Is Investing In Gold Ethical?

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The gold industry involves a long supply chain with many types of businesses. For example, you can invest in gold miners, transporters, dealers, or even gold coins and jewellery. Still, an important question to ask before you invest is, “Is investing in gold ethical?”.

Investing in gold can be more or less ethical. However, you must do your research to ensure that your money only goes to ethical businesses in the gold supply chain. Unfortunately, unethical gold companies will affect the environment and local community negatively. By avoiding those companies, you’ll use your power as an investor to make the overall gold industry more ethical in the long run.

This guide will help you understand the ethical concerns associated with investing in the gold industry. Then, you’ll learn about the industry standards that keep gold companies honest and how you can channel your investments only to ethical companies.

is investing in gold ethical

Is Investing in Gold Ethical?

Ethical investing and gold doesn’t have a great track record together.  

Investing in gold doesn’t necessarily mean you are investing in mining, but you are putting money into that supply chain, which is likely encouraging more mining.

Of course, that will depend on whether or not you choose to invest your money in companies within the sector that follow high ethical standards.

Unfortunately, the gold sector is like any other part of the economy but more so like oil and gas extractive industries.

Yes, gold itself is not a dirty fossil fuel, but getting it out of the ground can be very harmful to people and nature. And there is still plenty of gold mining, transportation, trading, and other companies whose practices hurt the environment and the surrounding communities.

Thankfully, unethical practices are being more closely monitored and curtailed these days. An increasing number of companies along the gold supply chain are voluntarily becoming more ethically conscious as time goes on.

For example, the World Gold Council continues to develop industry standards to make the gold industry more ethical. These standards cover every part of the gold supply chain, from mining to accounting and retail investments. 

As more and more gold companies follow internationally recognized ethical standards like those by the World Gold Council and other bodies, you’ll have even more ethical options to invest in gold in the coming years.

That’s the “good” news about the legal gold trade; however, the illegal gold trade is a completely different story, and the challenge remains to separate the two in the supply chain and subsequently in your investments.

What Are The Ethical Concerns Of Investing In Gold?

To answer the question of ‘Is investing in gold ethical?’, you must first be aware of the ethical concerns in this industry.

As you perform your due diligence or research into potential gold investments, you’ll want to be on the lookout for two ethical concerns in particular: environmental problems and societal concerns.

Here’s why:

#1 Environmental Concerns

One of the most potentially damaging parts of the gold supply chain is the first stage: mining it out of the ground.

Gold mining operations will produce plenty of solid and chemical waste when done unethically. For example, the mining process involves chemicals like mercury which miners use to separate gold from ore. These chemicals are very harmful as they damage the local ecosystem and leach into nearby drinking water sources.

Those chemicals kill plants and animal life, but they will also lead to health problems for workers and community members nearby.

This damage and its scale with large mines can make the impact last for decades.

#2 Societal Concerns

Aside from environmental concerns, gold operations can also harm local communities in several ways.

Unethical gold companies are known to displace local and indigenous communities to access gold. Besides that, they’re also known for not respecting workers’ rights, particularly those of female workers.

Unethical gold companies might have practices that include underpaying their workers, not treating them well, and not paying for any damage they might cause to the community.

For that reason, you’ll want to make sure that the gold companies you invest in are treating their workers fairly and have not harmed the communities in which they operate.

How Can You Invest In Gold Ethically?

Here’s the fantastic thing about investing in any sector, especially the gold industry: by investing in ethical companies, you’ll help to make the industry more ethical overall.

As you saw above, companies understand that modern investors like you are more ethically conscious than ever before. So, not only do they adhere to internationally-accepted ethical industry standards. They also maintain a high level of transparency to attract ethical investors like you.

When more investors like you put your money into ethical gold businesses, that encourages the industry to become more ethical overall.

So, how can you invest in gold ethically? Here are 3 steps:

#1 Invest With Reputable Names

No matter how you choose to invest in gold, always remember to stick with reputable names. The gold industry’s recognized and respected names have a reputation to protect, so they are less likely to engage in unethical practices.

Whether you’re investing in gold mining, storage, transportation, or retail businesses, the same is true. 

Even if you’re investing in gold by purchasing gold bullion, coins, or jewellery, be sure to buy only from reputable sellers that only get their products from ethical sources.

#2 Study Prospectus And Documentation

Next, be sure to study all documentation related to your gold investment.

For example, you can get a prospectus from a gold mining company that you wish to buy stocks in. The prospectus will detail all the information that they are required to provide to investors just like you.

Studying that documentation will help you understand where your investments are going and whether or not they align with your ethical standards.

#3 Check For Industry Standard Compliance

Lastly, be sure to check for compliance with gold industry standards. Earlier in this article, you saw that the World Gold Council sets several different standards for companies throughout the gold supply chain.

However, there are plenty of other gold industry bodies that do the same, like:

Final Thoughts Is investing in gold ethical?

It can be but is still fraught with problems separating out legal, illegal and harmful practices in the supply chain.

For these reasons, ethical investors must ensure that their money goes to companies in the gold sector that maintain high levels of ethics, particularly when it comes to the environment and the communities affected by their operations.

References

https://www.ii.co.uk/analysis-commentary/can-you-be-green-investor-and-still-own-gold-etf-ii514055

https://www.investopedia.com/articles/basics/08/invest-in-gold.asp#toc-different-ways-of-owning-gold

https://www.forbes.com/advisor/investing/how-to-invest-in-gold/

https://blueandgreentomorrow.com/invest/gold-as-green-investment-things-to-know/

https://earthworks.org/campaigns/no-dirty-gold/impacts/

https://www.gold.org/goldhub/gold-focus/2020/10/how-gold-can-be-major-player-socially-responsible-investing

This article is for information only and is not an endorsement for investing in gold or the bodies associated with monitoring its practices.

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