GLOSSARY

GOLD

28 June 2018 By PDSNET

A precious metal that has been known and kept for thousands of years as a currency and a way to store value. All the gold ever mined throughout history would not fill a cube 25 meters on a side - so its value is mainly derived from its scarcity. It is held by central banks throughout the world as a reserve asset. For private investors, it is the ultimately secure asset, but it has a zero return. Gold does not pay dividends, rent or interest - so investors only hold it as a security against the potential weakness of paper currencies. The massive printing of money through quantitative easing (Q/E) programs across the world in the wake of COVID-19 and before will probably result in rising levels of inflation - which will cause the gold price to go up. Inflation in America at the beginning of 2022 was already at 6,8% - a 32-year high. In the past, South Africa has been the largest supplier of gold in the world. In 1970, South Africa produced 1000 tons of gold - more than all the rest of the world put together. In 2018, we produced only 140 tons - and we were the eighth largest producer in the world. So this industry has largely disappeared and it is no longer our main source of foreign exchange. The problem is that our gold is in "conglomerate form" and it is mostly very deep underground. In fact, South Africa still has about 40% of the world's known underground reserves of gold, but much of it is just too deep to be mined economically. Our deepest mine is Mponeng which is mining gold at about 4000 meters below the surface and there are plans to extend it to 5000 meters. It is also the deepest mine in the world. At that depth the rock temperature is around 60 degrees Celsius. To make it possible for workers to operate in that heat, the mine has the largest crushed ice plant in the world which pumps crushed ice down to the bottom of the mine continuously and then pumps the water back up when it melts and re-freezes it. South Africa also produces the world's best known gold coin - the krugerrand. There are more krugerrands in circulation than all other gold coins combined in the world.

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