Economic Features
The principal and most essential use of gold is as a standard of value and a medium of exchange. Gold has been prized since the earliest times because of its luster, color, malleability, and indestructibility, and has long been used as a trading medium. At present little of the metal is actually circulated from hand to hand. Stocks of gold, however, accumulated by governments and banking interests, form the essential foundation of paper currency and of the vast modern system of credit relations. In the settlement of international trade balances considerable quantities of gold frequently move from debtor to creditor nations. Although the amounts thus shipped are frequently great in value, they are very small in volume. It is interesting to note that the entire accumulated gold stocks of the world's governments—about nine billion dollars—cast in a solid block, with the horizontal dimensions of the Washington monument, would be only about 12 feet high.
Other uses of gold are in dentistry, and in the arts for jewelry, gilding, and other forms of ornamentation. Consumption for these purposes has been increasing of late years and now takes a third or more of the world's annual production. In the United States, before war-time restrictions were adopted, the consumption for jewelry and similar uses exceeded the consumption in coinage. Since the war it has exceeded the total domestic production of gold. An interesting problem for the future is how an adequate supply of gold is to be distributed between monetary uses and the arts. The curve of increase in the requirements of the arts indicates that, unless there is greatly increased production, all the world's gold will be necessary for the arts in a comparatively few years. To retain it for monetary purposes would require government restrictions.
Of all the mineral commodities, gold has played perhaps the most important and certainly the most romantic part in the world's history. The "lure of gold" has taken men to the remotest corners of the globe. It has been the moving force in the settlement and colonization of new countries, in numerous wars, and in many other strenuous activities of the human race.
About two-thirds of the annual gold production of the world comes from the British Empire—from South and West Africa, Australasia, Canada, and India. A single colony, the Transvaal, produces about 40 per cent of the world's total. British capital, which seems to have a particular affinity for investments in gold mines, controls not only the larger part of the output from the colonies, but also important mines in Siberia, Mexico, South America, and the United States.
Russia, Mexico, and Japan have small gold production. The chief deposits of Russia are those of Siberia, which have had an important output and have apparent great possibilities of increase. Other foreign districts are numerous and widely scattered, but, with the exception of Colombia and Korea, no one of them yields 1 per cent of the world's gold.
French interests control about a tenth of the production of the Transvaal, and minor supplies in Mexico and South America—in all about 6 per cent of the world's production. Germany and Austria control less than 1 per cent of the total gold production. German interests formerly had extensive holdings in South Africa and Australia, but during the war this control was eliminated.
The United States, the second largest gold-producing country, supplies about 20 per cent of the world's total. Commercially it controls production of another 5 per cent in foreign countries, chiefly in Canada, Mexico, South America, and Korea. About one-fourth of the United States production comes from California. Other producing states in order of importance are Colorado, Alaska, South Dakota, Nevada, Arizona, Montana, and Utah. These eight states supply 95 per cent of the country's output, and most of the remainder is obtained from other western states.
International movements of gold depend chiefly upon its use in the settlement of trade balances, and are not governed by the considerations which control ordinary mineral commodities. Imports and exports vary with changing foreign trade balances. Large amounts of gold normally go to London, because Great Britain requires all gold produced in the colonies to be sent to England; but since England ordinarily has an unfavorable balance of trade, much of this gold is reëxported. The United States up to a few years ago was also a debtor nation, and more gold was exported than was imported. During the war, however, this country became the greatest of the creditor nations and imports of gold, chiefly from Europe, were several times the exports.
The total world's gold production up to 1920 has been upwards of 19 billions of dollars, of which about 10 billions have gone into the arts or been hidden and lost, leaving 9 billions in monetary reserve.