However, we are interested in gold as part of the financial market, i.e. private investment and official gold reserves. Hence, although jewelry – which makes up almost 50 percent of that total gold stock – serves also as a store of wealth in many cultures, we subtract it from our calculations. We neither include gold in technological applications. Therefore, after these corrections, we can say that the gold’s market capitalization is about $2.5-3 trillion. It’s enormous number, which surpasses the size of all European sovereign debt markets.
But we can also interpret and measure the size of the gold market in terms of its liquidity. As one can see in the chart below, the average daily trading volumes for gold rank among the largest financial assets in the world. In 2017, it was almost $200 billion per day through over-the-counter transactions (e.g., in London market), futures, and ETFs. Hence, gold is heavily traded, much more than many sovereign debt markets. Only Japanese Government Bonds and US Treasuries are more liquid.
Chart 1: Average annual trading volumes in certain financial markets in $ (source: gold.org)
To sum up, the gold market is enormous, which makes it one of the largest and most important financial markets in the world today. Given its size and liquidity, gold is clearly a monetary asset and attractive alternate currency. The huge trading volume also explains why annual mining production (and its cost) is an irrelevant factor in gold’s price formation (its equivalent changes hand in the global gold market during one trading day).
We encourage you to learn more about the gold market – not only how large it is, but also how to successfully use gold as an investment and how to profitably trade it. Great way to start is to sign up for our Gold & Silver trading Alerts. If you’re not ready to subscribe yet and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!
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