🤔 Bitcoin or gold, which one is better (2/3)
Looking at the environmental impact 🌱 and the financial returns 📈
Part 2/3: Gold
PS: Check out Part #1 where we talk about Bitcoin its environmental impact and financial returns.
Now this is the OG, a real old-timer and heavy-weight of the financial system.
The current market cap of gold is $10T (trillions), vs $960B (billions) for Bitcoin, which increased by 1.4x over the last 10 days. Apple comparatively has $2.2T Market cap ( #1 company).
So they don't really play in the same category…just yet. It’s like a Mid-weight vs Super-heavy weight 🥊
Btw, market capitalisation (or market cap) means how much a company or asset is worth on the market. It's the price per share/asset * the number of units circulating.
First thing first, What do we do with gold?
👑 47% is used for jewellery
💰 39% is for investments (25% Central banks and 14% private investors)
💻 14% for other (electronics etc.)
🌱 About environmental impact
⚡️ The gold industry is a highly energy-intensive industry; it is about 132 terawatt-hours per year, the average consumption of Argentina per year (Bitcoin was 70TWh, ~Chile).
Some sources say it's about one day of electricity use for the average American home for extracting 1g of gold.
However, gold extraction damages the earth in more than just releasing carbon into the atmosphere when powering machines to dig holes.
“Gold mining is one of the most destructive industrial activities — large open-pit gold mines generate vast quantities of waste, much of which is contaminated with cyanide and other chemicals used in separating gold from ore”
– Says Payal Sampat, director of the No Dirty Gold campaign for Earthworks
Right, let’s get into it 🕵️♂️.
🗑 220 millions tonnes of toxic waste are dumped into rivers, lakes, and oceans each year. Some say it’s about 2.8 tons of waste for every gram of gold produced 😱
The infamous Lihir gold mine in Papua New Guinea dumps over 5 million tons of toxic waste into the Pacific Ocean each year, destroying corals and other ocean life 🤮
🌳 A study shows that across the Amazon, gold mining causes about 2 million tons of forest to be lost each year. In the Guiana Shield, it is responsible for as much as 90% of total deforestation.
Also, once the mining is gone, it is very tough for the land to go back to its original state as a lot of toxic chemicals have been spilt in the ground.
💦 Mining also requires gargantuan quantities of freshwater (Saltwater cannot be used because it corrodes equipment.) Large amounts of water are needed for virtually every aspect of the operation—drilling, dust control, grinding ores, and so forth. Trying to find an accurate number is hard as it depends on location, mine, grade..So let’s look at Western Australia for example. According to Mr. Bergin, a professional in the mining industry, you need 222,222t of water (222ML,ie. megalitres) required to produce a tonne of gold. CSIRO is publishing 250ML per tonne. So that makes 222 litres per gram of gold…Some says water is the new gold…not quite at this price, even though it just has been started to be traded on Wallstreet.
🚛 Once the mine is extracted, then it has to be transported. We could not find an exact number but we don’t expect something too small.
What about sustainable, eco-friendly or ethical gold?
Some jeweller uses the label 100% ethical gold, for example, Chopard who claim to use 100% Ethical Gold in its jewellery and watches since 2018.
👨👩👧👦 Ethical gold is from responsible artisanal and small-scale mining and is produced using legal operations. Ethical gold means good labour conditions, no child labour, gender inequality or unfair pay. Supply chains are also transparent.
🌿 Eco-friendly is different. Most large-scale mining companies use mercury (which is a major pollutant) to recover the gold, whereas those that define themselves as eco-friendly, don’t. Eco-friendly gold is mined in such a way to ensure minimal impact on the land and environment - for example, no toxic chemicals are used during the process. Amalena also states that there are programmes put in place for the restoration of the native ecosystem.
♻️ Recycled gold accounted for about a third of total supply, on average, from 1995 through 2014 – according to BCG (2015).
It is not necessarily eco-friendly as it may not be traceable and therefore could come from “dirty gold”. Also, there is a huge amount of energy required to recycle gold. 50% of the cost of recycling comes from electricity to run blast furnaces. 5% to transport. Both are not coming from renewable energy. At least it does not creates as much toxic waste.
What about clean mining?
A company in Australia is trying to remove the toxic usage of cyanide and mercury. It is quite promising but would not scale to the massive open gold mines.
👀 What do they look like, those mines?
The biggest open pit ones are huge, even visible from space.
Artisanal and small scale gold mining is conducted by individual miners or small enterprises with limited capital investment and production and accounts for an estimated 20% of global production. Source
💰 What about returns?
Data doesn’t lie. You would be better off investing in the stock market (if you re-invest the dividends).
However, it depends on when you buy and when you sell. During a time of economical crisis, the price of gold jumps. And vice versa.
Looming over time, yes gold is always taking value...but less than the market value.
However, gold is fairly stable and could cause less stress than other forms of investments. But at what price?
86% of gold is used for jewellery and investment. Only 14% to make things.
It requires as much electricity as Argentina per year.
220 millions tonnes of toxic waste are dumped into rivers, lakes, and oceans each year.
It takes 2.8t of waste to produce 1g of gold.
220L of freshwater is required to produce 1g of gold.
Just in Amazon, 2 million tons of forest are lost each year due to artisanal mining.
It is very hard for the vegetation to grow back once the mining is over because of the toxicity of dumping sites.
It has stable growth over time, but less than the American stock market.
Is this worthwhile?
🙈Knowing that only 14% of gold is used to make things, the rest is either stored in vaults or used for decorative/status purposes… Definitely not
Is it sustainable?
🙅♂️🙅♂️🙅♂️ Definitely not for now. Some glimpse of light with clean mining and responsible mining, but it is very marginal.
How does this compare to bitcoin?
🤔 Coming next..Stay tuned.
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