Do you think gold is money?
– No. It's [inaudible]. 
– Even if it's been money for 6,000 years somebody reversed that and eliminated that economic law?
– Well, it's it's you know, it's an asset.
The biggest misconception about gold is that it's a speculative element.
The biggest misconception is that gold is the cause of financial panics and was the cause of the Great Depression. It's simply not true.
People always compare gold to stocks that's just nonsense.
The majority of people don't have any understanding about gold at all.
The biggest misconception about gold is that it's no longer money. The idea that a bureaucrat, a president
Could say in 1971 that Gold's not money and therefore it isn't, and after 4 thousand years
the bureaucrats control money is an absurdity to anyone who studied history and understands economics.
Gold is a financial asset which polarizes opinion like no other.
To many it represents the one true money.
But whether you believe in it or not gold has somehow outlasted every alternative currency for thousands of years.
i'm, Grant Williams and in this series i'm going to explain how and why gold became money show you what it takes to find and
Produce an ounce of gold and examine its place in the modern-day financial system
we look at the history of the gold standard show you how gold is bought and sold around the world, and you'll witness the
extraordinary measures people take to keep it safe.
When i'm done,
I hope you have a better understanding as to exactly why this curious yellow metal has been the source of such
fascination for mankind for thousands of years.
Gold's places money has run deep within the fabric of society since it was first discovered thousands of years ago.
But how and why did this curious yellow metal find itself at the center of the financial universe?
The gold has been money for four thousand years and one most fascinating things about that. Is that nobody knew why
gold is money until about a hundred years ago. Everyone just did it. The market,
it was an emergent property of the market, but no one decided
let's use Gold. The kings of Judea did not sit down and say let's use gold it.
It came out of the market. The history of the world is the story of gold. So said Canadian billionaire Eric Sprott.
Unique in its endurance and rarity gold has been valuable throughout the history of mankind
When molten iron formed the Earth's core, it pulled most of the gold on the planet down with it.
The gold in the Earth's core could make a 13 inch coating across the entire planet's surface, but of course, it could never be recovered.
For the earliest civilizations
Gold was a store of value a medium of exchange as well as a thing of beauty for the Egyptians
gold represented the Sun that gods their rulers and
Eternal life. The Incas described gold as the tears of the Sun and the Greek author Homer in the Iliad and the Odyssey
Saw gold as wealth for humans and the glory of the Immortals
The first use of precious metals as money took place around 700 BC with coins struck by the merchants of Lydia
Which were actually formed from a naturally occurring mixture of gold and silver known as electrum
Gold's unique properties enable the Templars to create the first banks in 13th century
Europe as people were able to store their gold in one bank and borrow against it elsewhere as they traveled across the continent.
Gold's role as money and the universal acceptance of its value enabled mankind to build a vibrant economy, that transcended both borders and cultures
It allowed new worlds to be discovered and settled and enable trade to spread across the globe
But today we find ourselves in the first period of human history in which no country on earth has a currency backed by gold
So why does goal retain its importance in the modern day financial system if it's no longer money?
I would argue to begin with the gold is still money. It's one of many forms of money
It is a medium of exchange and a store of value
unlike other forms of money including fiat currencies and crypto currencies and in that context the gold market trades
Billions of dollars a day. So to describe it as something other than money is a bit of a mistake
There was a point in time in certain societies when the only money was gold were past that point in time
Gold is a competing currency. It is in fact payment rather than a promise to pay
most money is a promise to pay rather than being payment in and of itself gold is
Extremely important because throughout history Gold is the only money that has survived
throughout
Centuries and even you take 2,000 years back
Governments have always destroyed the value of fiat money or paper money or silver money at the time of the Romans
To the extent that a has become worthless
Gold is important today because it says--it's store value and in the moment at the moment. We have a real dearth of
reliable stores of value. I mean if you can if you can think of what gold represents the financial assets don't represent for example is
It scarce. It's independent
It's not anybody's obligation. It's not anybody's liability. It's not drawn on anybody
It doesn't require anybody's in pre-modern
To say whether it's good better and different or to refuse to pay it is what it is and it's a new hand
so in in the world where
Financialization and securitization has essentially converted a lot of things even real estate into securities,
which are merely obligations, claims
which are intermediated through multiple layers of financial
institutions but there are times when they cannot perforform.
The one thing that we have with gold is that it, you know, it can't be replicated
you know by by turning on a
printing press or or really adding a couple of zeros to a bank ledger.
You can't print more of it, which makes it a better money.
If it's not money, why does the U.S. Have 8,000 tonnes?
