First Mexican Gold Corp. TSX-V : FMG

Company ID [CVE:FMG] Last trade:CA$0.03 Trade time:16:00:00 EST Value change:▼0 (0%)

WHY GOLD & SILVER?  The Role of Gold & Silver in Modern Society

Gold as a preserver of value (inflation hedge, safe haven, etc.)  

Gold is an effective hedge against inflation. In addition, gold is inversely correlated to the US dollar, making it a good currency hedge. As an asset class, gold has all the advantages of being universally regarded as a currency, without what are all too often the disadvantages of being subject to the economic and monetary policies of one particular country's government. 

Gold's value as an effective portfolio diversifier (inflation hedge, safe haven, etc.)  
Gold is a highly effective portfolio diversifier due to its low to negative correlation with all major asset classes. Over the last 20 years, gold has shown no statistically significant correlation with equities. That applies not just to domestic US equities, but also to international equities, including those traded in London, Tokyo, Frankfurt, and so on.

Gold has also shown no statistically significant correlation with other mainstream asset classes, such as US Government bonds, Treasury Bills, and equity real estate investment trusts. The fundamental reason for this lack of correlation is that the factors driving the gold price are not the same as the factors that determine the returns on other assets. Obviously, there are some economic factors that influence the performance of all investments. But equally obviously, changes in gold supply and demand have no influence over the other asset classes.

As a rule, gold shows no statistically significant correlations with mainstream asset classes. However, there is evidence that when equities are under stress, in other words when shares are falling rapidly in value, an inverse correlation can develop between gold and equities. And this aspect of gold's behavior runs directly counter to the way other asset classes perform in stress situations. 

Gold's value as a currency reserve 

Gold is still considered an important reserve asset by most central banks, even though it is no longer the center of the international financial system. The most important reason is that gold is the only reserve asset that is no one's liability. This means that, unlike a currency, the value of gold cannot be affected by the economic policies of the issuing country or undermined by inflation in that country.

Gold has a track record of holding its real value over the centuries. Since gold is no-one's liability, it can not be repudiated and holding it is a safeguard against potential unforeseen crises. Gold also brings much needed diversity to a central bank portfolio due to its low correlation with key currencies and its strong inverse correlation with the US dollar. The central bank of Argentina, for example, when diversifying a portion of its reserves away from 100% reliance on the US dollar in 2004, included gold in its purchases.

Gold accounts for 9% of reserves held by central banks (valued at market prices). 

Gold's value in industrial applications 

Gold ranks among the most high-tech of metals, performing vital functions in many areas of everyday life. Gold's unique properties make it useful in medical applications, pollution control, air bags, mobile telephones, laptop computers, space travel, and many other things we consider indispensable to our modern lives. Approximately 12% of demand for gold comes from industry.

Medical Applications

Because it is "biocompatible", gold plays an important role in medical implants. For example, gold-coated "stents" are inserted into clogged arteries to clear the flow of blood. Also, because gold is opaque to x-rays, surgeons are able to place a stent with the utmost precision, which helps ensure optimal effectiveness. Other medical implants that contain gold are pace makers and insulin pumps. Gold possesses a high degree of resistance to bacterial colonization, and because of this it is the material of choice for implants that are at risk of infection, such as the inner ear.

Gold is being used increasingly in pharmaceutical applications. Gold is ideal for delivering biologically active materials directly into the target tissues in the human body, without damaging the tissues themselves, or altering the biological activity of the material being delivered. Gold helps doctors to deliver precise doses of powerful drugs to the parts of the body where they are required. This is important in the treatment of a range of diseases, including cancer and HIV, the virus that causes AIDS. On the molecular level, gold has applications through its organic and chemical compounds used in medical science: for instance, anti-cancer drugs.

