5 Reasons Why Gold Is Green – Investment Watch


Introduction by Matthew Piepenburg

On this refreshingly fact-focused report, Matterhorn Asset Management (MAM) advisor, Ronni Stoeferle, takes a deeper take a look at the false “eco war” on gold.

In a world of ever-growing public narratives completely at odds with transparent reality (from “Putin’s” war to “Transitory Inflation”), it should come as no surprise that the present ESG and “Green Revolution Army” of the woke West has turned its political gun sights toward the one precious metal which serves as the best threat to a dying fiat currency system: Gold. With puffed chests and lofty claims, global environmental leadership has conveniently made a disingenuous but full-frontal assault on gold mining (and hence gold) as an environmental threat.

How convenient…

Fortunately, Ronni’s evaluation of gold’s use/consumption data, CO2 characteristics and environmental comparisons to standard fiat currencies provides a much more fact-based (quite than politically-charged) context to this otherwise bogus war on history’s most precious of metals.

5 Reasons Why Gold Is Green

Within the gold industry, too, ESG is now on everyone’s lips. Behind the letter abbreviation ESG lies the endeavor to motivate firms to actively pursue ecological, social and good governance targets. ESG rankings offer investors and NGOs the chance to trace progress on this effort and discover the perfect firms within the industry.

Nonetheless, it’s unsuitable to limit the concept of sustainability only to those ESG rankings. In spite of everything, the rankings only evaluate the mining firms, but not the dear metals themselves. Gold suffers particularly from this limited view of sustainability. For instance, gold mining is frequently reported in a negative context. Inhumane working conditions in some gold mines in Africa or the environmental threat posed by cyanide contamination are the main focus of this reporting.

The detection of such misconduct is undoubtedly justified and essential. Nonetheless, the undeniable fact that such news completely discourages environmentally conscious or socially committed investors from investing within the yellow metal is an exaggerated response. It might sound surprising at first glance: Environmentally conscious investors should give attention to gold as an investment instrument. Gold is green because

  1. gold is used and never consumed
  2. CO2 emissions only occur within the relatively insignificant mining of latest gold
  3. gold is flexible in its use
  4. many other raw materials perform significantly worse ecologically
  5. fiat money also has a poor environmental record.

1. Gold is used and never consumed

In the general public debate, truncated representations are currently very much in vogue. Electric cars are considered climate-friendly because, unlike cars with internal combustion engines, their operation doesn’t cause any emissions. Any additional emissions and environmental impact attributable to electricity production and the manufacture and scrapping of the automotive will not be taken into consideration. On this context, nonetheless, only the general view over your entire life cycle ought to be relevant for an ecological assessment. And on this view, gold is indeed probably the most sustainable metal on this planet due to its elementary properties, the extraction process and its stable value.

Gold has been mined for greater than 7,000 years. During this era, greater than 205,000 tons have been produced, which is comparable to the dimensions of about 3.5 Olympic swimming pools. Greater than half of this has been mined for the reason that Fifties. Crucial to gold’s sustainability and environmental footprint is that virtually the entire gold ever mined continues to be in use. With every gold jewelry, every gold coin, every gold bar, there’s some probability that a few of it has been used for a lot of centuries, maybe even millennia. Unlike consumer goods resembling food, commodities, but in addition real estate, gold shouldn’t be consumed, but merely used.

Subsequently, recent gold production is hardly significant in an overall view, because the stock-to-flow ratio demonstrates. The present value of around 58 implies that the quantity of gold already in existence is 58 times the quantity of the present annual recent production. In other words, the annual “inflation rate”, i.e. the expansion of the worldwide gold stock in comparison with the already mined and further used (!) amount, is low and comparatively stable. It fluctuates between 1.2% and a maximum of two.4%.

As a precious metal, gold is characterised by the undeniable fact that it doesn’t chemically react with air or its components resembling oxygen, carbon dioxide and other gases. This protects gold from losing its luster. Gold subsequently stays in its purest form without end. This makes it the proper investment vehicle that will be passed down from generation to generation. The social and environmental costs of gold mining can consequently be spread over an almost infinitely long time period, making them converge towards zero. The permanence of gold also implies that gold never must be disposed of as waste. Nobody will voluntarily throw gold away, but will need to recycle it for profit.

