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willedoo
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I was reading an article about Russia's current gold production. They have the largest known gold reserves, about 13%, and in production are third to China and Australia. The head of the Ministry of Natural Resources said that at current production levels, Russia has enough gold to mine for another 40 years. The question is, in 50 years time, will most of the world's gold be mined, and what would that do to the price. Or is it that the world's known reserves are only a part of what is actually in the ground and unexplored.

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Probably the latter, Willedoo. Miners keep going deeper into known reserves and as the price goes up all sorts of low-grade sources will be exploited.

 

Although Nixon officially abandoned gold as the backbone of the US dollar, plenty of people still prefer to keep their savings in yellow metal rather then paper money.

 

Global currency trading is overdue for a reset, like Breton Woods in 1944. When world powers sit down to agree on a new system, those with the gold will be at the table.

Russia and China are playing the long game and quietly building up their gold reserves. Despite Australia being a gold superpower in terms of reserves and production, we probably won’t be invited; our reserves are tiny, since the Howard government sold most of it (at the bottom of the market). 

 

 

 

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Russia's reserves are real physical gold and I'd guess the same for China. I don't know if it's accurate but I read that of all the world's gold investments, only about 80% physically exists ie: has been mined. There must be a lot of countries that only own paper gold. If it ever hits the fan, it makes you wonder what that paper would be worth. I think countries investing in the actual heavy yellow stuff and holding it in their own country are doing the smart thing. Venezuela is a good example of learning the hard way with the Bank of England refusing to give them back one billion dollars worth of their gold. I don't know if it was paper gold or physical. I guess the problem for smaller countries is security which prevents them from holding their own physical reserves.

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I'm surprised that gold is not more expensive at this time. There's bugger all other things that aren't a risky investment. India converts a lot of it into Jewellery. It doesn't corrode. OUR currency is rendered of less value by how we act. We hope to up our exports by devaluing it but when some other country wants to manipulate it's currency we squeal to high Heaven and cry foul. Anyhow it's NOT working but if it did you would pay more for almost everything. (and a higher GST on it as well).  Houses cost prices that many current purchasers will never pay off and will have to default if interest rates go anywhere near what they sensibly should be.   IF it's widespread at all there will be panic and fear.  The average person is in strife after a few weeks of no job. We are setting ourselves up for the BIG ONE as far as recessions go. Credit is too easy to get .Money is being made available to People who have no real chance of paying it off . Nev

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50 minutes ago, willedoo said:

Russia's reserves are real physical gold and I'd guess the same for China...

Both are rapidly increasing their gold reserves, which are said to already be far larger than the official figures.

Like many countries which displease the USA, they are tired of the US using its dollar power to impose trade sanctions.

They are reported to be working on a gold-backed cryptocurrency.

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...I read that of all the world's gold investments, only about 80% physically exists ie: has been mined. There must be a lot of countries that only own paper gold. If it ever hits the fan, it makes you wonder what that paper would be worth...

Too right, Willedoo.
Lots of people have invested in various forms of gold certificates but some analysts say the value of this paper gold is many times the actual stuff in vaults. Setting themselves up for a good old fashioned “run on the bank”.

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I think countries investing in the actual heavy yellow stuff and holding it in their own country are doing the smart thing. Venezuela is a good example of learning the hard way with the Bank of England refusing to give them back one billion dollars worth of their gold.

 That story sure was noticed across the world; no wonder lots of countries are building up their home gold reserves.

 

19 minutes ago, facthunter said:

I'm surprised that gold is not more expensive at this time. There's bugger all other things that aren't a risky investment...

I agree, Nev, but don’t forget Real Estate. Economic uncertainty has resulted in truckloads of money going into that sector, pricing our kids out of the market.

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When I used to travel in aluminium  tubing  across (up and down actually) Australia  we actually carried Gold bars and they are extremely heavy. There was no security they just  sat on the forward cargo hold floor . The "word"  was when gold looked like it was going good, invest in Gold mines, There IS a difference though. Nearly everyone I know who has bought gold bullion hasn't made that much from it. Today where negative interest rates exist, we are surely in unchartered waters. Greed and fear are what makes the stock Market function. Insider trading is RIFE. That's how any real money is made. Poker machines are for the real mugs but the stock market is a gamble for people not in the know and they are a tiny minority who get the lions share of any profit.