Why is the IMF have 3000 tonnes? Why has Russia tripled his gold reserves in the last ten years?
Why is China buying every piece of gold that's not nailed down and has the largest mining production in the world and zero exports?
So the reasons why gold remains money are essentially the same as they've been for centuries and
while too many people's confusion
A lot of those reasons are based on faith the idea of faith in a timeless physical asset, which has proven its worth since the dawn of civilization is perhaps less
confounding than the faith shown in the central bank governors of the modern-day monetary system
who can conjure trillions of fiat currency
units out of thin air at will
But what was it without gold and silver which led to those two elements becoming money? Well, to answer that question
all we need is a periodic table and a big red marker pen.
First of all, we can remove all the gases obviously we can't use things like hydrogen or argon as money
Next we can remove elements such as calcium and sodium which dissolve in water and also anything that reacts with air
Whether it corrodes or burst into flames neither of which is a suitable thing to keep in your pocket
this removes 56 elements
Then of course
We need to eliminate anything radioactive because well quite simply you don't want your money to kill you
And perhaps surprisingly this disqualifies 45 elements
Now if you've been keeping up that leaves us with just five so-called precious metals gold silver
rhodium platinum and palladium
Now the rhodium nor palladium were discovered until the 18th century. So that rules them out as early money
And the problem with platinum is its melting point of around 3000 degrees Celsius
Which was far out of reach of mankind's earliest furnaces
All that leaves us is gold and silver and it was these two
Precious metals which mankind adopted as both stores of value and mediums of exchange
Despite the fact that gold is no longer used as currency its characteristics as a store of value remain untarnished
However, if you were to store a valuable asset you have to do so in a way that protects it to most people storing gold
Is thought to be a cumbersome and expensive process, but the reality is somewhat different
So how do you buy gold and once you do so where is the safest place to store it?
Golf has to be stored outside of the institution's against which it serves as insurance or against the collapse of which or the
Problems of which it serves as insurance and obviously it has to be stored in a way where you personally have
Ability to access it many people myself included
Prefer to hold gold in secure storage and they prefer to hold it outside the political
Jurisdiction in which they live because they regard it as insurance among other things
against the depredation of their own government this physical is allocated and
Segregated then you don't really care is then down to the quality Institute
But holding it and the quality of their security measures that they have
While an individual can easily store up to half a million pounds of gold bullion in a simple safety deposit box
there are places in the world which are home to the gold which makes up the wealth of nations and
secret vaults which house the gold to the planets wealthiest individuals
chooses their means of preserving intergenerational wealth
One of those vaults is buried deep beneath the Swiss Alps
It's home to billions of dollars of privately held gold and has never before been film
But we were granted permission to take a look inside
one of the world's most secretive locations to show you the lengths mankind will go to
In order to keep this most precious of metals safe
So we're here today in the biggest private gold wall in the world and here gold is stored for
wealthy families for institutions for private banks and even for some central banks
When you come through this vault you go through a number of security zones. You're deep in the mountain here
You conf four miles of kilometres through various security zones and different
Levels deep in the mistress mountain to reach actually where the gold is stored
It is the only vault in the world which is nuclear bomb proof earthquake proof gas attack proof
Has the security level that doesn't exist anywhere in the world
I've lost count of how many doors I've gone through
I have no idea how far I've walked and I find myself in the middle of a mountain somewhere in Switzerland
And it's only when you get to a place like this that you understand the lengths that people go to to protect
This yellow metal the security have to put in place the things you have to do to keep it protected
This idea of the preservation of purchasing power is
central to the notion of buying gold as a store of wealth and has been a proven strategy which has transcended history as
Mankind has debased hundreds of paper currencies over the centuries
Gold has remained as the anchor at the heart of the financial system
And the reasons for that are the unique properties which made it money in the first place
Gold's durability
Portability fungibility and divisibility have combined to make sure that it's maintained its purchasing power
Outlasting every fear alternative for almost six thousand years
Through booms and busts through war and famine and through mankind's constant ability to the Borch and devalue fiat alternatives
While the dollar has been the world's reserve currency for 40 years that hasn't always been the case
the British Pound
The Spanish peseta and even the Portuguese Escudo at one point in history were all as mighty in their time as the dollar is today
Throughout history when civilizations needed to finance expansion. They were constrained by their gold reserves
The Roman has physically clipped their coins
Reducing the amount of gold and silver and thereby reducing the wages paid to their armies until such point that the soldiers refused to fight
For the majority of the last 200 years the world has been on a gold standard of some sort
But we live in the first period in recorded history of a purely fiat currency regime
That regime began when richard nixon broke the dollar's link to gold in 1971
Today the absence of any link to gold has allowed governments to increase debt to completely unsustainable levels
When society can no longer service this ever-expanding debt mountain a return to a gold standard of some sort is almost inevitable
we've all lived in a purely Fiat monetary system since richard nixon's supposedly temporary suspension of the dollars convertibility into gold and
Because of that the idea of a return to a gold standard of some sort is seen as both unthinkable and unworkable
The gold standard has been blamed for the Great Depression and many prominent politicians and economists
Have claimed that a gold standard would be impossible in today's world
The question is why what was the gold standard and why does the very idea of its?
