No Green Gold - Why In-ground Gold Securitization Does Not Exist Yet

Abstract

This paper analyses why in-ground gold securitization does not exist, and is not even trialled, in any country despite the costs and negative externalities of gold mining. We demonstrate that current mining regulation favours mining gold over in-ground gold securitization potentially due to the preference of governments to create jobs and receive  taxes and royalties from mining operations. We show that significant value could be unlocked if in-ground gold securitization was allowed. Estimates of the price elasticity of supply further suggest that lower gold production due to securitization would lead to higher gold prices.

Keywords: Gold, in-ground gold securitization, mining regulation, government, royalties