If you pay attention to physical Gold flows and increased government gold bullion buying figures, you will often hear and or see the term “ton” or “tonne” used.
When referring to physical precious metals, a ton simply refers to a metric tonne. For .999 fine physical gold bullion or any other precious metal, a metric tonne is exactly 32,150.7 troy ounces of gold or other precious metals.
What is a ton of Gold worth?
A rough calculation can be executed using a simple live gold spot feed and a simple calculator, smartphone, or search engine.
The equation is simply as follows:
32,150.7 oz X live Gold Spot price = A whole lot of continually debasing fiat currency.
At the moment of writing this blog post...
A ton of gold is worth just over $41.5 million fiat US dollars, in late March 2019.
What does a ton of Gold cost?
One caveat to note when trying to gauge "What a tonne of Gold is Worth?".
Even the last 1980 gold bullion bull market's good delivery standard 400 oz Gold Bullion bar standard requires paying slight premiums over the spot price of gold.
Government central bank sized gold bullion bars fetch ask prices with a slight basis point premium (minor fractions of 1%), so gold dealers and gold refiners can maintain profitability.
The following video clip gives you an idea of the manufacturing effort required to make homogenous smooth 400 oz gold bullion bars.
German Bundesbank (German Central Bank Gold) - Frankfurt, Germany
1 ton of gold = about 80 of these gold bars
Buying Gold in Tonnage is Not Easy
To acquire tonnes of physical gold bullion requires relations with the largest physical gold bullion trading desks in the world (e.g. Bank for International Settlement's Gold Desk likely the largest). The BIS has advertised it's gold and FX intervention desk services to its central bank and commercial bank members over the years. They are often involved with gold swaps in the hundreds of tonnes per their annual report documentation.
Buy gold bullion by the ton also requires available gold bullion sellers at current gold spot price points where often today both government central banks and the eastern world is gobbling up all new line physical gold bullion supplies.
Often if someone is trying to sell metric tonnes of gold in an email or online, it is a tip-off that a greed driven gold scam attempt is in the works.
Here is a brief comedic example of a such a commonly occurring would be gold scam phenomenon.
If someone even mentions the word ton, tonne, or metric tonne. It is a 99.9% tip off of a scam artist.
Bank of England Gold Vault - Various countries store their Gold Bullion here
1 ton of gold = about 80 of these gold bars
Ton of Gold Price in Perspective
Since 1986, the US Mint has been making the world's most popular and often purchased modern-day gold bullion coin.
It was in the year 1999 when the US Mint had its best gold sales year ever. Just over 63 metric tonnes of gold bullion coins in total were sold by the US Mint in that record-breaking year (annual US Mint bullion coin sales data is at the bottom of the page).
Investors bought 22k American Gold Eagle Coins at a record clip in 1999 likely spurred by a combination of Y2K fears (see 1/10 oz Gold Eagle Coin 1999 sales), the ongoing Asian financial crisis, and generationally low gold prices vs other financial assets at the time (long term value buyers).
Estimates are currently 190,000 Tons of Gold exist Above Ground
Yet only about 1/5th of the above ground gold bullion supply is owned by government central banks. Another 1/5th is spread out amongst private investors in various coin and smaller gold bar size formats.
The vast majority, or around half of all physical gold above ground is held in jewelry most of which is in the east (e.g., India, China, etc.).
When it comes to notional gold derivatives traded around this very limited acute supply of physical gold, one should note that 'bets on the price action of gold' dwarf the actual value of physical gold throughout the world.
This is but one major reason why when you buy physical gold in any format, you will have to typically pay some sort of price premium above the fluctuating gold spot price.
^ If this illustration does not make sense to you, perhaps learn more about how the gold market works ^
400 oz Good Delivery Gold Bar begin refined into 1 Kilo Bars for China
In the following clip, you can get an inside first-hand tour of one of the world's biggest gold bullion vaults pictured above: the Bank of England gold depository.
1 Kilo Gold Bars the New Good Delivery Standard (China)
A seminal interview conducted in late 2015 interviewing the head of one of the world's largest Swiss gold refineries (the country has 4 of the world's largest gold refineries), confirmed the fact that China through its Shanghai Gold Exchange, has been forcing a new good delivery gold standard size on the world (1 kilo gold bars).
After moment @4:27, the gold refinery head confirms that the day to day gold spot price action has little to do with fundamental factors.
He also confirms how China's demand for 1-kilo gold bars has his organization working around the clock to meet demand. The physical gold bullion flowing from west (400 oz gold bars) to east (newly refined 1-kilo gold bars).
How tons of Gold flow through the Gold Bullion Market
Since beginning in 1987, the London Gold Bullion Association has taken the position as the world's dominant physical gold bullion settlement organization.
This will likely remain so until the eastern world wrestles away gold price discovery power.
The disconnect from gold derivative traders and physical gold flows is a real phenomenon. In fact, many of the individuals involved in day-to-day trading representing massive gold tonnage have often never even touched a Good Delivery 400 oz Gold Bar throughout their entire working career.
As well, since the LBMA established its dominance in the physical gold ton game, the daily west vs east compounding price discovery leaves little doubt that much of what is deemed price discovery has more likely meant price containment over the last three decades and longer.
Lacking Gold Ton Transparency Adds to Smaller 1 kilo Gold Bar Good Delivery Demand
The world's number one gold consuming and gold producing nation is now China.
Her gold bullion buying natives do not trust large 400 oz gold bars. They prefer smaller 1-kilo gold bullion bars which are easier to test for authenticity using noninvasive methods like ultrasonic sound speed tests.
If tungsten inserts were ever involved in these smaller sized 1-kilo good delivery gold bars, virtually any competent depository would find that out upon delivery of any physical gold bullion bar deposit.
How many potential fakes or encumbered 400 oz gold bars are currently within the LBMA's "closed loop" system currently?
The high ninety percentile of 400 oz gold bars held in government central bank vaults are most likely genuine yet trends are such, that many will be likely refined into smaller 1-kilo and 1 oz gold coin size lots in the decades to come.
Gold will certainly become prohibitively more costly by the troy ounce long term, and emerging physical gold bullion buying and saving investors will likely get larger in numbers too (e.g., India, China).
Thank you for visiting us here at SD Bullion.