Reinstatement stir up such passion in the hallowed halls of governments and central banks
we had no central bank from
1836 to
1913 that was one of the greatest periods of prosperity in world history forget American history me invention
You know the telephone the the Reaper the the airplane
radio phonograph
massive increased electricity massive increases in productivity
great industrial
Successes Andrew Klein, so America grew like crazy with no central bank
First of all it's voluntary. You as a nation could choose to be on it or not
A lot of countries found it in their interest to do so and all you had to do is okay
We we print money we have this paper money
but it's redeemable for gold at a fixed rate and you sort of
Declare that that was your policy and you stayed with it
Now if a whole bunch of currencies are convertible to gold at a fixed rate
Then through a simple transitive law they're convertible into each other at a fixed rate
and that was how the world worked again with no, no guidance from bureaucrats and if you ran a trade
Deficit you had to pay for that in gold
Well, what happened when you had to pay for that in gold where you were decreasing your money supply that was deflationary prices went down
Wages might have gone too out for that matter
But that made you more competitive and then you would come back to her trade surplus because those said you were the cheap provider
Likewise if you were running a trade surplus and you were getting all this Gold what happened your money supply increase that was inflationary
Your prices went up you were less competitive. So this was a self-equilibrating system.
The gold standard was a
method
That tied the political classes and the voter
to reality with regards to the construction of
an economy untied to arithmetic.
We've had a
Number of occasions when when a gold standard basically broke down
But it was never because of the system never because of the gold it's always been because of politicians
Breaking the gold standard.
The gold standard
Didn't work because it didn't allow the spenders
to plunder the savers
The politicians were of course instrumental in that. It wouldn't work today because the political class
Doesn't want any part of a system that constrains their power
There was an article and editorial New York Times actually that the point in the 50s pointed out that it didn't fail
It was killed. He was killed by the
power of the Allied powers
because they wanted to fight war before door one broke out the the the
Consensus was the general consensus was that the war couldn't last more than a few months
Because there was certainly wasn't enough money for the governments to fight the war and of course that that view
Didn't understand that first and the government's would do was cancel the right of redemption and print the money to fight that war
There were five people kind of in the room at Camp David that weekend was August 15, 1971
Richard Nixon went up to Camp David with his you know economic team
There was it was Paul Volcker who was deputy secretary of the Treasury at the time
Arthur Burns who was chairman of the Fed, John Connally was secretary of the Treasury
President Nixon and there was a fifth man. And for many years I never knew who the fifth man was
I couldn't figure it out. Turned out to be a friend of mine Kenneth W. Dam, was the dean Emeritus of University of Chicago Law School
I spoke to Volcker and I spoke to Ken Dam. So I spoke to two of the five people
who were there most involved with the and they all taught me the same thing, which is
They really thought it was temporary
So a monetary system, which had endured for thousands of years was terminated by the stroke of a president's pen
Well what changed when Nixon shut the gold window removing the dollars anchor that how has that affected the way we think of money today?
the world changed tremendously
After Nixon closed the gold window
Up until that point
effectively
In the immediate aftermath of World War two you had the Bretton Woods system where
the dollar
was
Valued at $35 was tied to gold at $35 an ounce
and the rest of the world's currencies were tied to the dollar and so what you had was
a system where the dollar was effectively as good as gold
they shut the gold wind and they thought well
"Let's get ready to reopen it tomorrow."
and
And see you know
Just just in case everyone sort of the there's a run on the dollar or you know
People lose confidence in the in the monetary system. Let's get ready to reopen the window pretty much immediately
So really was sending up a balloon, you know
Let's try this policy because we've really run out of money
And the other option is is to actually run a much tighter fiscal system. It wasn't the actual fact of closing that window that
That changed anything. It was the fact that everybody else accepted it. Right? If everybody had said
"What? Dollar, a piece of paper?"
