Bitcoin Forum

Alright, let's say that I find a gold mine large enough that if mined and refined, all the gold in it were enough to make gold about as rare as dirt.
First, what effect would this have on the economy? I heard somewhere that the wealth of nations is based on how much gold each country has.
Second, what if I could mine and sell it, like, really super fast without anyone knowing? Could I hypothetically become rich before anyone realized what was happening?

The current world economy is, sadly, not based on anything material.

There was a McDuck comic where he found more gold than existed in the rest of the world. Ancient incan treasure or whatever. His reaction was panic. Nobody must ever know about it or all his gold would become worthless.

This is why bitcoin is better than gold. The supply is known and cannot be changed beyond what is already predetermined. Especially since real gold is traded several times over the actual amounts that exist.

When the Spanish conquistadors invaded Mexico and Central and South America, they brought home a great quantity of gold. The amount of gold they brought back home was enough to cause inflation back home.
Yes, if enough gold were found that made it as rare as dirt, it would lose the value it now has, in the same way that fiat currencies are losing their values.

90% of earths gold is unmined but in a known location.   They simply have to find a way to bring molten magma from the earths core to the surface then refine the gold content and they effectively have an infinite source.


Some people speculate not that gold is rare but by the time they invent a way to gain large amounts in a similar scheme, at the same time we will have found free energy.  Like nuclear fusion or something.    Economies will not collapse from genuine advancement, but the nature of value may evolve like the network economy thesis   

This is pretty much why Ben Bernanke says gold is a historic relic, he thinks he is the replacement for such arcane practise.  He does not recognise his ilk is a problem not an answer and certainly no advancement over the Roman empires economic policies or similar failures since

...

First, there are some 175,000 tonnes of above-ground gold in stock.  Almost NONE disappears.  Estimated world production (not inc. recycling) is some 2500 - 3000 tonnes annually.

Second, one of the world's largest recent gold mines is Yanacocha (Peru).  This mine produces some (very roughly, production varies there, see link) 1.5 million ounces (that works out to some 47 tonnes).  en.wikipedia.org/wiki/Yanacocha (http://en.wikipedia.org/wiki/Yanacocha)  Even though Peru has a new discovery ("Conga", nearby to Yanacocha), there is tremendous resistance to putting it into production.  Even Alaska's Pebble mine (huge gold reserves) is now on hold at best, environmental resistance.  Bottom line here?  No, there will not likely be ANY discoveries within and order of magnitude that would affect gold prices.

Third, I believe (thanks to top gold analyst "FOFOA") that gold coming on-stream or off-stream will not much affect prices that much.  What WILL affect prices will be if/when large gold owners decide not to sell any of it...

fofoa.blogspot.com (http://fofoa.blogspot.com)

(very long reading)

it would cause gold inflation and push the price down, which is one of the reasons why bitcoin is better than gold as a form of money, the bitcoin creation algorithm is almost completely predictable and the amount of bitcoins will never surpass 21 mil.

I don't think it would cause economic collapse or anything but supply and demand would kick in and the price would plummet.

That's an excellent point, and one few people know.

All that gold mining caused inflation. But inflation wasn't understood back then. They thought gold was wealth. So huge efforts were put into gold-mining projects. Remember, this was in an era before cheap transport. Most transactions were local. Most long-distance shipping was for luxuries - silks, spices, gold, jewels, and such. So the country was expending resources developing colonies and gold mining, and becoming poorer by doing so.

Today, despite much noise from the "gold bugs", gold is just a commodity. Its price in dollars has varied over a factor of 6 in the last 20 years without affecting much.

if there is unlimited cheap energy like fusion power coming online

then you can get gold from filtering sea water, the price of gold will plumet

Gold is too impractical and obsolete.  What happens if your country enters anarchy and you need to bugout?  $1 million in gold weighs 55 pounds.  

We have both contemporary and historical stories of how refugees, with gold and diamonds on their possessions, often lose their valuables to bandits and scrupulous border officials.  

Much of gold's price comes from energy costs. Analyst usually estimate cost of gold from oil prices. If a large deposit was found, and oil prices is high, gold mining and production would remain slow.

will only cause a fall on gold prices, the world money has nothing to do with the gold since the 1970's. I personally believe that the big guys will just avoid the deposit being sold or even the info goes public

yes thats kinda true, it goes the same thing with diamomds da beers did advertising in the 1930's and now diamond is worth something just cause of that alone, here is a video to what I am talking about https://www.youtube.com/watch?v=N5kWu1ifBGU

Gold extraction isn't that energy intensive. Aluminum extraction is.

