How Mining and Refining Can Change the Price of Gold

Gold is a luxury product you see often. Celebrities on the red carpet often have gold hanging around their necks, sparkling on their fingers, or dangling around their wrists. When you think of extreme riches, what comes to mind? Likely gold bars sitting in a vault, indicating that their owner is a person of wealth and value. Gold coins in novels and movies are a reward for adventurers and heroes around the world. But not all gold is created equal, and despite the common perception, some gold can actually be not valuable at all. So, what’s the difference between a valuable metal and its less valuable alternative? The answer is often its origin point. Gold is brought out of the earth as ore, and the mining process can alter its value. Another way the price of gold can change is during the refining process. These two big variables can make the difference between two seemingly identical pieces of gold. The changes caused by the mining and refining process go even farther than that. Did you know that the gold market can change based off of new veins of gold being found or current mining conditions? Gold investors who watch gold’s value rise and fall based off global factors should be advised to how mining and refining can change the price of this valuable metal. Read on to find out just how these two industries can change gold’s value in both abstract and direct ways.

From the Source: Why Gold Mining Can Be a Difficult Task

While we often see the ‘end result’ of gold as a bar, coin, or necklace, we often don’t think about its origin point and how it gets to us. For one thing, mining is capable of causing massive economic damage. When constructing and operating a mine, everyone involved needs to be incredibly careful, or the damage can be devastating: erosion of the earth, dangerous sinkholes, eradication of local nature and life, and more. Human lives are also put at risk by water contamination or poor labour practices. Because of this, mining companies are meant to follow environmental and rehabilitation codes to minimize the environmental and health effects. What does this have to do with the price of gold? It’s important to remember that every market works off of supply and demand. And adding to the supply of gold can be very difficult when it takes time and effort to abide by the codes and laws of an area. While these laws are obviously necessary, they do affect the value of gold by making it more difficult to mine and obtain.

Rush Job: Why Sloppy Mining Isn’t Sustainable

There’s more than just environmental and health reasons for miners to take time and caution when it comes to mining. Rushing through extracting this metal from the earth can cause damage to it, therefore lowering its value. In order for gold to maintain full quality and value, the miners must take care and ensure to do the job right. Otherwise, the price of gold extracted will drop to match its state.

Why Refining is a Critical Part of Ensuring Gold Retains Its Value

Once the gold is drawn from the earth, its still not ready for the market. It must be refined and smelted and crafted. This is obviously not something that can be done easily and quickly. It takes time and care. If, at any point during this process, a mistake is made, then you can expect the price of gold to drop accordingly. This is further complicated by the fact that gold is an extremely soft metal that often requires special care; a hasty or unexamined refining process can cause issues. Gold and silver are often part of the same ores, and keeping the two precious metals intact while removing the unwanted part of the ore is extremely difficult; many efforts of coming up with a ‘perfect’ process have been attempted over the years. In the modern day, there are two major methods that are used: the Miller process (which uses chlorination to separate the precious metals from the ore), and the Wohlwill process (that relies on electrolysis). Dealing with strong currents or chlorine is no easy task; needless to say, there is no room for error.

Why Miners and Refining Companies Have to be Careful About Flooding the Market

Not only do miners and refining companies have to worry about the safety and practical aspects of gold mining, there’s something else they need to consider: the amount of gold they create and release. As mentioned earlier, the market runs off of supply and demand. By flooding the market with gold, they can cause serious long term impacts on the price of gold – and not for the better. Doing this is a good way to make short term profit at long term expense. Creating lots of supply throws the market out of balance, and the end result is a big dip in profits for everyone. Therefore, it’s in a refining company’s best interest to control distribution.

EDI Refining offers Canadians the ability to buy and sell gold, silver, and other precious metals. We also look at the gold market with a critical eye, giving advice to investors and examining the ups and downs of the market. For more information on what we do, our services, and what the gold market looks like, visit our blog. We cover all aspects of the precious metal markets and impart valuable information on investors.