"Forget it. No!" and the Dollar, you know collapsed or, you know, people stopped to accept it
or the Treasury bills, then then we'd still have the gold standard. But it's the apathy of the general population at large that caused
or that allowed Nixon to get away with this this this change.
If you think back to 1971 and decide
Whether on a global basis more people trusted Nixon or more people trusted gold
The circumstance where gold rose in dollar terms from $35 to $850 dollars
Tells you something about the franchise enjoyed by Nixon and the franchise enjoyed by gold
So what really happened to gold nothing what happened to the US dollar in the ensuing 40 years? Catastrophic.
The entire financialization of the system came about because of
This soft default on on US Treasuries. That happened in 1971.
And of course,
This is a soft default because it was a temporary
Suspension of the of the convertibility of the dollar and ie they still owe that gold
so in common parlance when Nixon
Abandoned the gold standard that is called in the August of 1971
The idea is that gold stop being money because the dollar wasn't tied to it, and there were people
People who thought gold would collapse without the monetary demand gold to go away as absolutely crazy
Because of course it was the dollar's connection a gold that stabilized the dollar not the other way around
So far in our journey
We've seen how and why gold became money and over many centuries
Gold has proven itself a far superior store of value than any fiat currency
but there's another story that needs telling the story of mankind's relentless quest to find gold and extract it from increasingly difficult places and
Then to turn it into the jewelry bars and coins with which we're all familiar
Milton Friedman
said and Warren Buffett likes to quote this that mining gold is insane you dig up the gold in one part of the world you
Transport it and bury it somewhere else in a different hole and the more any Martian watching us would be scratching his head
Of course
It's a little odd to say that an activity in which man has been engaged without
Interruption for four to ten thousand years is insane. It seems a little far-fetched people
Do do insane things for sure for a time but not usually for ten thousand years
Gold is among the rarest of all the elements it weighs 19 times more than water and is twice as heavy as lead
But it makes up only three parts per billion of the Earth's crust
That's the size of the challenge to find this most precious of metals
Since the dawn of civilization mankind has been forced into ever more extraordinary lengths to extract gold from the Earth's crust
So let's take a look at the evolution of how gold has been mined over the last thousand years
The earliest gold was found in riverbeds as miners diverted streams to reveal the gold beneath
In fact, the ancient Greeks believed that gold was a combination of water and sunlight because it was found in rivers
Placer mining involves swirling water in circles in shallow metal pans with soil from the river bed leaving gold as it was washed away
Back in 1200 BC enterprising early miners would also use water power to propel gold bearing sand over the hind of a sheep
Which would trap the tiny but heavy flakes of gold when the fleece had absorbed all the water it could
The golden fleece would then be hung up to dry and beaten until all the gold had fallen off?
hence, the legend of the golden fleece a
Number of early civilizations used a variation of this technique called winnowing in which soil was bounced on woolen blankets
Allowing the wind to blow away the lighter sand and thus freeing the gold
Once the easily accessible gold on the surface had been collected
Prospectors needed to start thinking about how to work lower down beneath the earth's crust
They went and this required - to work together in larger groups as they started digging underground
Amazingly underground mining dates back as far as the Romans
but the real challenge for gold miners was to move on from primitive methods of extracting gold from the soil to
developing machines of increasing sophistication
Which allowed them to mined gold from the hard rock below the earth's surface
The early days of quartz rock mining were relatively straightforward as far as the shallow deposits were concerned
But until the 1860s the maximum depth of miners could reach was around 300 feet
The sheer size and scale of the economic and geological challenges faced by early miners meant it would take many years of technological progress
To enable deeper order to be reached
Hard rock miners would sink shafts in order to extract gold from the quartz rock
Drilling was either done by hand or through the use of compressed air drills with the help of a little dynamite
Hydraulic drills were the next evolution and these helped open up deeper holes in the Earth's surface using drill bits
Which became longer and thinner the further they went down
Larger rocks extracted from the mines were crushed by heavy iron stamping machines to release the gold from the surrounding rock
Hydraulic mining used high pressure Jets of water to displace the rock and soil and open up the gold beneath
High in the hills water was diverted into ditches and through heavy iron pipes as the water channeled down
Gravity increased its pressure and as that pressure reached around five thousand pounds per square inch
It was pushed through a small nozzle and used to blast the mountains apart
The displaced soil cascaded down the valley and into the sluices below where it would be separated
This new mining technique was productive was not without cost however as diverting all that water caused huge flooding in the valleys below
Devastating farmland as a solution to this problem in, California
- turn to dredging which worked like a vacuum cleaner
Sucking up the material under water and running it through a sluice to sift out the gold
Mining for gold has gotten increasingly difficult over the last 50 years not just in finding the deposits themselves
But due to the increased social political and environmental factors shaping the mining landscape
But how has it affected the way deposits are discovered and what are the added risks?
