Topic: Hypothetically, if a large enough gold deposit was found, could it cause economi - page 2. (Read 2709 times)

For some reason , everyone has been ignoring the point of the question.

I think he is trying to ask something like this :-


Everyone seems to be answering why Bitcoin is better and why there would be problems mining.

Even if the question as reframed by me is not what he intended to ask , can anyone here answer it ?
The concept sounds interesting.

Other than making gold more used than aluminimum , for a huge amount of things (I guess we would use gold foil instead of aluminimum foil) , what effect would it have on the economy , of places like fort knox ?

I have recently read, astronomers found meteorites filled with gold deposits, bigger than the world supply x10.

Unfortunately, the cost to mine this, and to transport it back to earth, would negate the profit, from doing that. {With current technology}

If hypothetically this meteorite should enter earths atmosphere, and break or melt into smaller pieces, it would flood the market, and gold will be less valuable.

Gold is valuable because :

1. It's moderately scarce.
2. Expensive to mine.
3. Shiny and cool.  {I will not wear a stone ring}
4. Last for centuries {Do not rust or decay}
5. Very good conductor for electricity.

The difficulty varies though.   This is a history question to some extent, someone who knows their stuff could quote some facts on this.    But even present tense various companies around the world will quote you different costs to their mining

There is hard rock mining, the proper underground stuff.  Expensive but can bring entire seams of gold or the much cheaper alluvial mining which is surface mining for fragments of gold distibuted usually by water, rivers and glaciers over many years.    That can be cheap, depends if the gold has collected together or not.
   Mining grades for open pit vary from 1 gram of gold per ton to maybe over 10 grams or more per ton which would be great (much riches ).

This hypothetical gold mine I presume would be high grade and concentrated, if it really was a large amount of gold; then yes it is probably going to alter the gold price.    In turn this might cause economic change but modern day we dont really trade off gold, we base it off dollars which are incredibly more plentiful then any mine has ever been.

One of the largest gold mines in the world is on the 7 peaks route.  Its on the way to one of the highest mountain peaks in the world and on top of the world is this great big gold mine.   They have taken off the entire top to one of these peaks (not the summit), they liquate it and built a great big water slide to send it down to port for proper refining.    Plus on top of that they had terrorists attack them for a ransom I think it was.
Anyhow my point is costs can be massive or it could be very simple to get the gold like the original California gold rush - they just picked lumps of gold off the ground   (a bit like btc except without the price rise perhaps)


http://en.wikipedia.org/wiki/Seven_Summits

No it would not.

It costs money to mine gold from the gold mines so it would not be possible to extract the gold at a rate that you could sell it to cause a price crash.

If you would find a large gold mine, mine the gold and sell it, there would be no other effect other then if the same amount of gold was sold by existing holders of gold.

If the chinese find this gold mine it wont affect the price because the Chinese no longer export any gold.   They are the worlds largest gold miners, Im not saying this will always be the case but it is today.  Over time, I think the majority of gold has come from South Africa as it has special meteor displacement of its crust; not true most places.

But right now if China finds gold they will keep it hence the price would not change.  The reason we can say this is China is greatly lacking in gold reserves, a communist nation for fifty years this is no great surprise.
I believe they even lag behind UK (proportionally) which famously sold the majority of its gold at the lowest prices possible.   Obviously China lags USA with its fort knox reserves.    It has a great many people and so this is why they are so poor in this respect (but not in production)

It wont happen but in theory USA has that 17tn debt and yes the gold is in theory spent many times over and USA is not a rich nation at all, but in theory they can default the paper debt and be the richest via their gold reserves.   They have after all made it quite clear dollars do not give any claim to their gold.




Despite this, the above reference to paper gold and its distorting effects; this applies to dollars more then anything.  More then an ETF or futures contract, its really about the world over valuing the dollar because it used to be based on gold and it has gone so far from that standard that we are effectively walking on air here like a wile e coyote cartoon.  SO long as we believe, dont look down and apply cartoon physics then the world economy will continue on this way I suppose but if its ever tested we should find much weakness in many currencies that are stacked against this 40 year old Nixon standard



History has a couple examples of this so if you want the future check the past.  Off hand there is there is the Spanish empire mining south american.   They obtained alot of gold also silver.  Long term silver price has been debased far more then gold as an offset of the industrial revolution.

Another example I heard was of an African King on pilgrimiage to Mecca.   He took gold for his travel expenses, so much that nations he passed through saw inflation.   This was recorded in Egyptian history I think

That depends on who finds the mine. For example, if the Chinese find a gold mine having 1 million tonnes of the yellow metal, they will first use it to fill their gold reserves. The average annual global demand for gold is just 2,000 tonnes. So they can't sell all their gold at once. The price will definitely drop, but not by many times, as only one supplier is having infinite supplies.

The effect would be inflation.

In the pre-bretton woods world, money was gold.  So more gold = more money in circulation. Now money is not gold, so, theoretically, even if gold was 100x it wouldn't matter.

BUT, since the monetary supply of fiat currencies is inflated enormously by those who own the keys to the printing press, the only thing that constrains them is the price of tangible assets that would reflect their printing activities. Gold price spiking is an indication of people losing faith in the value of fiat.

