Understanding Gold
Gold is a physical metal with uses in jewellery, technology and investment. This lesson explores what makes it distinctive, who uses it and the forms in which people can own it.
What is gold?
Gold is a naturally occurring chemical element. Its symbol is Au. It has a distinctive colour, can be shaped into many forms and resists corrosion. These properties have made it useful to people across many cultures and periods of history.
Gold does not need to be manufactured, but it does need to be found, mined or recovered from existing products, then refined. Once refined, it can be used in jewellery and technology or made into investment products such as bars and coins.
Who uses and buys gold?
There is no single source of demand for gold. Jewellery buyers, investors, central banks and technology manufacturers all use or hold it for different reasons.
Jewellery
Gold is shaped into rings, necklaces and other pieces. Jewellery prices can reflect design and craftsmanship as well as the gold they contain.
Investment
Investors can buy physical gold as bars or coins, or use other products that provide exposure to its price. Those products do not all work in the same way.
Technology and reserves
Gold is used in some electronic applications. Central banks also hold gold as part of their reserve assets.
Where does the supply of gold come from?
New gold enters the market through mining. Gold can also return to the market when existing items, such as jewellery or industrial products, are recycled. Both newly mined and recycled gold are part of the wider supply picture.
Supply cannot always respond quickly when the price changes. Developing a mine takes time, while the amount of gold returned for recycling depends partly on whether existing owners decide to sell.
How can someone own physical gold?
Gold bullion is commonly sold as bars and investment coins. Products differ in size, purity, manufacturer and price. Gold may be kept by its owner or stored with a provider under an agreed storage arrangement.
Gold jewellery also contains physical gold, but it is usually bought as a finished item. Its purchase price should not be confused with the value of its gold content alone.
Key question: If you buy gold through an app or storage provider, find out whether you own physical metal, how that ownership is recorded, and what it would cost to sell or take delivery. We will cover these arrangements in later lessons.
Does gold always hold its value?
Gold has a long history of being valued, but its market price still moves. A buyer can lose money if the price falls or if the amount received on sale is less than the total purchase and holding costs. Gold does not pay interest simply because you own the metal.
The next lessons will help you understand silver and platinum before we examine prices, premiums, storage and ownership in more detail.