Now that we're looking deeper and deeper into the earth. It's getting
much more complex to find
much more complex to recover metallurgy and
Now we have to deal with issues to do with social situations
environmental situations
so the cost of finding these things has just gone up exponentially and the difficulty is of
finding a new deposit as as well back in the 80s a
New technology was developed in Nevada for each sleep retreat recovery, which meant that you could take low-grade
Oxidized or oxidize means basically the the gold used to be in pyrite iron
and it rusted when it rusted that turns the pirate to rust that liberates the gold so you can
You sprinkle a cyanide solution on it?
That dissolves the gold and you could you covered so that was a whole revolution. We've gone through that
Those deposits are mostly gone now
the next revolution in in discovery
was when the iron curtain fell in the whole world basically opened up to exploration as geologists and we could
Go to places and to walk up to outcropping or bodies that nobody had ever looked at a satellite imagery came in and by different
different metals different clays produce a different spectrum
Life spectrum and you could see that and process it and then you could find areas of alteration and you go straight to that
so that was sort of the big revolution in the 90s and
Subsequent to that there's been no revolution is just gotten much much harder to find these things
all the discoveries are having deeper and deeper and deeper in the earth and that brings a bunch of lotta a
Lot of issues in terms of finding those things because really we're looking blind
The truth is that the technology involved in finding gold has progressed
The traditional methods of gold and the traditional deposit styles that we mined 200 years ago
Are tough to find because we already found them and mined them but the industry is doing a reasonably good job of finding new
Deposits the challenges now, is that the easy to find deposits?
are often found in political jurisdictions that strike the people that have the money to go find gold as
being risky political jurisdictions I find myself
financing the exploration for gold in places like Congo
Sudan
Kyrgyzstan
Myanmar
Bolivia
Places that most people normally wouldn't choose to go on vacation that's their mistake by the way, you know
People always say well it mine is really risky because it's it's really hard to find something
You know, the expiration phase is really risky. Only one out of a thousand prospects every becomes a mind. So that's pretty risky
You know
it
Offers an awful lot of scope for shareholders to lose a ton of money and so it gets known to be a very risky business
But believe me
When you're in the mining business the risk begins when you find an economic deposit, what's once you've found a deposit?
What do you do?
well
you have to do a whole bunch of technical studies to make sure you can mine it and
Make money at it make make money. So it's actually or not waste and that takes a lot of technical skills
You have to have geologists engineers
Metallurgist you then have to have a whole bunch of lawyers making sure you get your title, right?
You've got your surface rights. You've got your social license and all your all your CSR people your environmental studies
You've got to get all that right? You've got to get your permits
So you have you have you know, you have expiration risk you have
Feasibility risk is this going to be feasible you have price risk?
I mean the gold press can swing or the silver price can swing, you know fifty percent in a single year
I've seen it happen. I've seen it go with the gold price to go from 300 or 450 in a year
The silver price goes from $5 to $10 in here
You can have the most brain, you know genius-level metallurgist in your company and they can still get it wrong
you can use a new method and it doesn't work on that particular or and
Finally you can get in the ground. You can finally start digging it up
And guess what all of your economic studies are based on drill holes and the drills might be you know
A couple hundred feet apart or there might be 30 feet apart and then you have social risk
You've got to have your social license
Right now in the world and there's all sorts of places that do not want mining for whatever reason they don't want mining for
Indigenous reasons having to do with the social nature of the tribal peoples in areas that that have never had money
They just simply don't want money there. It happens in Canada
It happens in Brazil happens all it happens in Africa all over the world mines are where you find them
They're in great places and they're in terrible places and you just have to take them worried. We're there
It's a highly risky business. The first thing I do when I go to a new project is you pick up the rock
But what you really do is is look around say okay, where am I? What's the infrastructure?
What's going to take to get in here to build to build this thing?
Is there a road is there power is there water you?
they're a church sitting on top of the deposit these things cost hundreds of millions to billions of dollars and
On top of that you're dealing with. Okay. What's the political situation here? You know we've seen just this year
Guatemala Tanzania
The Philippines and Indonesia throw taxes or pull mines or whatever on projects that were built or being built or operating?
So that's a respect you've got to throw into it
And then you you're predicting as your company you're predicting
What's the gold or copper prices going to be ten years from now when this thing's operating?
