-plated jewelleries stems from their affordability. However, the quality of gold-plated jewelleries extends to a certain period; the coating on the gold mixture is likely to wear off over time (Hustedt Jewelers, 2021).

As noted earlier, the carat system helps to denote the proportion of pure gold to other metals in gold alloys. Stated differently, carat is a unit which facilitates measurement of gold purity or content in an alloy. A higher caratage connotes purer gold, vice versa (World Gold Council, 2021). Fourteen-carat remains the dominant yellow gold alloy in the United States (Hustedt Jewelers, 2021), inferring 58.3% pure gold ((14 ÷ 24) x 100% = 0.58333 x 100% = 58.333 = 58.3%) and 41.7% (100% – 58.3% = 41.7%) other metals.


One of the precious metals found in the earth’s crust whose economic value dates back to several centuries and remains relevant in our contemporary socio-economic settings is gold. This precious metal has a face-centred cubic crystal structure (Hoffmann, n.d.); and described by some other experts including Davis (n.d.) as one of the pioneer metals known to human kind with its origin predated to 3400 BCE by the Egyptians. Hoffmann (n.d.) argued, history of gold discoveries that were identified earliest and realistically documented was dated about 6,000 years ago.

These earliest gold finds were believed to have occurred in Egypt and Mesopotamia c. 4000 BC. By 3000 BC popularity of gold had grown in leaps and bounds; gold rings were accepted as medium of payment. Wall reliefs in Egypt dated from 2300 BC depict various stages of mechanical working and refining of gold. By 2000 BC, ancient technological process had been developed to ensure salt was effectively used to extract silver from gold-silver alloys.

In addition to alluvial deposits mining, vein or layer deposits mining later became apparent. However, this mining process demanded considerable amounts of manpower as crushing was needed prior to the extraction of gold. The amalgamation technique was developed during the 10th century. This technique facilitated blending with mercury to increase gold recovery rate.

The Bulgarian shores of the Black Sea near the present city of Varna were source of major gold discovery in earliest periods. Similarly, gold was discovered in the Iberian Peninsula, Gaul, India and Ireland. However, Egypt remained the epi-centre of gold manufacturing prior to the era of Christ (Hoffmann, n.d.).

Davis (n.d.) and Hoffmann (n.d.) noted, the elemental abbreviation of gold is Au. This is derived from the Latin term, “aurum,” which means “shining dawn.” The atomic number of gold is 79. The foregoing affirms the universal acclamation and recognition of gold as very potent and precious metal capable of influencing lives of people on planet earth.

The authors described gold as precious metal that consistently symbolises beauty, value and wealth; and that, beauty and value are two significant images derived from two distinguished properties of gold. These include colour and chemical stability of gold.

Hoffmann (n.d.) revealed, mining of gold in the olden days was dominated by alluvial placers; craftsmen found and picked particles of elemental gold found in streams and river sands. To concentrate the gold, lighter river sands were washed away with water to leave behind the dense gold particles. These gold particles were melted for further concentration and other uses.

In gold measurements, a carat represents 1/24th part of the entire gold. This is equivalent to 4.167% ((1 ÷ 24) x 100% = 0.41666 x 100% = 4.1666 = 4.167%). The purity of gold alloy is expressed as the number of parts of the gold it contains. To illustrate, 18-carat gold refers to jewellery that contains 18 parts gold and 6 parts other blended metals.

Measurement of relative proportion of gold in alloys was believed to have originated with a medieval coin known as “mark.” However, it was difficult to use pure gold in the production of mark due to its softness. It was therefore imperative for gold to be blended with other metals to create a hard blend.

The weight of a mark was 24 carats; this carat was the same as the one used in weighing gemstones and was theoretically believed to be equal to the weight of the seed of the Coral tree. The purity of gold coin alloy was expressed as actual contribution of gold to the weight of the carat (Britannica, n.d.).