2. Significant CO2 emissions are incurred only during mining

The present strong give attention to curbing CO2 emissions to combat climate change also needs to result in a stronger give attention to gold amongst investors. It’s because gold is a decidedly CO2-friendly metal and investment.

Three different sources are distinguished within the attribution of CO2 emissions. Scope 1 emissions cover those climate-damaging emissions which might be released inside the company itself, Scope 2 includes those emissions attributable to the corporate’s energy suppliers, and eventually Scope 3covers those thatoccur within the upstream and downstream supply chain.

For a lot of products, the nice a part of the emissions arises within the upstream and downstream supply chains, i.e. Scope 3. Nonetheless, the Scope 3 emissions of gold mining firms are almost negligible, as a gold bar may be very rarely further processed. Moreover, Scope 1 and Scope 2 CO2 emissions per ounce of gold produced are extremely low for big operations.

The comparison with other raw materials makes this clear. The production of aluminum consumes almost 11 times as much CO2 per US dollar of production value, steel greater than 5.5 times, coal almost thrice and zinc greater than two times. Copper is within the region of gold, lead barely below, while iron ore is rather more CO2 -friendly, with around two-thirds fewer emissions. Nonetheless, gold recycling produces 90% fewer CO2 emissions than gold mining, and about 25% of annual gold demand is met by recycling alone.

As well as, gold that has already been mined doesn’t cause any additional emissions, as these are generated exclusively through the mining and refining of the gold. Gold is used and never consumed. Consequently, the possession of physical gold doesn’t produce any emissions. Only the processing of gold into jewelry and the economic use of gold emits a small amount of additional CO2. Over time, physical gold will subsequently proceed to cut back the emissions intensity of a portfolio.

3. Gold greens a portfolio

Consequently, a rise within the share of gold in an investor’s portfolio significantly reduces the CO2 footprint and the emissions intensity of the general portfolio. For a portfolio consisting of 70% equities and 30% bonds, a ten% gold allocation reduces emissions intensity by 7%. A 20% gold allocation reduces emissions by 17%, in accordance with calculations by the World Gold Council in its readable study “Gold and climate change – Decarbonizing investment portfolios.”

gold is green

4. Fiat money harms the climate and the environment

Fiat currencies, then again, have a serious impact on the environment. There are roughly 1.5 trillion coins in circulation worldwide, with a complete weight of an estimated 5.25 million tons, consisting mainly of nickel, copper and steel. Banknotes in circulation in 2018 were around 576 billion. Yearly, around 150 billion recent banknotes are put into circulation. This corresponds to a stock-to-flow ratio of not even 4. Or put one other way, a banknote has a life expectancy of just 4 years.

The environmental damage that such enormous quantities of cotton, water, ink, and polymers in addition to of metal continually cause is gigantic, especially when put next to the 205,000 tons of gold which have been mined up to now.

This raises the greater than legitimate query of whether our current fiat money system will be classified as sustainable – and this in two ways: on the one hand, sustainable within the sense of ecological compatibility, and then again, sustainable within the economic sense. It’s because the negligible marginal costs of paper money production encourage an excessive expansion of the cash supply, which causes each ecological and economic distortions.

5. Gold is flexible in its use

Gold can also be very sustainable because of other properties. Its specific gravity and malleability make gold the proper currency. It will probably be used to move a considerable amount of value in a confined space, or it will probably be hammered into paper-thin gold leaf that’s lower than a micron thick.. It was highly prized hundreds of years ago and continues to be the primary alternative of central banks today. Unlike a paper currency, gold reserves don’t should be replenished to take care of purchasing power, because gold is basically proof against inflation.


A more in-depth look reveals beyond doubt that, contrary to a mess of reports and prejudices spread by the media, gold can already be classified as a really sustainable investment within the sense of the ESG guidelines. And your entire industry is making great efforts to eliminate the remaining blemishes. Beyond the importance of gold for investors and the industry, the undeniable advantages of gold should raise the query of whether the present monetary system will be made more sustainable through greater integration of gold should increasingly come into focus; not just for environmental but in addition for economic sustainability considerations.

So anyone turning away from gold is actually turning away from the world’s most sustainable metal by way of its CO2 balance sheet, the quantity of waste and the quantity of resources used.

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