The wealth of nations has nothing to do with the amount of gold they have, gold is just a medium of exchange like the dollar. Currencies represent wealth, they themselves are not wealth. Gold does have some intrinsic value since it has industrial uses and is good for jewelry, but most of it's value come from it being a medium of exchange. Like Bitcoin, gold has value because people want it.

If you found a huge gold supply, it would lower the price of gold. You would only be able to sell so much before the price would drop, but, if you did it quickly enough you might be able to sell a significant amount at near the current price.

Yea that is interesting but bauxite is very much more common.     The thing with gold is it takes alot to actually mine it, apparently this is where they differ

So gold is tied to the oil price especially as this is the worlds most transportable energy source in bulk.   They can refine the alunminum in places where energy is excessive like Iceland with geothermic power, so this ties it far less to the global factors.  Its more of a specialised/industrial product, I think ironical this counts against it for value stored

In 2000 when oil was cheap to the extreme so was gold cheap.  Include inflation and it might have been cheaper then the 1970's.   Its likely both products are linked globally in line with world business, except oil is a heck of lot more trouble to handle

The effect would be inflation.

In the pre-bretton woods world, money was gold.  So more gold = more money in circulation. Now money is not gold, so, theoretically, even if gold was 100x it wouldn't matter.

BUT, since the monetary supply of fiat currencies is inflated enormously by those who own the keys to the printing press, the only thing that constrains them is the price of tangible assets that would reflect their printing activities. Gold price spiking is an indication of people losing faith in the value of fiat.

More gold would allow lower gold prices and as a consequence an expansion of "printing" activities as people would not be able to tell the difference since the gold price would decline.

The equivalent of the gold mine you describe is "paper gold". The invention of the bankers to multiply the quantities of gold traded, like it was actual gold, when in fact it is not. There is an artificial "supply" of gold (as much as 100x compared to actual gold) which keeps gold price down and the printing press going.

Their leverage between physical and fictional gold is only constrained by the lack of actual metal. Multiplying physical gold by, say, 10 times, due to some discovery, would allow them to leverage paper gold much higher (like 1000x) because there wouldn't be physical shortages of any kind and thus the situation would be well under control.

That depends on who finds the mine. For example, if the Chinese find a gold mine having 1 million tonnes of the yellow metal, they will first use it to fill their gold reserves. The average annual global demand for gold is just 2,000 tonnes. So they can't sell all their gold at once. The price will definitely drop, but not by many times, as only one supplier is having infinite supplies.

If the chinese find this gold mine it wont affect the price because the Chinese no longer export any gold.   They are the worlds largest gold miners, Im not saying this will always be the case but it is today.  Over time, I think the majority of gold has come from South Africa as it has special meteor displacement of its crust; not true most places.

But right now if China finds gold they will keep it hence the price would not change.  The reason we can say this is China is greatly lacking in gold reserves, a communist nation for fifty years this is no great surprise.
I believe they even lag behind UK (proportionally) which famously sold the majority of its gold at the lowest prices possible.   Obviously China lags USA with its fort knox reserves.    It has a great many people and so this is why they are so poor in this respect (but not in production)

It wont happen but in theory USA has that 17tn debt and yes the gold is in theory spent many times over and USA is not a rich nation at all, but in theory they can default the paper debt and be the richest via their gold reserves.   They have after all made it quite clear dollars do not give any claim to their gold.

https://i.imgur.com/v9bYyzo.jpg


Despite this, the above reference to paper gold and its distorting effects; this applies to dollars more then anything.  More then an ETF or futures contract, its really about the world over valuing the dollar because it used to be based on gold and it has gone so far from that standard that we are effectively walking on air here like a wile e coyote cartoon.  SO long as we believe, dont look down and apply cartoon physics then the world economy will continue on this way I suppose but if its ever tested we should find much weakness in many currencies that are stacked against this 40 year old Nixon standard



History has a couple examples of this so if you want the future check the past.  Off hand there is there is the Spanish empire mining south american.   They obtained alot of gold also silver.  Long term silver price has been debased far more then gold as an offset of the industrial revolution.

