Falling Portfolio Value of Gold

Following are the 10 facts which give a better understanding of falling portfolio value indicating the story of gold which is not yet over.

1) We don’t own enough yellow metal

Well it might seem shocking to you looking at the numbers of import and price of gold. However the fact is if all the gold in the  world was gathered it would just fit in one large house. India owns 18,000 tonnes of gold which if distributed equally among the Indians, would result in barely an ounce of gold for each which is significantly less than the consumption in western countries.

2) Decade long life of Gold

Volume of gold available for mining is estimated to be around 51,000 tonnes (estimated by US geological society). If the current rate of demand is considered, the estimated volume will last more than a decade (around 12 years) provided the reserve is only considered the source.

Read on GWI Costs, Advantages and Drawbacks in Buying Physical Gold from the Indian Post Office. 

3) Close to minimum support price

The average production cost of gold is reported at $1,200 an ounce. Gold has risen ever since 1990s to reach this level. The recent fall taking gold to $1,360 an ounce was the largest fall ever bringing gold closer to global average production cost. Faith in gold mining industry is declining as it has witnessed but only soaring production costs.

4) Chinese Gold

China was one of the countries not available in the gold map 20 years ago. However, after successfully investing in gold mining, China succeeded to the extent that it is now the world’s biggest gold producer. According to the data reported by gold reserve, China produced over 400 tonnes in 2012, which is expected to reach 450 tonnes by 2015. However, the metal never leaves the country and China is reported to be the world’s sixth-largest holder of monetary gold (As reported by World Gold Council).

5) Good olden days of Gold as money

Several states in the US are under the process of adopting gold and silver as money like the dollar. Process is being finalized to decide on the value of money made from gold, given the fact that gold’s price is fluctuating.

Read more about Gold ETFs in India.

6) Gold in smart phone

Gold is reported to be the best conductor of electricity after silver. Gold is anti-corrosive metal which does not react when it comes in contact with water. The property makes gold perfect, despite being expensive, choice for the consumer electronics industry. 10 troy ounces of gold is used in some 10,000 phones. Apart from smartphones, gold is used in laptops too. Around 200 laptops would yield five troy ounces of gold.

7) Here lies the Gold

New York Fed’s vaults hold about 23% of the world’s official gold reserves. This secretive vault is situated 80 feet below ground level. Vaults belonging to the Bank of England in London contain the second-largest stash of gold reserves. Reserve Bank of India owns 557.75 tonnes of gold of which 265 tonnes is in the vaults of Bank of England and the Bank for International Settlements.

8) Tainted Gold

There exists a grey market for the gold. The shadowy chain of smuggled gold which is available mainly in the jewellery shops in Mumbai and Delhi. It is estimated that over $600 million worth of gold leaves Congo every year, which is illegal.

9) Shining Silver a substitute

When it comes to RoI, price of silver has risen over 100% during the past four years and it has risen over 500% over the past 10 years. Silver is a long term bullish market which is seeing a new wave of buying. Also silver has strategic importance in the industrial and medicinal applications for which its importance never gets suppressed.

10) Gold story still alive

When it comes to physical demand, India was the first to respond. Tremendous demand of gold coins was seen during the past when the gold price fell. During 2008 too, when global economy collapsed, demand for gold bars and coins were at all time high.