Is sustainable gold a green investment?

More and more people are looking for sustainable investments or sustainable saving. In this knowledge base article, we explore how sustainable gold is and how to responsibly invest in physical gold.

Is Gold Mining Sustainable?

Gold is typically extracted through mining, often in less developed countries such as China or South Africa. There are three types of gold mines:

• Open-pit mines with a large excavation,

• Placer mines where riverbeds are dug up, and

• Underground mines that use tunnel systems.

This type of mining usually causes damage to forests and vegetation and pollutes groundwater—especially because harmful chemicals are often used. Gold mining is therefore environmentally burdensome, although there is growing attention for sustainable mining practices, usually in small-scale operations. Organizations such as the Alliance for Responsible Mining are working to promote more ethical practices in the sector.

Recycling as an Alternative

Gold directly sourced from mining is generally not very sustainable. However, well-known refiners like Umicore do strive to operate sustainably. Between 2017 and 2022, a Dutch initiative called the Responsible Gold Agreement (Convenant Verantwoord Goud) was signed by various stakeholders to explore more sustainable methods of gold mining and distribution.

In addition, refiners like Umicore are increasingly investing in gold recycling. Recycled gold does not require mining and promotes the reuse of old gold from industrial applications—such as electronics, which often contain trace amounts of gold. So while gold extraction is environmentally taxing, once it’s turned into a product, its ecological impact is relatively low. Due to its high value, gold is also more likely to be recycled than many other metals.

Comparing Sustainable Investing with Gold

This raises the question: How sustainable is (recycled) gold compared to sustainable investing? It’s a difficult comparison because the definition of “sustainable investing” varies widely. Furthermore, investing usually aims to generate returns through growing business activities.

One could question whether investing in a car manufacturer that builds electric vehicles with chemical batteries is truly much more sustainable than investing in one that builds fuel-powered cars. The reality is that reducing consumption is often more sustainable than simply replacing a polluting product with a slightly less polluting one. However, this philosophy doesn’t align well with the business models of most companies.

Of course, there are examples of organizations and companies that genuinely make a sustainable or social impact, but these are exceptions. You could argue that gold is less harmful than many business activities, since its value and returns come from scarcity rather than continuous production.

Buying Sustainable Gold

So, while gold may not be a completely green investment, it’s not necessarily worse than other forms of investing, especially considering how investment-grade gold is used.

It is important, however, to buy gold from a recognized dealer and certified refinery. This ensures that your gold has been produced ethically and responsibly, and that it hasn’t come from illegal mining, which is far less sustainable and socially responsible.

The Silver Mountain offers a wide selection of gold coins and bars from certified refiners that are actively engaged in sustainability. Additionally, The Silver Mountain holds an AFM license (Dutch Authority for the Financial Markets), providing assurance that you are dealing with a reliable and responsible party that prioritizes safety and ethical service.

Disclaimer: The Silver Mountain does not provide investment advice and this article should not be considered as such. Past performance is no guarantee of future results.