Another example I heard was of an African King on pilgrimiage to Mecca.   He took gold for his travel expenses, so much that nations he passed through saw inflation.   This was recorded in Egyptian history I think

No it would not.

It costs money to mine gold from the gold mines so it would not be possible to extract the gold at a rate that you could sell it to cause a price crash.

If you would find a large gold mine, mine the gold and sell it, there would be no other effect other then if the same amount of gold was sold by existing holders of gold.

The difficulty varies though.   This is a history question to some extent, someone who knows their stuff could quote some facts on this.    But even present tense various companies around the world will quote you different costs to their mining

There is hard rock mining, the proper underground stuff.  Expensive but can bring entire seams of gold or the much cheaper alluvial mining which is surface mining for fragments of gold distibuted usually by water, rivers and glaciers over many years.    That can be cheap, depends if the gold has collected together or not.
   Mining grades for open pit vary from 1 gram of gold per ton to maybe over 10 grams or more per ton which would be great (much riches :) ).

This hypothetical gold mine I presume would be high grade and concentrated, if it really was a large amount of gold; then yes it is probably going to alter the gold price.    In turn this might cause economic change but modern day we dont really trade off gold, we base it off dollars which are incredibly more plentiful then any mine has ever been.

One of the largest gold mines in the world is on the 7 peaks route.  Its on the way to one of the highest mountain peaks in the world and on top of the world is this great big gold mine.   They have taken off the entire top to one of these peaks (not the summit), they liquate it and built a great big water slide to send it down to port for proper refining.    Plus on top of that they had terrorists attack them for a ransom I think it was.
Anyhow my point is costs can be massive or it could be very simple to get the gold like the original California gold rush - they just picked lumps of gold off the ground   (a bit like btc except without the price rise perhaps)


http://en.wikipedia.org/wiki/Seven_Summits

I have recently read, astronomers found meteorites filled with gold deposits, bigger than the world supply x10.

Unfortunately, the cost to mine this, and to transport it back to earth, would negate the profit, from doing that. {With current technology}

If hypothetically this meteorite should enter earths atmosphere, and break or melt into smaller pieces, it would flood the market, and gold will be less valuable.

Gold is valuable because :

1. It's moderately scarce.
2. Expensive to mine.
3. Shiny and cool.  ;D {I will not wear a stone ring}
4. Last for centuries {Do not rust or decay}
5. Very good conductor for electricity.

For some reason , everyone has been ignoring the point of the question.

I think he is trying to ask something like this :-


Everyone seems to be answering why Bitcoin is better and why there would be problems mining.

Even if the question as reframed by me is not what he intended to ask , can anyone here answer it ?
The concept sounds interesting.

Other than making gold more used than aluminimum , for a huge amount of things (I guess we would use gold foil instead of aluminimum foil) , what effect would it have on the economy , of places like fort knox ?

It depend on how much cost mine it and how much gold there is.
Without these numbers it is impossible to give a sensible answer.

Supposing the price to mine it would be in the 100$/once and there is enough gold to increase the amount globally mined 10x per one year, it would crash the price (if all would be released in a continuous stream).
But, if it is finite (as it should be) miners would keep the gold and sell enough on the market to finance their operation.
Then, they would slowly sell it for years buying undervalued assets.

There is, also, the problem with refineries: there are not enough refineries to smelt the ore and refine it at an industrial financial level if you have too much ore production.

The lower value of gold would increase the uses as an industrial good.

No.

Gold miners would still need to invest in equipment, manpower and other capital in order to extract the gold from the mine. This is similar to how BTC miners still need to invest in electricity when they receive a high powered (when compared to other mining machines) miners. 

Gold is inflationary. Technology will always find new ways to extract more and more gold from the earth. Eventually they will figure out how to mass produce it through industrial processes. In the short term it can be a hedge of sorts but eventually the price will keep falling.

Well perhaps maybe the person that found this would be the richest man alive. Finding this I don't think would decrease the price of everything more so just have him money.

If you find it just keep it a secret. You can tell me of course.  ;D

The price is also related to quantity of fiat.

Quantity of fiat vs quantity of gold.

Given that the global debt situation requires a lot of new fiat to be issued to cover old debts => it's unlikely gold production will hit the percentage increases of new fiat production.

Gold is generally considered to be a hedge against inflation.

It is... it inflates at a rate of ~1-1.5% in itself (2.500 tons added annually to 180.000 tons above ground quantity). The global monetary supply is inflating faster, so the ratio between fiat money and quantities of gold is going in favor of gold.