The Royal Mint (2020) shared some revealing facts about gold and its discovery in ancient times. It noted, in 560 BC, the Lydians located in Asia Minor learnt how to refine gold and other metals. During this period, the maiden bi-metallic coinage, made up of silver and gold, was manufactured. These coins were called croesids; they were named after king of the Lydians, King Croesus. The gold content in the production of these bi-metallic coins was very consistent. As a result, croesids became an acceptable form of currency and were traded with confidence.

The earliest known map was dated from 2600 BC. The map depicted the plan of a gold mine; the first gold jewellery was seen during this period; and Egyptian hieroglyphs described gold as being more in terms of quantity than dirt. Gold was first smelted in ancient Egypt in 3600 BC. However, earlier in 600 BC, the first gold coins comprising crude blend of gold and silver were strut in Lydia in Asia Minor (The Royal Mint, 2020).

Egyptians were believed to have often accumulated significant quantities of gold during the reigns of Pharaohs with the sole aim of covering the coffin of deceased Pharaoh. A classic example is the containment of gold equivalent to 112 kilograms or 247 pounds in the coffin of King Tutankhamun (popularly called, King Tut), following his demise and burial in Egypt in 1223 (Davis, n.d.; The Royal Mint, 2020).

In the ancient Chinese state of Chu, Ying Yuan was circulated as a gold square coin in 500 AD; and eight hundred (800) years later, the Goldsmith’s Hall in London hosted establishment of the first hallmarking in 1300. Between 1370 and 1420, mining activities in Europe became very prevalent to such a height where mines were almost empty.

This fifty-year period (1370 through 1420) became known as The Great Bullion Famine. In 1717, the gold standard was set by the United Kingdom to link currency to gold at a fixed rate; and between 1870 and 1900, the world, with the exception of China, adopted the gold standard (The Royal Mint, 2020).

Prior in 1816, the world witnessed dramatic changes to the entire financial system and how money was produced; and this dramatic transformation was attributed to the industrial revolution.

During this period, inventions by Matthew Boulton and James Watt introduced seamlessness and more efficiency to the money production process. These renowned inventors introduced the steam-powered coining presses machine to facilitate money production (The Royal Mint, 2020).

Eastern slopes of the Ural Mountains in Russia and Brazil were major sources significant gold finds during the early to mid-eighteenth century. In 1840, Siberia was found to have large alluvial deposits (Hoffmann, n.d.). Eight years later, James W. Marshall discovered gold at Sutter’s Mill in Coloma, California (The Royal Mint, 2020).

This discovery attracted many people from far and near to California in 1848. To wit, the 1848 gold discovery formed the basis of mass exodus of people to California during the period. This mass exodus was known as the California Gold Rush (Davis, n.d.; Dowd, 2016).

The number of slaves employed in various gold mines in Spain by AD100 was estimated at forty thousand (40,000). However, demand for gold during the period was believed to have been negatively impacted by the introduction of Christianity. This notwithstanding, gold demand began to surge during the 10th century (Hoffmann, n.d.)

Prior to independence, Ghana was called the Gold Coast. Allen (1958) revealed the maiden authentic record of gold mined from the Gold Coast dates from 1471 when the Portuguese commenced trading in gold dust along the banks of River Pra. Gold trading in the 15th and 16th centuries were believed to be brisk. However, the trade took a nose-dive following the introduction of slave trade in the 18th century. Effective gold trading was not recorded until slave trade was abolished in the 19th century.

Junner (as cited in Allen, 1958) presented estimates for gold exported by sea from the Gold Coast from 1471 to 1880. As noted earlier, 1471 was when official figures for gold exports first became available. The statistics revealed from 1471 to 1750, about 40,000 ounces of gold were exported annually. These translated into 11.2 million ounces (40,000 x 280 years = 11,200,000 ounces) over the 280-year period. Further, approximately 10,000 ounces were exported annually from 1751 through 1800, implying total exports of 500,000 ounces (10,000 x 50 years = 500,000 ounces) over the 50-year period.