The risks involved in finding and building a gold mine are just the beginning
the risks of investing in junior mining companies are every bit as fraught through investors as those faced by the men and women troubling the
Earth's crust in search of deposits
Mining companies need to make predictions about the costs of their minds as well as the future value of the metal
They'll eventually be able to pull from the ground but investors not only have to evaluate these variables
But also make a calculated prediction about the ability of the company's management to successfully navigate the treacherous path from discovery to production
The challenges of success are frightening Leeloo a new deposits are proving increasingly difficult to find
when you're investing in junior exploration companies
My job is to find the fatal flaw as soon as possible
Newmont did a study a number of years back where they estimated that one in a thousand
Prospects turned into a mine of some sort and a one in 10,000
Turn into a tier-one deposit. Now those odds sound really bad and it's not that bad because it's easy to screen out the crap
But it's still really long odds. I mean looking at gold. We as an industry produce about 90 million ounces a year
we haven't found 90 million ounces since
2006
Right now we're averaging about 20 million ounces a year
So there's a real deficit as you look at their production profile and two three four or five years out. It drops off
But you got to consider
it takes
For a large deposit to be drilled out
Studied and built 10 to 20 years. So anything we find a date we've got to think 10 years down the road more or less
It'll be in production. It's on priced optionality there because there's gonna be an M&A wave at some point
There has to be because the largest companies of interpreting reserves hand-over-fist
And will have to come to the market to to buy some of the sorts of names that we buy
Do you always buy a fund or an index? Do not buy an individual stock? Because the risk reward is completely wrong
It doesn't there's no logic in doing that. You must buy
You must limit your downside risk by having an index, which will also maintain
75 80 % of your upside potential. So that's that that's the first point. The second is to understand
What is it that moves them?
so while yes
there's an exploration phase where you can make 10 times your money if someone drills something out and it looks
Way bigger than people saw that that's fine. But for me, it's about
Gold silver mining companies a mining. Margin. That's what they're doing
The fact that a lump of yellow metal can command a price of over
$1000 an ounce is a source of mystery to many people
but when you look at the cost of
Exploration as well as the cost of the labor and energy which goes into extracting it from the ground
To say nothing of the taxes and the regulatory burden it becomes much simpler to understand God's value
But there is a point at which every deposit in the world becomes an economical to mine
And when that point is reached the decisions that have to be made have far-reaching consequences
So there's an expression mines die hard
They really are hard to kill and they're hard to kill because when you have a mine that let's just say is losing money
That's that's an economic reason to close a mine. You have might have a thousand people whose livelihoods depend on running that mine you have
You have if it's an underground mine
You have a lot of maintenance cost to keep that mind going if you close you have to D Waterston
You have to keep the power and you have a lot of equipment you have to maintain an open-pit mine
You can do less expensively
But it still does have care and maintenance cost and sometimes those care Amina's costs are way higher than running the mine and a loss
For a period of time so mines die hard
It takes a long time to close the mine and most companies will will end up losing money for a long time before they fight
The ball and say this is hopeless miners are very optimistic people as a rule. We're and we're born optimist
Otherwise who wouldn't be in this business
while it may be true that every miner is a born optimist this
Optimism and this willingness to go to dangerous places in search of untold riches is certainly not without its dark side. I
Mean, I've had cerebral malaria. I've had talks with Paz Moses various parasites that have almost killed me. I've had helicopter crashes
I was in a plane crash to destroyed the plane and had to climb out the window. I
Fallen in four passes. I thought I've been in riots. I almost was killed in Liberia and in a riot in Liberia
I've been tear-gassed in Bolivia
God knows how many times I mean it course the the real you know what the real carnage is in the exploration industry
It's cars. It's it's it's bad roads and bad places and people get it in accidents in cars
And so how many how many?
Geologists that I know and now actually have worked with in my company who have died in car crash
I can count them on two heads, which is a lot three guys from my class have been shot in
in
hot places
two of them were shot in getting out of a helicopter in Philippines in Mindanao and
One was killed in South America in in a you know
You know by bad guys. It's a very dangerous business
but I loved it so much that I embraced that kind of risk and it's worked for me and I'm still alive and and
So, you know, here we are
The challenges associated with finding and mining this strange elemental increase every year and as the process has evolved over the last half-century
Mining company CEOs are finding those challenges harder and harder to solve
the mining industry has been a hard industry to operate in for the last 30 years and
the
era of respect
Surrounding mining and somewhere below that surrounding garbage collection and the consequence of that
is that many competent people would choose a job in any career other than mining the
People that you see in the executive ranks of mining companies are largely of my generation which is to say old
While they have experience we're beginning to lack legs in the industry the biggest challenge
I think that gold mining CEOs have today is that
None of them that I've met and I've met dozens or hundreds of them really understand what gold is
they've mined gold as if it were copper as if it were 10 as if for other things
And and you should mind you'll in a very different way because gold is a very different dynamic given its dr
Flow ratio and given the fact people hoard gold. They don't
Consume it. If you go back before the 70s when people understood gold
the impetus was to have your gold mined last as long as it could and
And again this this is something that no mining CEO that I have ever come across
Understands and because they're trained to look at it as their commodity and it isn't and as a result the toll entire gold mining industry
Is is is massively?
