The Throne of the Safe Haven — Gold in the Modern Age

In the previous episode, the last chain binding gold to the dollar was broken. In 1971, the United States suspended the convertibility of dollars into gold, and the system that fixed one ounce of gold at 35 dollars came to an end. Gold, whose price had been held in place, began to move freely within the market.

It was also the moment when gold was released from its duty as the backing of currency. Gold was no longer the anchor guaranteeing the value of paper money. So did gold, having lost its role, quietly withdraw into being just another precious metal? The opposite was true. Freed from the shackles of a fixed price, gold rose to a new throne as the ‘safe-haven asset’ bought every time the world shook. In Episode 9, we trace the modern face of gold from three angles: investment, the state, and mining.

Gold shines in every crisis

When the era of fixed exchange rates ended, the price of gold began to swing widely, reflecting supply and demand as well as people’s anxieties. And one tendency was confirmed again and again: the more unstable the world becomes, the more gold is bought.

War, financial crisis, sudden inflation. When the value of stocks, bonds, and currencies wavers in such moments, investors try to move their money into assets thought less likely to lose value. The vessel chosen for this has long been gold. Rather than relying on the credit of any one country, gold is recognized as valuable across the whole world, does not rust, and exists in limited quantity. These qualities of gold are reappraised in times of crisis.

This tendency has continued in recent years as well. Against a backdrop of geopolitical tension, wariness of inflation, and uncertainty over the monetary policies of various nations, gold prices have repeatedly been reported to reach record highs. The structure by which gold is chosen as a safe haven appears unchanged from half a century ago.

Central banks build up gold once again

After convertibility ended, gold was no longer the center of the monetary system. Even so, the central banks of various nations did not let go of their gold. In fact, in recent years it has been reported that, viewed across the whole world, central banks have continued to add to their gold reserves.

According to the World Gold Council, a private body that studies world gold demand, net gold purchases by the world’s central banks are said to have remained at high levels exceeding 1,000 tonnes per year from 2022 through 2024. This was reported to be a scale unseen in recent decades. There are also observations that the central banks of emerging economies in particular became the center of the buying.

Why deliberately hold gold, which generates no interest? One reason is the idea of diversification: a wish to reduce the risk of relying on the currency of a single country for foreign reserves. In particular, amid questions over dependence on a key reserve currency and the possibility of assets placed abroad being frozen, it is argued that the value of gold, unswayed by the credit of any one nation, was reappraised. Gold is still being quietly stacked in the vaults of states as a ‘reserve of last resort’ bound by no country’s promises.

The gold ETF broadens the base of investment

One major change surrounding modern gold is the form of investment. To invest in gold once meant buying gold coins or bullion and storing them at home or in a safe-deposit box. They are heavy, carry the worry of theft, and take effort to buy and sell.

What greatly changed this inconvenience was the gold ETF (exchange-traded fund). This is a financial product designed to track the price movements of physical gold, traded on stock exchanges just like shares. They appeared one after another in various countries from the 2000s, and products listed around 2003 in particular are said to have marked a turning point in expanding the market. Investors could now take part easily in gold’s price movements without carrying actual bars of gold.

Through this, a wide range of people, from institutional investors to individuals, came to join the gold market. Gold became not only something for the treasuries of kings or the vaults of states, but also a familiar investment object bought and sold on a screen. At the same time, the spread of such financial products gave rise to debate over the backing of physical gold and the transparency of the market. The more deeply gold is embedded in the world of finance, the more its price movements come to resonate with the world economy itself.

The shadow of mining — South Africa and the world’s gold mines

Up to here, this has been the story of the side that ‘buys’ gold. But modern gold also carries the heavy reality of the side that ‘digs it out’ of the earth. The symbol of this is South Africa, which long sustained the world’s gold production.

Throughout the twentieth century, South Africa reigned as the world’s largest gold-producing country. The veins around Johannesburg run deep, and some of the world’s deepest gold mines, reaching several kilometers underground, were developed there. But the further mining advances, the deeper and thinner the veins become, and the harder it is to turn a profit. South African gold production has continued to decline over the long term, and the center of the world’s gold production is now said to have shifted to other countries, China foremost among them.

Mining in deep gold pits sits side by side with dangers such as rockfalls, high temperatures, and earthquakes, and has been accompanied by a history of harsh labor. Furthermore, gold mining casts the shadow of environmental burden in many places. Especially at small-scale, artisanal mining sites, mercury is used to extract gold, and it is said to pollute rivers and the air and to threaten people’s health. Reports by international bodies point out that such small-scale mining accounts for a considerable portion of the world’s mercury pollution. Behind gold’s dazzling shine, the costs borne by land and people pile up.

The gold market, a system that links the world

Finally, let us look at how modern gold is traded. Gold has no single head office or country, the way a stock does. Even so, the world’s gold is loosely bound into a single price through several markets and trading conventions.

London has long been known as a center of physical gold trading, and the price that serves as the world’s benchmark has been compiled there day by day. In addition, futures markets such as those in New York actively conduct trades that promise future delivery, exerting great influence on the formation of the gold price. Through these markets, the speculations of the whole world over crisis, interest rates, and currencies converge into a single number: the price of gold.

In this way, gold became a presence holding many faces at once: ornament, national reserve, investment object, and industrial material. Released from the chain of a fixed price, gold, by moving freely instead, rose to a new throne as a mirror reflecting the anxieties of the world economy.

Even so, gold’s story does not end here. Gold as a safe-haven asset, gold as an investment object. Beyond that shine lies yet another face of gold, hidden within the small machine in our hands. For gold’s story does not end with ornaments and investment.