Environmental Applications

Recently, it has been discovered that gold nanoparticles, measuring only 25 nanometres across, can split oxygen atoms, thereby facilitating oxidation reactions, which create useful organic products as oxygen atoms and carbon compounds combine. New research published in the top scientific journal Nature has revealed that gold catalysts can clean up an important chemical process that is used every day to produce tons of pharmaceuticals, detergents & food additives. As a chemical catalyst, gold is playing an important role in new environmental applications, such as pollution control (mercury emissions) and fuel cells.

Gold is one of the most effective conductors of electricity known to man, and its reliability compared with other metals such as palladium or copper is increased by the fact that gold is also an excellent conductor of heat. Gold is also inert and, therefore, does not react when it comes into contact with other substances. In addition, Gold does not corrode or tarnish, so it is much more reliable than other metals in electronic applications.

Gold mining's value to developing countries 

Gold mining is vital to the fragile economies of many impoverished countries, which account for roughly two-thirds of global gold production. In addition to generating export revenue in these countries, gold production provides royalty and tax income to their governments, technology transfer, worker training and the creation of a skilled workforce. Gold mining can also bring substantial improvements in physical, social, legal and financial infrastructure. In many of these countries, gold mining is a foundation industry that often provides the critical mass for the development of electricity, water, road and rail transport in a region, that are the essential foundations of an economy.

Developing countries accounted for 72% of global output in 2004. Most of this came from low-income or lower-middle-income countries that together accounted for two thirds of global output.

The strongest rise in output has been seen in Heavily Indebted Poor Countries (HIPCs), whose gold production rose by 84% between 1994 and 2004. Of the 38 HIPC countries, 14 are significant gold producers with lesser or minor production in at least another 14 countries. There is potential for substantial additional production in several other countries. The rise in HIPCs' output has been paralleled by rising export dependence on gold. In 2003, gold accounted for 13% of goods (merchandise) exports of the 14 significant producers and 10% of their exports of goods and services. For HIPCs as a group, gold accounted for nearly 8% of goods exports and over 6% of exports of goods and services. It is one of the most important exports for HIPCs.

Gold mining companies source supplies locally where possible and employ local labor where possible. Export revenue is not the only benefit gold mining brings to a developing country. It provides royalty and tax income to governments, technology transfer, skilled employment and training for local populations, together with further jobs through the multiplier effect.

Gold mining can also bring substantial improvements in physical, social, legal and financial infrastructure. The establishment of a formal mining industry can be the first step in a country's industrial development. Mining is a foundation industry that often provides the critical mass for the development of electricity, water, road and rail transport in a region.

Gold's important role in society's long-standing customs 

Gifts of gold make a vital contribution as tokens of love and precious souvenirs on those emotional occasions that bring people together - weddings, anniversaries, birthdays, Christmas and other religious holidays, graduations, Mother's Day, birthdays, religious ceremonies such as baptisms, and many more. Gold's function as an adornment, as jewelry, has been in existence for over 6,000 years. The earliest gold jewelry dates from the Sumerian civilization that flourished in the fertile basin between the Tigris and Euphrates rivers around 4,000 BC.

Why is gold so coveted? Since the beginning of time, the intrinsic beauty, warmth, sensuality and spiritual richness of gold has earned it pride of place as the favorite metal of jewelers. Today, consumer demand for gold jewelry is growing by over 20% per annum, demonstrating the confidence that women around the world have in gold. This level of demand far outstrips the supply for gold that mines can produce.

Content Courtesy of World Gold Council:


Silver Has Enduring Value  

Mankind’s timeless fascination with silver stretches back 6,000 years. As early as 700 B.C., the Mesopotamian merchants used silver as a form of exchange. Later, many other civilizations also came to recognize the inherent value of silver as a trading metal.

The ancient Greeks minted the drachma, which contained 1/8th ounce of silver; and in Rome, the basic coin was the denarius, weighing 1/7th ounce. And let’s not forget the English shilling "sterling," originally denoting a specific weight of silver, which has come to mean excellence.

Today, millions of people throughout the world recognize silver’s intrinsic value and have made it popular as an affordable investment. In the United States, Individual Retirement Account (IRA) participants can invest a portion of their investment portfolio in silver bullion coins and silver bullion bars provided that they are of a fineness equal to or exceeding 99.9 percent silver.

