Gold is a chemical element which occurs as nuggets or grains in rocks. This dense metal is also soft and shiny making it a natural choice for early jewelry and adornments. Gold is also naturally resistant to corrosion giving it modern appeal in dentistry and electronics. A popular choice for use in everything from wedding rings to coins, gold has been located in almost 90% of the land areas on earth. Even the oceans contain gold, however, extracting it would be too costly on a large scale. Gold is normally combined with other metals as pure gold is too soft to be applied in ways that result in frequent handling. Although gold mining is an important source of world gold, it is also one of the most recycled metals today meaning that the supply and demand dynamics are a little removed from the normal production and consumption cycle.

According to the World Gold Council, in 2008 the supply sources of gold could be broken down as illustrated in the following chart:

*Data courtesy of the World Gold Council

Gold mining can be traced back to early Egyptians around 3500 B.C. and the largest known deposit of the yellow metal is in South Africa. At the dawn of the 20th century, the Gold Standard Act was enacted in the US causing them to maintain an exchange rate in relation to other countries on the gold standard, a practice that persisted until 1919. Today, gold mines are operated all across the globe with the most important - or at least prominent - in South Africa, the source of 40 percent of modern gold mining, and China.

The latest estimates and projections from the US Geological Survey provide an illustration of world mine production as follows:

Bullion - Precious metals in bar or coin form. These can be used as a vehicle for physical investment in gold. Bars are usually larger than coins. Many popular coins for investment are produced by the national mint of particular countries.

Good Delivery Bar - An acceptable bar of gold which can be delivered against a contract. The London Bullion Market Association has requirements for their Good Delivery bars which include an approved list of refineries. These are the bars normally used on major markets like government gold reserves and central bank reserves.

Carat; Karat - A term for a measure of fineness for gold which is between one and 24 with 24 being closest to pure gold. Often abbreviated as "k"

Fineness - A term for a precious metal's purity expressed as a portion of 1,000 parts of an alloy. .999 gold has 999 parts gold, one part another metal. Gold is often alloyed with silver or copper, or both.

Important fundamental factors for gold prices include economic conditions as well as supply conditions.

Important fundamental factors for gold prices include economic conditions as well as supply conditions.

Economic Reports: Gold can be viewed as a haven for investors due to is historic level of import with regards to wealth, however, it is still a commodity and can move largely associated with the movements of world currencies and vice versa.

Regional Concentration & Perceived Scarcity: The state of mining in South Africa, the jewelry demand in Asia, bullion demand, investment concerns - all add up to a pretty important basket of fundamentals.

Applications: Besides jewelry or investment demand, any increase in industrial applications for gold could impact price or volatility.

Gold has been applied to everything from pharmaceuticals to food but continues to be used primary for ornaments.

*Data courtesy of the World Gold Council