Missed allocates its capital. Let's say it's one gram per tonne is equivalent basically to one part per million
So what we're saying is that with in a million
grains of sand
One of those grains of sands is gonna be gold
So it's not much not much at all, but that can make money that's sort of the scale
we're looking at and the complexities involved in figuring that out is
Unbelievable because consider we're drilling a hole
300 meters down
Into an ore body looking for our bus gonna be you know, 100 200 meters wide, etc. Your drill hole covers an area that big
You cut that in half
crush that half of the core
Down and then you get distract a 30 gram sample in that 30 gram sample, whatever that is is meant to represent an area
25 by 25 by 25
so you can kind of see that complexity issues we deal with here the first time I found a gold mine a
Bunch of times. I thought I did but didn't but the first time I actually did I was working in Honduras
Funded by some guy out of Australia and working on this conceptual idea these hot springs
that
Are forming gold deposits?
I went, you know got the geologic maps which were pretty poor and in fact at that point in Honduras
You could only get a map from the government and they cut all sorts of bits and pieces out of it
So it's very difficult. And what I saw on the map was a lot m baladeiro, which is bubbling hot spring
So I went there and found a big outcrop of SLUSA 5 red shaded Center, which is hot springs
deposit and
That never carried anything
It was much gold in that yet on the sides on the fault over here in this rock type was Altered all the hell
It I started picking up some good numbers, you know 78 grams gold
You're like a detective you're trying to figure out what happened on this piece of ground a million ten a hundred million
You know billion years ago
Based on a little bit of data
So it's always fascinating to me just figuring that sort of thing out and if you get it, right?
It's it's it's it's incredible feeling why you know, I got it right it's working
It doesn't happen that often but as a geologist, I mean, that's what I love it
You know no matter where I go in the world. I've always got rocks to look at and think and I like that
Gold is unique amongst the elements and that it isn't consumed like say silver
Value makes even the tiny amounts of gold using things like electronics
Economical to recover and this means that importantly just about every ounce of gold ever mined remains above ground
Gold is not consumed
All the gold ever mined in human history still exists above ground somewhere
May be buried in a pyramid perhaps but available at the right price
It comes back into the market and what that means. Is that what gold mining does is it has
Goal, or the an enormous goal of above-ground supply of the metal already. And so we think about gold mining
It's very unlike oil
Production or copper mining or iron ore mining?
Because those commodities are consumed very shortly after they're miners gold is not now gold production is actually increased significantly over the past 150 years
with the advent of new technologies and new deposits that are found but interestingly if you look at
The percentage increased above ground supply. It's been fairly stable that between 1 and 3 percent at the moment
The best best guess is probably that. They're one hundred and eighty-seven thousand tons of gold
So this is all the gold that that ever was mined
this is
The stock but you could also call it the inventory
And then there's the flow. The flow is at the moment I think in
2016 mine production was three thousand two hundred tons, so
187 thousand tons of stock three thousand two hundred tons of flow
If you divide that you arrive at fifty eight point eight, I think
That's a stock to flow ratio. That means that
If you continue producing at the same rate
It would take 58 years to double the stock of
187 thousand tons of gold, but that also means that the annual inflation of gold is
1.7 percent
Which is pretty low and I think it's interesting that
Population growth is also roughly 1.7 percent
now
I think when it comes to to money
trust and stability is crucial if you compare it to feared money inflation since
1971 on average the monetary base grew at 9% per year since
1913 it grew by 8% per year. So
Much much more if there would be a major supply disruption in the copper space or especially in the oil space. I
Mean if if they close down the Straits of Hormuz or or whatever
Oil supply would last for a couple of months and would have a huge impact on gold on on oil prices
While for gold if there's a big strike in in in South Africa and mining production is down 10%
It doesn't have any impact on the price of gold because of the stock the existing gold
is there people trade with that existing gold and
and at some price every holder of gold will become a seller and that's the beauty of it and that is
Also from my point of view the reason why gold is that liquid?