Silver is a Precious Metal 

Precious metals are valued for their beauty and relative scarcity in the Earth’s crust, and their superior properties. They are very malleable, highly resistant to corrosion, superior reflectors of light and are unsurpassed as conductors of heat and electricity.

Besides signifying status and wealth, silver has been one of the most romantic and sought after of all the precious metals. Mystified by its beauty from the beginning of time, people have been drawn to remote areas of the world in search of this white, reflective metal.

Silver has often been surrounded by mystery. The Incas of Peru called it "the tears of the moon" because they were awed by silver’s strange gleam, and the Chinese believed that a silver locket hung around a child’s neck would ward off evil spirits.

The principal use of silver is as a precious metal. Its salts, especially silver nitrate and silver halides, are also widely used in photography (which is the largest single end use of silver). Some other uses for silver are as follows:

  • Electrical and electronic products, which need silver's superior conductivity, even when tarnished. For example, printed circuits are made using silver paints, and computer keyboards use silver electrical contacts. Silver (silver cadmium oxide) is also used in high voltage contacts because it can minimize any arcing
  • Mirrors which need superior reflectivity for visible light are made with silver as the reflecting material in a process called silvering. Common mirrors are backed with aluminium.
  • Many high end musical instruments are made with silver, which benefit from a higher tone quality.
  • Silver has been coined to produce money since 700 BC by the Lydians, in the form of electrum. Later, silver was refined and coined in its pure form. The words for "silver" and "money" are the same in at least 14 languages.
  • The metal is chosen for its beauty in the manufacture of jewelry and silverware, which are traditionally made from the silver alloy known as Sterling silver, which is 92.5% silver and usually alloyed with copper. The name of United Kingdom monetary unit 'Pound' originally had the value of one troy pound of sterling silver.
  • Silver is also used in medals, denoting second place.
  • The malleability, non-toxicity and beauty of silver make it useful in dental alloys for fittings and fillings.
  • Silver's catalytic properties make it ideal for use as a catalyst in oxidation reactions; for example, the production of formaldehyde from methanol and air by means of silver screens or crystallites containing a minimum 99.95 weight-percent silver. Silver (upon some suitable support) is probably the only catalyst available today to convert ethylene to ethylene oxide (later hydrolyzed to ethylene glycol, used for making polyesters)"a very important industrial reaction.
  • Oxygen dissolves in silver relatively easily compared to other gases present in air. Attempts have been made to construct silver membranes of only a few monolayers thickness. Such a membrane could be used to filter pure oxygen from air.
  • Used to make solder and brazing alloys, electrical contacts, and high capacity silver-zinc and silver-cadmium batteries.
  • Silver sulfide, also known as Silver Whiskers, is formed when silver electrical contacts are used in an atmosphere rich in hydrogen sulfide.
  • Silver fulminate is a powerful explosive.
  • Silver chloride can be made transparent and is used as a cement for glass.
  • Silver chloride is also a widely used electrode for pH testing and potentiometric measurement.
  • Silver iodide has been used in attempts to seed clouds to produce rain.
  • Silver oxide is used as a positive electrode (cathode) in watch batteries.
  • Colloidal silver is a possible antibacterial / antibiotic treatment espoused in alternative medicine, also notorious for causing argyria.
  • Silver nitrate (liquid) was a standard of care but was largely replaced by silver sulfadiazine cream (SSD Cream) which was generally the "standard of care" for the antibacterial/antibiotic treatment of serious burns until the late 1990's. Now, other options such as silver coated dressings (activated silver dressings) are used in addition to SSD cream, and may present advantages such as pain reduction and capacity for treatment at home.
  • Silver is often used in modern horror fiction as a weapon against certain supernatural entities, especially werewolves, who are sometimes described as being burned by silver. 

Content Courtesy of The Silver Institute: and Wikipedia

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