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If you want to buy gold, it is best to purchase either from a broker who is a member of one of the metals exchanges (e.g. London Metal Exchange), or a reputable asset manager. $2 companies and their ownership certificates would be dubious at best. The other two best ways to get exposure to gold is through a specific reputable fund (which will actually be through an asset manager, as well), or through options/futures contracts. Options/Futures contracts will be where there is an over-investment relative to the actual current supply, but both will require delivery - futures on the specified date and options, if exercised. Again, I would only buy through a reputable broker and only contracts on a reputable exchange. BTW, futures are a zero sum game.. you either win or lose.. unlike shares, which you may sell at a loss, but unless the company goes broke, at least you get something back.

 

I have had little to do with commodities as an asset class. which was in 2017 for about 3 months. At the time, the spot price of gold on the LME was around USD$1250/troy ounce. Today it is USD $1,889. Not a bad return, but if you put 1,250 in the stock market with strong but boring companies, your return would have been sky high. BTW, I remember when I was 17 or thereabouts, gold peaked at something lik USD $850 a troy ounce. That was 39 years ago.. or thereabouts.. So as an investment, although a safe haven in high inflation/poor return on other asset class times, it is not a good investment at all. In fact, Warren Buffett famously said that it is the most useless investment as people dig it up, melt it, and then guard it under lock and key.. I know it is used in electronics and jewellery making, but generally speaking, it is the holdings that drive its value.

 

The lack of return over many years compared to other asset classes is why some countries (like Aus and the UK) decided to sell their reserves - and yes - at rock bottom prices (thanks, Gordon Brown). Until the Brexit referendum, though, the £ held its value pretty well... so maybe gold isn't the way to go.

 

Creating a gold-backed cybercurrency could be a step forward to rival the USD. However, there will have to be regulation and strict controls around it. How much gold will be held - how much currency will be issued - what happens if they sell off some of their reserves? If they add reserves, can they increase the currency in circulation, etc? The Bank of International Settlements had an interesting article/speech transcript on cybercurrency, and it is only a matter of time before one is launched that will be similar to a sovereign currency.

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Ne'er heard of Krugerrands before... looked them up on Wiki - Gold/Copper alloy coins and the reason they were made illegal was apparently/allegedly because of the sanctions imposed against SAF due to apartheid..


Also forgot to mention, my experience in commodities wasn't the physical stuff - just the exchange traded futures and options, and the opening/closing spot price auctions (which is for transfer of ownership of the physical stuff, which in the case of gold bullion, is usually stored in vaults and never sees the light of day.

 

So, I guess (and only guess) that one can short gold, which means that the seller doesn't actually hold it, but promises to deliver it when the buyer wants it; in which case they source it from the spot market on demand. This could be one other way there is more ownership in gold than there is gold.

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Physical Gold is fascinating stuff, I love it. Having been a gold miner and having owned a viable gold mine, and having personally produced probably a couple of thousand ounces of gold, the intrinsic fact that so much money value can be contained in such a small volume, is what fascinates me, and which drives many people to continue searching for it in the ground.

 

There's a story on the ABC right now of a 64kg piece of speciman rock that has just been purchased by the Perth Mint. It was bought for $3M and they claim it possibly holds up to $3.5M worth of gold (you don't know what the actual gold content and value is, until it's smelted and refined. Gold in its natural state can contain many other "impurities", such as silver and copper, thus making the refining a particularly interesting exercise.

 

When the brother and I produced "dore" from our mine, it went around 92% gold when refined by the Mint. That's a good figure, many mines produce dore gold that is a much lower percentage of gold. The Mint would pay us for silver refined from our dore, but not copper. Even though copper is still regarded as a precious metal and still used in currency, the amount of copper recovered from our dore bars was deemed not to be significant enough to pay anything for it.

 

https://www.abc.net.au/news/2021-06-08/perth-mint-buys-king-henry-gold-specimen/100196356

 

Edited by onetrack
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We took on 3 business partners in the early 1980's to assist us with re-treating about 240,000 tonnes of gold tailings on our lease, utilising "vat leaching" and cyanide.

The operation was very successful, it took us a bit over 2 years to extract all the remnant gold, and we made a tidy profit on the operation.