Similarly, 40,000 ounces of gold were believed to have been exported each year from 1801 to 1850, inferring 2 million ounces (40,000 x 50 years = 2,000,000 ounces) were exported over another 50-year period. Finally, 25,000 ounces of gold were exported annually from 1851 to 1880, implying total exports of 750,000 ounces (25,000 x 30 years = 750,000 ounces) over the 30-year period. The data revealed in all, about 14.45 million ounces (11,200,000 + 500,000 + 2,000,000 + 750,000 = 14,450,000 ounces) of gold were exported from the Gold Coast over a period of 410 years (1471 through 1880).

Hoffmann (n.d.) noted, gold discovery in the Witwatersrand in South Africa in 1886 remains the single largest discovery in human history. However, the discovery was believed to have been made in June 1884 by Jan Gerrit Bantjes on farm Vogelstruis Fontein. Later in September of the same year (1884), the Struben brothers made another gold discovery on farm Wilgespruit, situated near present day Roodeport (South Africa History Online (SAHO), 2016).

Though Hoffmann (n.d.) and SAHO (2016) present contrasting dates, they hold one thing in common. That is, significant gold discovery was made in the Witwatersrand in South Africa. By 1889, production from the Witwatersrand constituted 25% of global gold production; and by 1985, its contribution to total gold production at the global level had sky-rocketed to 40%.

The Witwatersrand’s gold discovery was believed to be very timely; it coincided with development of the cyanidation process, a technique that facilitated recovery of gold values that could not be accounted for through amalgamation and gravity concentration techniques. Kamituga is a mining town in South Kivu Province in the Democratic Republic of Congo. It has been a mining town since gold was first discovered in commercial quantities in the 1920s. The discovery attracted succession of large mining firms to the town (Smith, 2020).

In 1914, many countries adopted the fractional standards to the neglect of the gold standard, so they could pay for the cost of World War I. The fractional standards allowed countries to inflate their respective currencies; and these countries did not return to the gold standard until 1925. The Bretton Wood Agreement was signed after World War II in 1944. During this period, the American dollar began gradually to replace gold as the base reserve currency.

However, the American dollar was linked to the price of gold; and central banks continued to hold portions of their liquid reserves as gold. It was during this period that the International Bank for Reconstruction and Development (World Bank) and International Monetary Fund (IMF) were established (The Royal Mint, 2020).

Between 1971 and 1973, the Bretton Wood Agreement was abandoned by former President Richard Nixon of the United States. This initiative implied the American dollar and other currencies across the globe were no longer linked to the value of gold; and that, the United States could effectively print more currency notes as and when necessary.

Twenty-six years later, the first Central Bank Gold Agreement (CBGA) was signed in 1999. After the signing, European banks pledged continuous use of gold as part of their monetary reserves; and capped annual gold sales at 400 tonnes over a five-year period. In 2010, the World Bank’s President, Mr. Robert Zoellick, suggested the need for global economies to revert to use of the gold standard to help strategically address challenges posed by the floating exchange regime (The Royal Mint, 2020).

The Problem

Societies throughout the world were believed to have witnessed tremendous increase in the use of various metals, including gold, in the twentieth century. However, the demand in recent periods has sky-rocketed due to the pace of technological advancements witnessed globally; accelerated development of notable economies such as China and India with very large and distinct populations; strong tastes and demands for gold jewelleries by these and other economies, among other significant factors. Indeed, the world has experienced considerable expansions in the activities of gold mining; and considerable increase in total volumes of gold mined and used, relative to the volumes in reserves underground (Lumen, n.d.).

The U.S. Geological Survey’s (n.d.a) data on gold for 2019 depicted estimated total volume in stocks at 197,576 metric tonnes, equivalent to 6,352,216,582 troy ounces (197,576 metric tonnes x 32,150.75 troy ounces = 6,352,216,582 troy ounces); while total volume in reserves underground was estimated at 54,000 metric tonnes, equivalent to 1,736,140,500 troy ounces (54,000 metric tonnes x 32,150.75 troy ounces = 1,736,140,500 troy ounces).

