The History of Gold Bullion
The history of gold bullion is both rich and intriguing; ever since gold was initially discovered and refined (thought to be around 3600 BC by the Ancient Egyptians), further ancient civilisations were magnetised time and time again by its allure. The precious metal has since established its status as a store of wealth, and continues to be coveted across countless countries and cultures. Throughout the ages gold has been used in religious practices, in jewellery, technology, as an anchor for currency as well as currency in its own right. As JP Morgan once said ‘Gold is money. Everything else is just credit.’ In this article we will delve further into the intriguing story of gold bullion.
Early Civilizations and Gold
The Ancient Egyptians are thought to have been the first civilisation to discover gold, regarding it as a symbol of power and divinity as it was linked to their sun God, Ra. At first they reserved its use for the pharaohs and the most sacred religious ceremonies, but it also came to be used by nobles and in trade. It was custom to bury Egyptian pharaohs in gold masks and surround them in their tombs by gold objects which were believed to bring them prosperity and safe passage in the afterlife. Perhaps the most famous among these pharaohs buried in gold is Tutankhamun, whose short reign continues to captivate the world long after his passing. The Ancient Egyptians believed gold was ‘the flesh of the Gods’ as did the ancient Greeks, who also revered gold and in fact, the story of King Midas and the golden touch comes from Greek mythology.
The Gold Rush Era
On January 24, 1848, James Marshall was inspecting a mill race for his employer - Sutter’s Mill - when he glimpsed something glimmering in the cold winter water. This discovery was the start of the famous California Gold Rush of the 19th Century. Following the discovery, news spread and thousands of would-be gold miners flocked to the San Francisco area, augmenting the non-native population of California by 100 fold in a year. In total, gold deposits worth $2bn were extracted over the Gold Rush period which saw its peak in 1852. However, it is thought that very few people were actually able to make money from the Gold Rush, those that did were the merchants, rather than the miners themselves. New mining methods were created by the Gold Rush, while the influx of gold led to the expansion of manufacturing and service industries. The Gold Rush Era also paved the way for the establishment of the Gold Standard in the US, as it had hugely increased the supply of domestic gold. Participating countries in the Gold Standard tied their currency to a specified amount of gold. However, after the Second World War the traditional Gold Standard made way for the Bretton Woods system, which placed the US dollar at its heart. The Bretton Woods system began to dissolve in the late 1960s and since then International Monetary Fund members have used the free floating system without pegging their currency to gold.
Gold in Modern Finance
Today, investment grade physical gold, or gold bullion has established itself in modern finance as a serious consideration for all. As a globally recognised store of value, gold can offer an attractive portfolio diversification opportunity which throughout history has shown itself to have a negative correlation with stocks. Furthermore, gold is considered by many as a hedge against inflation: During times of inflation, the value of fiat currency is eroded as its purchasing power decreases. Contrary to this, the cost of every ounce of gold in that same currency rises as a result, and gold investors are compensated with more currency for each ounce of gold. Over time, analysts have demonstrated that gold is a good hedge against inflation. In fact, many consider gold to be a ‘safe haven’ for wealth during times of economic uncertainty. This sentiment has been apparent in World Central Banks’ recent spate of gold accumulation – although buying slowed during Q3 of 2024, Central Banks have been purchasing record amounts of the precious metal since 2022, an activity which has supported the gold price rally.
Production and Refining Processes
Gold bullion refers to investment grade gold at a purity of at least 99.5% in the form of bars, coins, ingots or rounds; in order to become gold bullion, there are several steps of production and refinement that must happen. Firstly, the gold itself must be obtained, which may occur as a result of extraction from mining – the most popular form of which is mining directly from the rock in which gold was formed – or recycling previously refined gold. Today, recycled gold accounts for around one third of the total gold supply, according to the World Gold Council. After extraction, or obtainment from a secondary source, the gold is then refined, which includes separating it from impurities; the higher the refinement, the finer the gold. In order to make the large market bars which are often depicted in films, molten metal is cast into moulds to make what is called ingots, while smaller bars are created by minting or stamping rolled gold sheets. For coins, these gold sheets are cut into ‘blanks’ in preparation for minting – the process by which dies are pressed under great pressure into the gold blanks to produce finished coins. The production of gold bullion is carried out under the strictest quality and security standards to ensure top quality bullion of the necessary finesse. Today’s production methods allow for larger production numbers than were possible in the past, for example, the Royal Mint presses can strike around 750 coins a minute. This has helped accommodate the growing demand for gold and silver bullion.
If you are looking to begin your journey into gold investment, or you would simply like to find out a little more, the team at Sharps Pixley is at your disposal T +44 (0)207 871 0532 or E [email protected]