The Definitive Guide to Gold ITS VALUE THROUGH HISTORY AND WHAT IT MEANS TO THE MODERN INVESTOR. BROUGHT TO YOU BY NOVEM “Gold is money, everything else is credit.” JP MORGAN NOVEM The definitive guide to gold 2 INTRO An investment like no other Gold is an investment unlike any other in modern history. It retains value not only over the course of one’s life but intergenerationally. The value of gold has ups and downs depending on the strength “Gold is literally in of the global economy - with gold typically strengthening in value during times of economic our blood — our uncertainty - but unlike other investments, gold will bodies contain never completely lose its value. 0.2 milligrams of Gold has held extant value for humans for over 7,000 years - and will likely remain so over the next it, mostly in our 1,000 years. No other stock, bond, or commodity blood.” has a comparable or foreseeable endurance to retain value and it is a safe bet that gold will remain a valuable commodity. It is the closest concrete expression we have to the idea of “value”. While currency itself is an invention of humankind, gold is as close to the core of the abstract concept of currency as any single commodity. It is not hard to see why gold has a legendary appeal, a spotted history of humans building and destroying civilizations to attain it and a definite allure for the diversified investor to this day. As human technology has evolved from papyrus and pottery to smartphones and blockchain, gold has always been and will always be everlastingly valuable. The history of gold is the history of currency; the history of currency is tantamount to the history of society as we know it. The idea to abstractly represent and value wealth in a way that creates stability and easily enables transactions is one of the wonders of the modern world, without which global trade, or even national trade would be impossible. NOVEM The definitive guide to gold 3 SECTION 01. The value of gold Gold is widely known as one of the most sought after precious metals, but why is gold inherently valuable and how did gold gain and maintain its status? Its timeless appeal and humanity’s long historical relationship with gold are contributing factors to the enduring value of gold, and its success as an asset and means of exchange. NOVEM The definitive guide to gold NOVEM The definitive guide to gold 4 01. THE VALUE OF GOLD Why do we buy gold? Traditionally people trust gold, seeing it as a It is seen as a safe haven, possibly because its store of value – especially in uncertain times performance in the market tends to be or as a hedge against inflation of a weakening predictable. For example, when the US Dollar dollar. or the stock market drops, when inflation is high, or when it is a low-interest-rate environment, Gold has been used historically to barter for investors tend to purchase gold and/or gold prices goods, and so it has a historical element to it tend to rise. This is a reflection of how investors that makes us use it to denote value. see gold as a good option for preserving wealth in uncertain times. “Gold has been discovered on every continent on Earth.” SOURCE Gold always has value Gold has always been valuable in that its value While gold is perceived as a stable store of value, has never reached zero. In fact, it is probably the gold price reflects supply and demand, and one of the most sought after of all the precious the price can fluctuate like any commodity. For metals in existence. example, gold coins might retain near full value even when there is political instability or when it is The value of gold could be said to be moved and used across national borders. multidimensional. First, gold is perceived to be a stable store of value. However, gold Gold has a universal, international appeal that is as a physical element also offers immediate sustained to this day. value; it is highly corrosion-resistant and easily worked, so it has multiple applications from jewellery and decorative purposes to industrial applications. NOVEM The definitive guide to gold 5 01. THE VALUE OF GOLD All currency is founded upon belief Some of gold’s value could come from the belief factor. This means that because we have faith in the value of gold – and in part due to our trust in an external authority within our economies – we collectively recognise it as a reliable medium of exchange and indicator of value, and so gold retains its value. All currency is based on belief, and it’s believed that the emotional attachment our historical forebears have had to gold is a driving factor in that belief. Beyond the human belief in gold’s value, gold has a few characteristics that separate it from every other currency that has been tried. Gold’s unique coloring and luster have fascinated humans for centuries, which is why gold has been so successful. “All money is a matter of belief.” ADAM SMITH NOVEM The definitive guide to gold 6 SECTION 02. The 3 characteristics of gold’s success Gold is historically humanity’s clear choice as the eminent representation of wealth - but what makes gold the best fit? Other precious metals like silver could be and have been used to exchange wealth. Spices and salt have been used as currency. What makes gold “the winner” as the commodity most closely associated with wealth? Gold’s success could be said to be founded upon three key characteristics: ♦ Workability ♦ Immutability ♦ Duality In addition, other key factors include the ability to measure and validate gold, and the fact that it is not easy to manipulate the price of gold. NOVEM The definitive guide to gold NOVEM The definitive guide to gold 7 02. THE 3 CHARACTERISTICS OF GOLD’S SUCCESS Workability Gold is considered a soft metal, and so it is highly workable and can be used for very fine work. It can be alloyed with other metals – from silver and copper to zinc and titanium – to make it stronger, more durable, and more suitable for other purposes such as jewellery. Skill in minting gold With a low melting point, gold is easier to mint and finally to the steam-powered and and use as coinage than some other metals electrical-powered minting processes of modern like titanium, zirconium, aluminium, and times - our ability to mint coins from precious and iron. And while silver has similar properties semi-precious metals has greatly advanced. that make it almost suitable for minting, it tarnishes, unlike gold. Gold rates at 2.3 on a hardness scale of 10. The human advances in coin-minting As a very soft metal, gold is very malleable and can technologies, including gold coins, might be a be pounded, twisted, rolled, and shaped into a contributing factor to gold’s success. From the huge variety of forms without breaking apart. Gold handheld dies of the Middle Ages to the first has chemical and physical properties that make it mechanised minting processes in the 1660s, ideal for serving as currency. Uncommon uses for gold Gold can even be pounded into sheets so that it becomes translucent yet still remain intact. These sheets of gold allow some sunlight to pass through while reflecting infrared rays, which is why some skyscrapers use gold in their glass windows to assist with cooling. Gold is similarly used in satellites and astronaut helmets to reflect infrared rays in space. NOVEM The definitive guide to gold 8 02. THE 3 CHARACTERISTICS OF GOLD’S SUCCESS Gold used in technology and More gold is re- electronics coverable from a tonne of personal Gold is also highly workable because it is extremely ductile, and can be shaped into computers than wire or threadlike forms without developing from 17 tonnes of brittleness or breaking. And although gold is not magnetic, it is an excellent conductor of gold ore. electricity. This makes it extremely valuable for sectors like the electronics industry in applications like circuits. SOURCE Gold used as medicine Gold is even used in medicine. Gold powder, gold dust, or gold salts have been used for years to treat conditions like rheumatoid arthritis. For health-related applications gold was used as far back as 4,500 years ago, when the ancient Egyptians used gold for dental work and other purposes. In modern times, gold has been used in aurotherapy or chrysotherapy (use of gold salts to treat rheumatoid arthritis) since the early 1900s. Gold’s use in medicine is likely due to its purity and hence inert status when used in the human body. Its biocompatibility with the human body, along with its potential anti- inflammatory and antimicrobial properties, means it has been widely used in health fields ranging from dentistry to medicine. NOVEM The definitive guide to gold 9 02. THE 3 CHARACTERISTICS OF GOLD’S SUCCESS Immutability Gold is one of the most non-reactive of all metals, and so it remains benign in all environments, giving it a level of immutability that is rare. These special physical properties, including its non-oxidising, non-corroding, and non-tarnishing qualities, has been a contributing factor to the number of uses it has been mined for. Gold endures where other metals do not While gold is a highly workable metal, it is not corroded or tarnished by moisture, and it does not oxidise when exposed to water and oxygen.