Mining
An Inside Look at the World’s Biggest Paper Gold Market
Every day, there are a whopping 5,500 tonnes ($212 billion) of gold traded in London, making it the largest wholesale and over-the-counter (OTC) market for gold in the world.
To put that in perspective, more gold is traded in London each day than what is stored at Fort Knox (4,176 tonnes). On a higher volume day, amounts closer to total U.S. gold reserves (8,133.5 tonnes) can change hands.
How is this possible?
The infographic below tells the story about gold’s foremost trading hub, as well as the paper gold market in London, England:
Image courtesy of: BullionStar
London is dominant in global price discovery for gold.
In 2015, it accounted for roughly 88% of gold trade – most of which occurs between banks on behalf of their clients. Further, 90% of London trade is spot trading, which further emphasizes London’s importance in price discovery for gold markets.
While the high-level details of the market are visible, the individual mechanisms behind the London gold trade are less clear. There is very little detailed information provided on physical shipments, outstanding gold deposits or loans, allocated or unallocated gold, or clientele types. Trade reporting also breaks down at a more granular level, and datasets on the GOFO (Gold Forward Offered Rate) were also discontinued in January, 2015.
Almost all gold (95%) traded in London is unallocated and without legal title. This makes it easier to trade, but it also raises concerns about a market that is opaque to begin with. There are 5,500 tonnes of paper gold exchanging hands on paper each day, but there are only 300 tonnes of gold vaulted in London outside of the reserves for ETFs or the Bank of England.
What would happen if there was ever even a small rush to get the physical asset behind the paper? Is there a system in place for such an event, and how does it work?
Original graphic by: BullionStar
Mining
Gold vs. S&P 500: Which Has Grown More Over Five Years?
The price of gold has set record highs in 2024, but how has this precious metal performed relative to the S&P 500?
Gold vs. S&P 500: Which Has Grown More Over Five Years?
This was originally posted on our Voronoi app. Download the app for free on Apple or Android and discover incredible data-driven charts from a variety of trusted sources.
Gold is considered a unique asset due to its enduring value, historical significance, and application in various technologies like computers, spacecraft, and communications equipment.
Commonly regarded as a “safe haven asset”, gold is something investors typically buy to protect themselves during periods of global uncertainty and economic decline.
It is for this reason that gold has performed rather strongly in recent years, and especially in 2024. Persistent inflation combined with multiple wars has driven up demand for gold, helping it set a new all-time high of over $2,400 per ounce.
To put this into perspective, we visualized the performance of gold alongside the S&P 500. See the table below for performance figures as of April 12, 2024.
Asset/Index | 1 Yr (%) | 5 Yr (%) |
---|---|---|
🏆 Gold | +16.35 | +81.65 |
💼 S&P 500 | +25.21 | +76.22 |
Over the five-year period, gold has climbed an impressive 81.65%, outpacing even the S&P 500.
Get Your Gold at Costco
Perhaps a sign of how high the demand for gold is becoming, wholesale giant Costco is reportedly selling up to $200 million worth of gold bars every month in the United States. The year prior, sales only amounted to $100 million per quarter.
Consumers aren’t the only ones buying gold, either. Central banks around the world have been accumulating gold in very large quantities, likely as a hedge against inflation.
According to the World Gold Council, these institutions bought 1,136 metric tons in 2022, marking the highest level since 1950. Figures for 2023 came in at 1,037 metric tons.
See More Graphics on Gold
If you’re fascinated by gold, be sure to check out more Visual Capitalist content including 200 Years of Global Gold Production, by Country or Ranked: The Largest Gold Reserves by Country.
-
Mining2 weeks ago
Charted: The Value Gap Between the Gold Price and Gold Miners
-
Real Estate1 week ago
Ranked: The Most Valuable Housing Markets in America
-
Business1 week ago
Charted: Big Four Market Share by S&P 500 Audits
-
AI1 week ago
The Stock Performance of U.S. Chipmakers So Far in 2024
-
Misc1 week ago
Almost Every EV Stock is Down After Q1 2024
-
Money2 weeks ago
Where Does One U.S. Tax Dollar Go?
-
Green2 weeks ago
Ranked: Top Countries by Total Forest Loss Since 2001
-
Real Estate2 weeks ago
Visualizing America’s Shortage of Affordable Homes