Evidently, the stocks of gold mined and available for use were equivalent to 3.66 times (197,576 metric tonnes ÷ 54,000 metric tonnes = 3.6588 = 3.66) the total volume of gold in reserves during the period; implying gold mining across the globe is nearing depletion, controlling for new discoveries in both small and large commercial quantities in the immediate-, medium- and long-term.

Most developing economies endowed with large quantities of gold are plagued with unbridled activities of illegal artisanal miners. Official figures for total volumes of gold produced annually by developing economies are understated due to non-accounting or improper accounting for volumes of gold produced by illegal artisanal miners; and miners in rebel-controlled areas and other conflict zones. The implications of these challenges are dire for efficiency in the mobilisation of gold revenues for developments at the national and global levels.

Moreover, effective assessment of the contribution of gold revenue to national, regional and global gross domestic product (GDP) values may be impaired. Equally worrying is the end-social-product of the activities of small scale illegal miners.

Activities of illegal artisanal miners often lead to loss of lives through sudden collapse of mine pits as recorded at Kamituga in South Kivu Province in the Democratic Republic of Congo (Smith, 2020); pollution of water bodies through the use of heavy metals including cadmium, lead, mercury and copper, among others, during mining in rivers and streams (Duncan, 2020; Attiogbe and Nkansah, 2020); and adverse effect on the health of people living in mining areas, suburbs and the environment (Stewart, 2020; Matschullat and Gutzmer, 2012).

In 2017, about 60% of Ghana’s water bodies were believed to have been polluted, integrally, as a result of the activities of illegal artisanal miners. For every GH¢10,000.00 worth of gold mined and not accounted for by illegal artisanal miners, an estimated US$100,000.00 was required to treat the drain of water polluted during the mining process.

The permutations and computations revealed colossal amount of funds quantifiable in millions of American dollars required by the government of Ghana to ensure polluted water bodies were treated to mitigate harmful effects on the health and lives of people resident along the banks of the polluted rivers and streams; and who rely on same for daily domestic activities, including drinking, cooking, washing and bathing.

The threats posed by illegal mining activities tend to have dire implications for total gold earnings; they defeat economic viability of the precious metal as governments are compelled to channel substantial portion of their earnings into treatment of contaminated water bodies and rehabilitation of the environment. Similarly, waste dumps created by some large scale mining firms are not effective and risk of collapse to impact negatively on human lives and the environment.

The general management problem is the inability of regulatory bodies in mining economies, especially those in developing economies, to formulate implementable mining codes and regulations that would assure effective co-ordination, monitoring and integration of the activities of illegal artisanal miners, so their operations become regularised to enhance annual quantitative measurements and estimates for total volume and value of gold produced; and to provide the requisite protection for key stakeholders including mine workers, inhabitants of mining communities and suburbs; and the environment; while assuring governments’ share of total gold revenues is channeled into productive use, rather than expended on perennial environmental and health challenges occasioned by the activities of illegal artisanal miners and non-compliant large scale mining companies.

The near-depletion of gold reserves is affecting quality and earnings from operations by mining firms and economies. In 2019, nearly 71% of total mining operations in South Africa depicted marginal profits or losses. Though evidence of the phenomenon exists, there are limited empirical studies to clearly establish the effect of gold trading activities on national and global gross domestic product (GDP) values over extended periods.

The specific management problem is the level of innovativeness and technological standards required to invent new techniques to assure accelerated recycling rates of rare precious metals such as gold, considered to be critical to the manufacture of key consumables such as cell phones, so this very critical metal does not deplete entirely to impact severely on its availability for use in contemporary technology in the near and distant future. The present study sought to examine how trading activities related to gold tend to affect gross domestic product values at the national and global levels.

Author’s Note

The above write-up was extracted from recent Publication on “Implications of Gold Trading for the Global Economy” by Ashley, Osei-Assibey, Gariba, Asubonteng and Ackah (2024) in the International Journal of Business and Management (IJBM). DOI No.: 10.24940/theijbm/2024/v12/i3/BM2403-012

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