 

One of our partners (Don Blaxell) was a WW2 veteran who had served in an Airfield Construction Sqdn in PNG, and who had dabbled in gold for years. He was a boatbuilder by trade, and he was a pretty clever cookie.

When the military found out he had extensive boat building skills, they took him off the ACS, and put him into a military boat construction operation.

 

He told us, during our tailings re-treatment operations, about how he'd come across a former WW2 veteran who had served in PNG. The subject of gold came up in conversations, and about how there were sizeable gold deposits in the PNG highlands.

The former veteran said to Don, "Yeah, we found gold when we were tramping through the PNG mountains! It was everywhere in the creeks! We picked up a few nuggets and specimen stones, but I have no idea what happened to them".

Don said, "Was there much by way of 'fines' (knowing that fine gold is more important than a few large nuggets, when assessing a potential gold deposit value) in the creek gold deposits you found?"

 

And the old veteran said to him, "Yeah, there was heaps of fine gold! - but we just threw it all away! We only wanted the big chunks!"

Don said he nearly wept at the recount, and the fact that the old veteran would be unlikely to ever re-discover the PNG creek where he found the gold!   LOL

 

Don was only a small bloke, but pretty fit, and he only just died in March 2018, at age 99, just 9 mths short of 100.

His family name is on a range of boats and surfboards, with 2 sons operating the boat and surfboard business from 1968 to 1987, when they sold out. Another of Dons sons was a W.A. District Court Judge, now long retired.

Edited by onetrack
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Is this fake? I didn't think you would be able to hold a gold bar that size in one hand. It's supposed to be at the depository of the Central Bank of Russia. Maybe Putin is tougher than we think. At least he's got his shirt on. I remember reading years ago that a cubic foot of gold weighs about one ton.

 

 

 

 

17f.jpg

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I think that pic is old hat - about 2013, when Vlad was younger and stronger.

 

Google claims that a standard bullion bar weighs about 12.5 Kg.  I know that I can lift that much but I can't hold that weight at arm's length so I think the pic was faked for the media.

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There's no such thing as a "standard bar". They come in a mind-boggling array of sizes and a huge variation in gold purity - unless it's a "minted" bar, whereby the mint that produced it, usually guarantees it to be 99.99% pure.

 

The photo's a bit deceiving because the camera is close to the bar, making it appear bigger. And there's no indication whether it's a "dore" bar (straight from a mine and not fully refined) or a bank bar, which would be refined more.

 

We have to go the photo source to find more info - and the original photo caption says Vlad is at the Russian Central Bank and examining their gold reserves and processing and weighing and packing.

 

Curiously, the article says "a standard gold bar weighs between 10 and 14 kgs". ?? If it varies that much in weight, how can it be a "standard gold bar"?  IMO, the only "standard" should be the 99.99% pure standard.

 

Anyway, if the bar weighs around 12 kgs and he's holding it fairly close to his body, with a crooked arm position, it wouldn't be impossible for him to lift it. Not easy, but do-able. Vlad's one tough and strong hombre, and don't you forget it!

 

Gold bars of the World - https://goldbarsworldwide.com/PDF/BG_10_Categories.pdf

 

Original photo from the Archive of the Russian PM (P.S. - the photo is dated 2011) - http://archive.premier.gov.ru/eng/events/news/13930/

 

In days of yore (70's and early 80's), the Perth Mint did guided tours of their refining and processing of gold at the Hay Street, Perth, Mint premises. It's no longer done there, the processing and refining has been moved out to a new premises right adjacent to Perth Airport.

 

But during the tour, you could hold a 400oz refined (99.99%) Mint bar. They're bloody heavy (12.44kgs), and I had to use both hands to lift it, and I was in my late 30's back then. I've produced many gold bars from our gold mining activities (we had our own furnace and crucibles and bar molds), but we very rarely poured a bigger bar than about 100 ozs - it takes a lot of effort to get 100 ozs of gold, I can tell you!

 

Most bars we poured were between about 20 and 80 ozs. It takes a lot of heat and a big crucible to pour a huge bar, the temperature needs to be around 2000 deg, and if you pour a big bar, it needs two blokes with tongs each side of the crucible, to enable a proper and safe pour.

 

The bigger mines pour big bars because they have large furnaces and mechanised gold pouring arrangements. Even then, they very rarely pour anything bigger than around 400 oz dore bars.

 

 

 

 

Edited by onetrack
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