Gold

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Gold

Gold is a precious metal. Its several qualities have made it valuable throughout history. It is an attractive color (yellow), bright, malleable, and workable in various forms. It is also long-lasting and tough. All these properties have made it the metal of choice for decoration and art objects. Gold has also been the standard of wealth for seven thousand years, dating from the time of the ancient civilizations of Egypt and Mesopotamia. More recently, gold has become the standard of currencies.

Gold is found across a wide range of the earth’s landscape, but its accumulation in large quantities dates from the era of European explorations that began in the middle of the fifteenth century. Ventures to the New World opened new chapters in the history of gold. The first of these new stages was the Spanish conquest of the Americas with the accompanying destruction of the Aztec and Incan civilizations. Within a generation, these expeditions of plunder had produced an outpouring of gold from the New World that astonished the Old and led to endless expeditions of discovery and conquest, all in search of the legendary golden city known as El Dorado. Over the seventeenth and eighteenth centuries, the gold flowing out of the South American mines continued to dominate world production. As the nineteenth century unfolded, Russia became the leading producer. By 1847 Russia was the source of about three-fifths of the gold mined annually in the world.

The second great era of gold production was associated with major discoveries in California and Australia in the middle of the nineteenth century. In addition to the large quantities of gold harvested, these discoveries led to a new departure in the history of gold. Heretofore, gold discoveries and the gold mined from them had been a monopoly of the state. California and Australia represented a dramatic change in the sense that these mid-nineteenth century bonanzas belonged to any individual who could stake a claim. In this fashion, the gold passed directly into the hands of private citizens (or noncitizens, as was frequently the case). California’s gold production moved rapidly from $10 million in 1849 to $80 million in 1851, thereafter settling at about $40 million annually. California almost immediately produced half the world’s supply. Within the first five years, California produced as much gold as the Roman Empire had taken from the mines in northern Spain in half a century. The yields in Australia were almost as great. The Australian gold rush, like that of California, had a short life. After a dozen years, gold mining became industrialized. Still, the returns were remarkable. In the quarter century from 1850 to 1875, more gold was produced than in all the years since 1492, almost all of it in California and Australia.

The gold discoveries and the availability of these riches to anyone led to a remarkable rise in the numbers of miners. In California, the numbers rose from perhaps 5,000 in 1848 to 125,000 in 1851. This harvesting of gold on such a scale changed California from an isolated pastoral community into the most cosmopolitan place in the world. By 1852 its population had passed 250,000 people. California now became a pioneer in new patterns of rapid and intense migration associated with mining. These would include the astonishing rise of towns (and sometimes cities), the recruitment and use of labor forces, and shifts in capital and labor to remote areas all over the world. Such phenomena appeared first in California and Australia. The arrival of overseas Chinese, Irish, and other northern European immigrants in the gold fields created a diverse population and led to later racial strife. In both Australia and the mining camps of the American West, the Chinese were a particular target. Everywhere, whatever the racial and ethnic composition, mining camps were intensely male. Only gradually did the emerging towns come to include women and children.

At the same time, the techniques used to harvest the gold changed in decisive ways. Mining in California began with picks, pans, and shovels, as individuals and small companies washed gold from mountain streams. Within a few short years, gold mining had progressed to damming (then mining dry river beds), to hydraulic mining (using water streams to wash away hills), and to underground mining. What had begun as the work of individual miners had within a dozen years become an extension of industrial techniques, with wage laborers deep underground, complex processing machinery and plants above ground, and a stock market that enabled absentee investors to speculate.

These bonanzas of the 1850s enormously increased the world’s supply of gold. The gold reserves in the Bank of England almost doubled between 1848 and 1852; the gold inventory of the Bank of France increased seven times. Thus, the impact of the Californian and Australian gold rushes was quickly reflected in the gold reserves of Britain, France, and other powerful European nations. Great wealth also accrued to individuals and companies of various sizes. This increase led to extended debate within financial circles about the role of gold in the currencies of individual nations and the significance of gold as a worldwide standard.

The third great increase in the world’s supply was associated with gold discoveries in Alaska at the close of the nineteenth century and in South Africa at the opening of the twentieth century. The Alaskan strikes began as a reprise of the Californian dream of riches for individuals and small groups, then rapidly shifted to production by well-financed companies with the latest equipment, all within the context of a climate that severely limited the mining season. In South Africa, the gold discoveries laid the basis of some of the more remarkable mineral fortunes in the world. They also established a labor system in which thousands of black Africans labored deep in the mines for the benefit of a few white-owned South African companies. The increase in gold production in these years was notably aided by a new chemical process, the use of cyanide to recover gold from low-grade ores.

The flooding of gold into Europe at the opening of the sixteenth century and in the middle of the nineteenth century raised continuing questions about national currencies. Over the course of the nineteenth century, most major Western nations went on the gold standard; that is to say, their national currency acquired a fixed relation to gold and was supposedly freely convertible into gold at that price. England was the first to adopt the gold standard, in 1821. France, Germany, Spain, and the United States followed in the 1870s. The gold standard spread across Europe, but ended with the outbreak of war in 1914. It was reinstituted in 1928. As national economies grew, nations without sufficient gold reserves (the majority of nations) supplemented their currency reserves with U.S. dollars or British pounds, thought to be the most stable of the world’s currencies. With the onset of the Great Depression, the gold standard collapsed again. Although it was restored after the war, the dominance of the U.S currency (the dollar) and dwindling gold reserves led to the gold standard’s abandonment in 1971.

SEE ALSO Gold Industry