Gold is a dense, bright yellow metallic element with a high luster. Gold is an inactive substance and is unaffected by air, heat, moisture, and most solvents. Gold has been coveted for centuries for its unique blend of rarity, beauty, and near indestructibility. The Egyptians mined gold before 2,000 BC. King Croesus of Lydia created the first known, pure gold coin in the sixth century BC.
Gold is found in nature in quartz veins and secondary alluvial deposits as a free metal. Gold is produced from mines on every continent apart from Antarctica, where mining is forbidden. Because gold is virtually indestructible, much of the gold that has ever been mined still exists in one form or another. The largest producer of gold in the U.S. by far is the state of Nevada, with Alaska and California running a distant second and third.
Gold is a vital industrial commodity. Pure gold is one of the most malleable and ductile of all the metals. It is a good conductor of heat and electricity. The prime industrial use of gold is in electronics. Another important sector is dental gold, where it has been used for almost 3,000 years. Other applications for gold include decorative gold leaf, reflective glass, and jewelry.
In 1792, the United States first assigned a formal monetary role for gold when Congress put the nation's currency on a bimetallic standard, backing it with gold and silver. Under the gold standard, the U.S. government was willing to exchange its paper currency for a set amount of gold, meaning its currency was backed by gold. However, President Nixon in 1971 severed the convertibility between the U.S. dollar and gold, which led to the breakdown of the Bretton Woods international payments system. Since then, the prices of gold and paper currencies have floated freely. U.S. and other central banks now hold physical gold reserves primarily as a store of wealth.
Gold futures and options are traded at the CME Group. Gold futures are traded at the Bolsa de Mercadorias and Futuros (BM&F) and at the Tokyo Commodity Exchange (TOCOM), and the Korea Futures Exchange (KFE). The CME gold futures contract calls for the delivery of 100 troy ounces of gold (0.995 fineness), and the contract trades in terms of dollars and cents per troy ounce.
Prices - CME gold futures prices (Barchart.com symbol GC) in early 2023 were under pressure and posted a 1-year low in February of $1.807.80 per troy ounce. Gold prices fell as US economic reports the first two months of 2023 were stronger than expected, which bolstered expectations for additional Fed rate hikes. Gold prices recovered into May after the collapse of some US regional banks and turmoil at Credit Suisse Group AG sparked some safe-haven buying of gold. Dollar weakness in mid-2023 also supported gold after the dollar index fell to a 1-1/2 year low in July. Gold prices ratcheted lower into October as T-note yields rose to a 16-year high after the Fed signaled monetary policy could remain tighter for longer. The outlook for tighter Fed policy sparked a mass exodus of investors from gold as holdings in gold ETFs fell to a 4-year low in October. Gold prices then rallied into year-end and posted a record high of $2,130.2 per ounce in December. Gold rallied after Fed Chair Powell signaled in December that the Fed was done with its tightening cycle and would pivot toward cutting interest rates in 2024. Gold prices finished 2023 up +13.3% yr/yr at $2,062.40 per troy ounce.
Supply - World mine production of gold in 2023 fell by -2.0% yr/yr to 3.000 million kilograms, below the 2018 record high of 3.310 million kilograms (1 kilogram equals 32.1507 troy ounces). The world's largest producers of gold in 2023 were China with 12.3% of world production, followed by both Australia and Russia with 10.3%, Canada with 6.7%, the U.S with 5.7%, Indonesia with 3.7%, both South Africa and Uzbekistan with 3.3%, and both Peru and Ghana with 3.0%.
US gold mine production in 2023 fell by -1.7% yr/yr to 170,000 kilograms. Canada's gold mine production in 2023 fell by -2.8% yr/yr at 200,000 kilograms, down from the 2021 record high of 223,000 kilograms.
US refinery production of gold from domestic and foreign ore sources in 2023 fell by -11.6% yr/yr to 160,000 kilograms. In addition, US refinery production of gold from secondary scrap sources in 2023 fell by -2.8% yr/yr to 90,000 kilograms.
Demand - US consumption of gold in 2023 fell by -2.7% yr/yr to 250,000 kilograms.
Trade - US exports of gold (excluding coinage) in 2023 fell by -40.5% yr/yr to 250,000 kilograms, well below the 2012 record high of 699,000 kilograms. US imports of gold for consumption in 2023 rose by +44.9% yr/yr to 200,000 kilograms.
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