More gold would allow lower gold prices and as a consequence an expansion of "printing" activities as people would not be able to tell the difference since the gold price would decline.

The equivalent of the gold mine you describe is "paper gold". The invention of the bankers to multiply the quantities of gold traded, like it was actual gold, when in fact it is not. There is an artificial "supply" of gold (as much as 100x compared to actual gold) which keeps gold price down and the printing press going.

Their leverage between physical and fictional gold is only constrained by the lack of actual metal. Multiplying physical gold by, say, 10 times, due to some discovery, would allow them to leverage paper gold much higher (like 1000x) because there wouldn't be physical shortages of any kind and thus the situation would be well under control.

Yea that is interesting but bauxite is very much more common.     The thing with gold is it takes alot to actually mine it, apparently this is where they differ

So gold is tied to the oil price especially as this is the worlds most transportable energy source in bulk.   They can refine the alunminum in places where energy is excessive like Iceland with geothermic power, so this ties it far less to the global factors.  Its more of a specialised/industrial product, I think ironical this counts against it for value stored

In 2000 when oil was cheap to the extreme so was gold cheap.  Include inflation and it might have been cheaper then the 1970's.   Its likely both products are linked globally in line with world business, except oil is a heck of lot more trouble to handle

The wealth of nations has nothing to do with the amount of gold they have, gold is just a medium of exchange like the dollar. Currencies represent wealth, they themselves are not wealth. Gold does have some intrinsic value since it has industrial uses and is good for jewelry, but most of it's value come from it being a medium of exchange. Like Bitcoin, gold has value because people want it.

If you found a huge gold supply, it would lower the price of gold. You would only be able to sell so much before the price would drop, but, if you did it quickly enough you might be able to sell a significant amount at near the current price.

Gold extraction isn't that energy intensive. Aluminum extraction is.

yes thats kinda true, it goes the same thing with diamomds da beers did advertising in the 1930's and now diamond is worth something just cause of that alone, here is a video to what I am talking about https://www.youtube.com/watch?v=N5kWu1ifBGU

will only cause a fall on gold prices, the world money has nothing to do with the gold since the 1970's. I personally believe that the big guys will just avoid the deposit being sold or even the info goes public

Much of gold's price comes from energy costs. Analyst usually estimate cost of gold from oil prices. If a large deposit was found, and oil prices is high, gold mining and production would remain slow.

Gold is too impractical and obsolete.  What happens if your country enters anarchy and you need to bugout?  $1 million in gold weighs 55 pounds.  

We have both contemporary and historical stories of how refugees, with gold and diamonds on their possessions, often lose their valuables to bandits and scrupulous border officials.  

if there is unlimited cheap energy like fusion power coming online

then you can get gold from filtering sea water, the price of gold will plumet

That's an excellent point, and one few people know.

All that gold mining caused inflation. But inflation wasn't understood back then. They thought gold was wealth. So huge efforts were put into gold-mining projects. Remember, this was in an era before cheap transport. Most transactions were local. Most long-distance shipping was for luxuries - silks, spices, gold, jewels, and such. So the country was expending resources developing colonies and gold mining, and becoming poorer by doing so.

Today, despite much noise from the "gold bugs", gold is just a commodity. Its price in dollars has varied over a factor of 6 in the last 20 years without affecting much.

I don't think it would cause economic collapse or anything but supply and demand would kick in and the price would plummet.

it would cause gold inflation and push the price down, which is one of the reasons why bitcoin is better than gold as a form of money, the bitcoin creation algorithm is almost completely predictable and the amount of bitcoins will never surpass 21 mil.

...

First, there are some 175,000 tonnes of above-ground gold in stock.  Almost NONE disappears.  Estimated world production (not inc. recycling) is some 2500 - 3000 tonnes annually.

Second, one of the world's largest recent gold mines is Yanacocha (Peru).  This mine produces some (very roughly, production varies there, see link) 1.5 million ounces (that works out to some 47 tonnes).  en.wikipedia.org/wiki/Yanacocha  Even though Peru has a new discovery ("Conga", nearby to Yanacocha), there is tremendous resistance to putting it into production.  Even Alaska's Pebble mine (huge gold reserves) is now on hold at best, environmental resistance.  Bottom line here?  No, there will not likely be ANY discoveries within and order of magnitude that would affect gold prices.

Third, I believe (thanks to top gold analyst "FOFOA") that gold coming on-stream or off-stream will not much affect prices that much.  What WILL affect prices will be if/when large gold owners decide not to sell any of it...

fofoa.blogspot.com

(very long reading)

90% of earths gold is unmined but in a known location.   They simply have to find a way to bring molten magma from the earths core to the surface then refine the gold content and they effectively have an infinite source.


Some people speculate not that gold is rare but by the time they invent a way to gain large amounts in a similar scheme, at the same time we will have found free energy.  Like nuclear fusion or something.    Economies will not collapse from genuine advancement, but the nature of value may evolve like the network economy thesis   

This is pretty much why Ben Bernanke says gold is a historic relic, he thinks he is the replacement for such arcane practise.  He does not recognise his ilk is a problem not an answer and certainly no advancement over the Roman empires economic policies or similar failures since