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A Looming Decision From The Fed Could Send Gold Soaring

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Joao Peixe

Joao Peixe

Joao is a writer for Oilprice.com

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Where Did Gold Come From: Black Holes, Aztecs And The Gods

Forever synonymous with wealth, gold has been the most coveted mineral on earth since its first recorded use back in 3000 BC.

From Ancient Egypt to the U.S. Treasury its history is one of war, death, love and prosperity.

But how did this most precious of precious metals actually get here? How much gold is there in the world? And, most importantly, how can you get your hands on it? 

Gold: Origin

It’s the stuff movies are made of. Literally. From Goldfinger (1964) to The Good, The Bad, and The Ugly (1966), from The Italian Job (2003) to Die Hard: With a Vengeance (1995). Hollywood keeps making movies that depict the irresistible nature of gold and reinforce its mythical status.

But little is known about how gold gained its unrivalled reputation or, more interestingly, how it first came to be.

 The only thing that seems certain is that such a heavy metal would require the most extreme conditions in the universe to create - both the highest densities and the highest temperatures. 

Here are four of the most popular theories when it comes to the mysterious origins of gold:

#1 Sun Sweat

The Aztecs famously believed that gold was the sweat of the sun and that it was literally falling from the sun to the earth, where it could be gathered. This origins story goes a long way to explaining why the Aztecs believed gold held a very strong spiritual value.

While the notion that gold is sun sweat may sound crazy, some scientists believe that the Aztecs weren’t a million miles from the truth…

#2 Metal of the Gods

The Romans thought that gold was the metal of the gods, and like the Aztecs, thought that gold had descended from the sun. The Romans thought Pluto, the god of wealth, was the giver of gold and other metals.

They mined most of their gold in the Eastern part of their empire, Romania, which even today is home to a huge amount of this precious metal.

Modern day miners don’t have much time to worry about the origins of this remarkable metal, but for E junior gold miners, finds of any size will certainly seem like a god send in the current bull market.

#3 The Rock Star

Now we don’t want to get bogged down in the detailed astronomical explanations behind this theory. Suffice it to say that some scientists believe gold is created when a “rock star” collapses and becomes a very heavy neutron star (aka, black hole). The extreme density and heat created by this explosive process, called a supernova, is what some scientists think creates these heavy elements such as gold.

#4 Neutron Stars

An alternate cosmic theory is that when two neutron stars touch each other, it creates billion-degree heat and extremely high density, which is powerful enough to eject mass, creating a Jupiter-sized batch of gold in a single go.

Regardless of which cosmic phenomena are responsible for forming the precious metal, most scientists do agree on how that universe-created gold came to earth. It is widely understood that gold arrived on this planet in meteor showers a couple hundred million years after the earth was formed.

As for the involvement of god… well that is a question we are going to leave open to you.

Easy Come, Easy Go

Origins may be elusive, but the meaning is certainly not. We may not know exactly how it came into being, but the mysticism has only added to gold’s use, since the beginning of time, as a currency. 

Other currencies have come and gone, but gold has remained as the support for nearly all currencies around the globe. Its long-term value, unlike other forms of currency, has kept it above all other minerals. While dollar bills and other forms of paper currency eventually took over how the world conducts business, gold has backed many currencies, and at one point in history, the United States even backed every dollar that was in circulation with gold.

So where does this leave us? None the wiser, but all the richer.

In the immediate term, it’s about getting gold out of the ground, not finding more. We’ve tapped out Earth’s supplies. 

In a beautiful cyclical manner, it seems that the gold story is likely to end where it began – with the race to mine space already underway. After new technologies have squeezed the last of our gold reserves out of the earth, we must look to the origins of this most precious of metals and search for more in the final frontier.

A few companies that are benefiting from the current rally in gold are majors like…

Teck Resources (NYSE:TECK) (TSX:TECK)

Teck could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy,  Gold, Silver and Molybdenum assets. Its free cash flow and a lower volatility outlook for base metals in combination with a potential trade war breakthrough could send the stock higher in H2 of this year.

Teck’s share price stabilized last year and many investment banks now see the stock as undervalued. Low prices for Canadian crude and disappointing base metals prices weighed on Q4 earnings.

Despite its struggles, however, Teck Resources recently received a favorable investment rating from Fitch and Moody’s, and will likely benefit from its upgraded score. “Having investment grade ratings is very important to us and confirms the strong financial position of the company,” said Don Lindsay, President and CEO. “We are very pleased to receive this second credit rating upgrade.”

Kinross Gold Corporation (NYSE:KGC) (TSX:K)

Kinross Gold Corporation is relatively new on the scene, founded in the early 90s, but it certainly isn’t lacking drive or experience. In 2015, the company received the highest ranking for of any Canadian miner in Maclean's magazine's annual assessment of socially responsible companies.

While Kinross posted a significant loss in the fourth quarter of 2018, the company is making strong moves to turn around its earnings, including the hiring of a new CFO, Andrea S. Freeborough.

“Andrea’s successful track record at Kinross and throughout her career, including accounting, international finance, M&A, and deep management experience, will be an excellent addition to our leadership team,” said Mr. Rollinson. “We have great talent at Kinross and succession planning is a key aspect of retaining that talent for the future success of our Company.”

Wheaton Precious Metals Corp. (NYSE:WPM) (TSX:WPM)

Wheaton is a company with its hands in operations all around the world. As one of the largest ‘streaming’ companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.

Recently, Wheaton sealed a deal with Hudbay Minerals Inc. relating to its Rosemont project. For an initial payment of $230 million, Wheaton is entitled to 100 percent of payable gold and silver at a price of $450 per ounce and $3.90 per ounce respectively.

Randy Smallwood, Wheaton's President and Chief Executive Officer explained, "With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton's portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile."

Eldorado Gold Corp. (NYSE:EGO) (ELD.TO)

This Canadian mid-cap miner has assets in Europe and Brazil and has managed to cut cost per ounce significantly in recent years. Though its share price isn’t as high as it once was, Eldorado is well positioned to make significant advancements in the near-term.

In 2018, Eldorado produced over 349,000 ounces of gold, well above its previous expectations, and is set to boost production even further in 2019. Additionally, Eldorado is planning increased cash flow and revenue growth this year.

Eldorado’s President and CEO, George Burns, stated: “As a result of the team’s hard work in 2018, we are well positioned to grow annual gold production to over 500,000 ounces in 2020.  We expect this will allow us to generate significant free cash flow and provide us with the opportunity to consider debt retirement later this year. “

By. Joao Piexe for Oilprice.com

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