There are also other uses of gold other then as a hedge against inflation. Gold is often used in semiconductors among other thins. This will put somewhat of a floor on the price of gold in terms of CPI as companies can produce things with gold more cheaply if the price of gold falls, creating demand for gold.

If we had ample quantities, there would be no reason having copper-nickel coins. It'd all be gold and silver. So even more demand.

For silver in particular, it would also mean wires are made out of silver, instead of copper. Silver is a better conductor. Especially in electric motors, silver wire coils produce more power than copper coils for the same electricity produced.

...

My first guess is that there are NO big and easy-to-mine gold mines to be found.

Second, most gold miners are losing money right now...

Third, there is HUGE RESISTANCE among locals re new & big Au mines (ref: Conga in Peru and Pebble in Alaska).

***

Buy and hold physical gold in your own possession without worries.  Um, like BTC!


The race is on!  Which gets to $55,000 first (Au (via FOFOA), or BTC from its fans)?

instead gold, what about petrol ... what do you thing OPEC would do ?

Technology finds ways to do alot of things faster which is a good thing.    I think the thing you are forgetting there is the gigantic population increase, so there is tons more gold but even more then that is the larger amount of people

So per capita over the world, gold is not inflationary.    It doesnt make much sense to say that, in ancient Egypt the price of a field of wheat was roughly the same as now; if you measure it as exchanged for gold.
That should be impossible it seems, the world is so different and there was certainly far less people plus they made the wheat by seeding with hand tools?  



The answer to the OP is simple, no its not having that radical an effect.    How many people here spend gold coins.      We have already debased any link to gold, right now its meaningless.  The centre of the world economy right now is Washington politics, its not some metal dynamic.
   Technology here is trying to take some power back via innovation and cryptography, convenience but look at bitcoin market cap and its nothing.  BTC is barely even a small NYSE stock size, its a fly on the windscreen of a juggernaut.   Gold is not massive either afaik, oil is big yes and the biggest market is government debt

Different metals have different kinds of uses and properties. Silver has a lower value (by measure of weight) and is generally is used for things that cost less. If the price of gold were to decrease sufficiently (because of either lower demand or higher supply) then things that are normally use silver could instead use gold.

If such a deposit was found, companies with vested interests in the price of gold remaining high would keep the news hush hush and hoard what was found, much like what is happening with diamonds today.

Yes and No

Depends how big the deposit, you do notice fluctuations in Gold prices (if you day trade) when SIGNIFICANT deposits are found because new ones of rather small size are found daily.

Currently, the amount of Gold mined in the history of mankind could fill 1/3 of the Washington Monument.  If a deposit that could fill the rest was found then DEFINITELY there would be a significant price drop.  If the price at the time of the find is $1,250 USD per ounce, 2/3 of that is $425 per ounce because the world supply tripled overnight.

However, the chances of such a deposit found on earth now are slim to none.  In the past decade there has been about 3 significant deposits found.

Price of Gold = 1 Ounce = 1 Paycheck

The faster you extract it, the more paychecks you get; just like Bitcoin mining.  Bitcoin Mining, very much like Gold mining is a number's game; but remains a game none the less ;)

No world economy is not tied to gold. As far as second part of your question goes, it's not question of "speed", it's question of "spread". If you could spread sales far enough from each other so you do not oversaturate markets too fast, than yes, you would walk away with thitload of fiat. But as you say, "as common as dirt", i'd say that saturation would happen really quickly. But still, you would get shitload of money.

In California gold rush, the gold price did not crash hard, instead, the whole west coast were built. It clearly reflected that in people's consensus, gold is money, more gold = more money, more money = richer

But economists say that more money will cause inflation, because fiat money's value purely comes from it being used to trade, it has no other use, more fiat money = more spending = inflation, but more gold will not cause more spending, since it holds value long term wise, the extra gold will just be hoarded

Gold rush is nowhere near to what OP described (gold as much as dirt). That would destroy price of gold to price of dirt (we use dirt too you know...for growing food etc.)

In today's 24 hour news cycle it would be very difficult to keep this kind of information private, especially from people who make a living off of trading gold.

The price would not be affected unless the entity mining the gold were to sell it in the open market in mass.

If the company/entity that mines the gold were to hold it as an investment then the price would not be effected, as neither supply nor demand would have changed.