“Natural Gold” Unhealthy For Your Portfolio

While not nearly as common as overpriced numismatics, every now and then the precious metals investor will come across the opportunity to purchase natural gold nuggets. While they may be appealing at first glance, these opportunities are just another distraction from the real purpose of investing in precious metals: as a long-term, liquid store of wealth.

Often these natural nuggets are called “placer gold,” which are basically deposits of gold that have found their way to the Earth’s surface, either in the silt of a riverbed or the topsoil nearby. When you think of the classic image of a ’49er panning for gold, this is the metal he is looking for. The gold can range in size from the tiny flakes you might find floating in bottles in souvenir shops to substantial nuggets weighing several grams or more.

There are legitimate placer mining companies who still operate today around the world, though the profit margin is highly variable. Placer gold can be anywhere from 50-85% pure, with the remainder being a hodgepodge of other metals. To make money, these operations search not just for gold, but also precious gems and valuable minerals.

Clearly it takes more resources to further refine placer gold into a pure product. So when you see gold nugget sales at well over the spot price, red flags should go up. How can gold nuggets be that costly when they aren’t even pure?

The seller may make the point that placer gold finds its value as a collector’s item. They may emphasize the unique quality of the gold nugget as a natural phenomenon, like a gemstone, unprocessed by humans. They may assure you this unique beauty is appealing to jewelry makers who search out nuggets for use in custom craftwork. Keep in mind that these sellers are often just hobbyist collectors or amateur gold panners, and so there’s a chance they haven’t even verified the percentage of gold in their specimen. Profitable placer mining operations are refining their metals themselves or else selling their product to refineries, and aren’t going to waste their time trying to sell unrefined gold on the Internet one nugget at a time.

Gold has fascinated humanity since the beginning of time, and natural gold nuggets do hold a certain aesthetic appeal to the Midas in all of us. This is what nugget salesmen are betting on. Unless you have a lot of extra cash to throw around, and are looking for a collector’s item as a gimmick to share with your children and friends, you’d be wise to pass on these offers.

You can acquire a pure troy ounce gold coin or bar for significantly less than the same weight in impure gold nuggets. Not to mention, of course, the problem of an exit strategy. If the day comes when you need to sell your gold back to the market for whatever reason, a well-known coin from a reputable mint is going to be infinitely easier to sell than a handful of natural nuggets. All of the sudden, you may find yourself as the seller on eBay trying to convince buyers of the unique value of your overpriced “investment.”

Can Bacteria Produce Gold?

News from earlier this month is still circulating about a newly discovered bacterium that…how do we put this…“excretes” gold under the right conditions.

That’s right—when forced into a toxic environment saturated with gold chloride, Cupriavidus metallidurans will essentially eat up the toxins of gold chloride and leave behind pure, 24K nuggets. Gold skeptics and scaremongers are having a field day with this so-called discovery, in spite of the fact that the project is part of an art show, and the creators of the process acknowledge there is no profitable way to use this bacteria to create gold.

Nevertheless, if you cruise the feedback on Facebook or under the news articles themselves, you’ll find comment after derisive comment suggesting “gold hounds” should sell all their bullion before the value plummets, or voicing relief that “we’re not on the gold standard anymore.” Some even go so far as to suggest the world can stimulate its economy by harvesting gold chloride from asteroids and thereby fund government recovery projects.

Let’s get real.

It doesn’t take more than a minute of basic research on gold chloride and the process in question to understand what ridiculous claims these are. Gold chloride is, in laymen’s terms, liquid gold. And all that Cupriavidus metallidurans does is separate the chlorine from the gold molecules that are already present in the formula. While the discovery of this bacterium may tell scientists something about how some gold is created in nature, it is not the philosopher’s stone the media would have us believe. The bottom line: it takes gold to make gold chloride. These researchers have not created gold, they’ve merely isolated pre-existing gold.

To suggest there might be some profit in this technology is like suggesting real estate developers could earn money by tearing down their existing houses and then using the materials to build… more houses. Or that a car manufacturer could just take unsold inventory and use the parts to create… more of the same inventory. Needless to say, we’ll be among the first to warn you when pigs fly and gold starts materializing out of thin air. Until then, the precious yellow metal is still an excellent investment and hedge against inflation.