Weekly Reads #1: Who is buying gold?
If you have any questions about the gold markets, today's piece is a great starting point.
Hey everyone!
What are Weekly Reads? In our research, we sift through tons of materials on various companies and industries. Among these, we occasionally find true gems - rich in knowledge and insights. We've decided to share these compelling pieces with you on a weekly basis. This section aims to enhance your understanding of specific industries, market trends, technologies, and more.
Here is the first one!
Have you ever wondered how gold markets operate? Who are the buyers and sellers? What is gold used for besides jewellery? If so, here is a thorough read from the World Bank titled Gold Investing Handbook for Asset Managers where you'll find all the answers and more.
Below, we summarize a section on supply and demand. Just look at the figure below. Impressive, isn’t it?
Here’s what we see:
The initial source of gold is mining companies, which provide 75% of the annual supply. Given gold's high recyclability, the remaining 25% comes from recycled materials, including old jewellery and industrial products.
Once extracted, gold ore is processed to separate gold from other minerals and is then sent to refineries that purify it into high-grade gold bullion.
After refining, gold bullion is sold to bullion banks. These banks play a crucial role in the gold market as they trade large volumes of gold daily, provide liquidity, and facilitate transactions between miners, refiners, and other market participants.
On the demand side, half of the produced gold goes to jewellery production and technology, while the remainder is used for investment purposes.
Retail investors typically buy physical gold in the form of coins or bars, accounting for about 20-30% of total annual gold demand, while institutional investors use futures contracts or exchange-traded funds (ETFs) to gain exposure to the gold market.
Central banks are another significant player in the gold market. They hold large reserves of gold as a store of value and a hedge against currency risk, seeing gold as a reserve of safety in times of economic instability.
That’s it for today. You will find more interesting information in the report.
Have a good weekend!