20% of the world's finished gold products come from a single refinery in Switzerland
in the final part of our journey this episode we want you to see firsthand this
Fascinating process to understand how the gold extracted from the ground is turned from a few flecks and a piece of rock
To a finished gold bar
That what we are doing here
Is actually really very very old techniques. There's nothing automatically new has been invented
all the
Technology that we are using here is known for hundreds if not 4,000 years, but of course it has been refined in them
Okay, we are now
entering the
What we call the black foundry black because the material that we are processing here is to containing impurities
It's many to Tory coming from the mind
the rebar
consists of gold and silver and some impurities
Actually, we called or a already when it is
One or two percent containing gold and the rest in is mainly mainly silver
This is high grade Tori. And you see also it is is
drill holes
They were made by the mind by the producer
So they know
what they are sending
so we take these parts into our
refinery as well as also scrap or jewelry or
industrial scrap
Refine it. That means we bring it up to a fineness of up to
99.99% pure gold
We reach 250 degrees we are ready to go in 45 minute
We take our samples always out of the liquid gold because
Now only then you are sure that you have a representative sample
Now we take drillings here
So this is the electrolytically refinery
Just me before
Side
Little clams
With your plan, do we have?
Yes
So we dissolve everything with the particular setting of current-voltage
Guarantee that the only pure gold
Result of the process
From the refinery it is the first step is we have to prepare the
Final bars we have to melting pots
we are heating up in one part and the other part is pouring and then it
Solidifies in this cube, he cut it now in two pieces like this
and this is a little bit less than
one kilo
Now we are going to what we call the white foundry
Right because it is all pure high grade Phi that is processed here
You see here. Is this carousel very low box?
Now the robot is taking one of the clocks and is having a little piece on it
Man can take
The block a little bit less than Akina some wire
That's it done
Again here you're not you you you have to flame
So if I so oxygen is burned away
He cools it down pushed into water a Tennessee
final shiny
On the other side we can show you the hundred red box
numbers are
produced fully by robots and you remember
We had these books for the kilobars
This is now 400 gram bars
So it's a little bit less than on the graph a robot is taking this clock putting it on a scale
Having some wire but then you see there in the back this furnace is is a
It is put on a conveyor belt a
Little bit of fire and people way about is moving it through this tunnel and then it comes out
So this year is
Quality control
That means we are checking here. I had the weight of each bar
If you want to do it precise, there is no other way
Puts it on the scale and just checking the weight at the end. This lady is the most important
You have two big issues
In in our business in refining one is precision. You have to be precise
And the other thing is you have to be fast because the value of cold
Akeelah roughly 40,000 dollars does not permit us to have this this petal just laying around so
the whole
Production has to be meticulously planned. So every step
Must be defined to the last I would say almost minute
Workers have to work hand in hand
To make sure that the metal that comes in is as quickly through the process as as possible
The process of finding extracting and refining gold gives it not only its luster but also much of its economic value
Today with fiat currencies all around the world completely unhinged from any kind of a monetary
Anchor Gold value has arguably never been higher
There's some magic about gold and to some degree silver. There's some magic it's the heft. It's the feel. It's the warmth
It's the color. It's just a beautiful thing and it always has been beautiful and clearly it's the
absolute core of the lasts
Well, not just several hundred years of history, but probably thousands this genuinely changes people's lives
There is more about gold than then. It's just like a shiny thing. What is really special?
So now we have a better understanding as to why gold is money and why no matter what alternatives mankind dreams up over the centuries
We always return to this curious yellow metal
we've taken you underground to witness firsthand the enormous challenges that confront those who scour the globe looking for new deposits and
we've traced Gold's path from Emir twinkle and a geologists eye to the gold bars and coins that we know and recognize as
Gold gets more difficult to find and more expensive to produce
The challenge is facing those who spend their lives in search of this most precious of metals are constantly increasing
Since it was first discovered gold has held a special place in the hearts and minds of man for thousands of years
It's provided stability and a means by which wealth could be measured preserved and protected for generations it
remains the only universally accepted currency and the only store of wealth impervious to government debasement in
The next episode we'll examine the different attitudes towards gold in the east and the west
will explain how the gold price is different from the price of gold and
We'll take a look at how gold is bought and sold around the world
we'll also ask the question is the price of gold manipulated and if so by whom
And we'll look at some of the many legends and conspiracy theories surrounding the older money on earth
Join me next time as our journey continues
You
You
