January 2008


GATA’s advertisement in The Wall Street Journal

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The gold reserves of the United States have not been fully and independently audited for half a century. Now there is proof that those gold reserves and those of other Western nations are being used for the surreptitious manipulation of the international currency, commodity, equity, and bond markets.
The Federal Reserve’s general counsel, J. Virgil Mattingly, acknowledged as much when he told the Federal Open Market Committee on January 31, 1995, that the Treasury Department’s Exchange Stabilization Fund had undertaken gold swaps.
Federal Reserve Chairman Alan Greenspan acknowledged as much in testimony to Congress on July 24, 1998, when he said that “central banks stand ready to lease gold in increasing quantities should the price rise.”
Barrick Gold Corp. acknowledged as much in a fi ling in U.S. District Court in New Orleans on February 28, 2003, asserting that the mining company was the instrument of the central banks in shorting the gold market.
The Bank for International Settlements acknowledged as much on June 27, 2005, when the head of its monetary and economic department, William S. White, declared at a convention of central bankers in Basel, Switzerland, that a major purpose of international central bank cooperation is “the provision of international credits and joint efforts to infl uence asset prices — especially gold and foreign exchange.”
Since last May the U.S. Treasury Department’s weekly report of the government’s international reserve position has cited loans and swaps from the U.S. gold reserves.
Since 2004 four major international investment houses — Sprott Asset Management, Cheuvreux, Citigroup, and Redburn Partners — have issued reports stating that Western central banks have been manipulating the gold market.
The objective of this manipulation is to conceal the mismanagement of the U.S. dollar so that it might retain its function as the world’s reserve currency. But to suppress the price of gold is to disable the barometer of the international fi nancial system so that all markets may be more easily manipulated. This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world.
Gold’s recent rise toward $900 per ounce shows that the price suppression scheme is faltering. When it is widely understood how central banks have been suppressing gold, its price may rise to $3,000 or $5,000 or more.
Surreptitious market manipulation by government is leading the world to disaster. We want to expose it and stop it.
Who are we?
We’re the Gold Anti-Trust Action Committee Inc., a non-profi t, federally tax-exempt civil rights and educational organization formed by people who recognize the necessity of free markets in the monetary metals. In May 2001 we gathered representatives of five gold-producing African countries in Durban, South Africa, at the GATA African Gold Summit. In August 2005 we brought gold market experts and investors from around the world to the Gold Rush 21 conference in Dawson City, Yukon Territory, Canada, excerpts of which you can watch on the Internet here: http://www.GoldRush21.com
Now GATA is marching on the Treasury Department to demand, via the Freedom of Information Act, that the U.S. government come clean about its gold reserves — to disclose how much gold is left and how much has been compromised by leases, swaps, and other encumbrances undertaken for surreptitious market intervention.
So that we may explain how the unfolding world financial disaster can be mitigated and why free markets in the monetary metals are essential to free markets everywhere, we invite you to join us at our next conference — “GATA Goes to Washington: Anybody Seen Our Gold?” — to be held Thursday through Saturday, April 17-19.

For information about that conference and GATA, visit http://www.GATA.org.

This advertisement, sponsored by GATA and costing $264,426.26, is scheduled to appear in The Wall Street Journal on Thursday, January 31, 2008.

Complete documentation of the statements cited in the advertisement can be found as follows:

Paragraph 2, statement by J. Virgil Mattingly, general counsel for the Federal Reserve:

http://www.federalreserve.gov/fomc/transcripts/1995/950201Meeting.pdf

Paragraph 3, statement by Federal Reserve Chairman Alan Greenspan:

http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

Paragraph 4, motion by Barrick Gold Corp.:

http://www.lemetropolecafe.com/img2003/memoformotiontodis.pdf

Paragraph 5, statement by William S. White of the Bank for International Settlements:

http://www.gata.org/node/4279

Paragraph 6, U.S. Treasury Department international reserve position reports:

http://www.gata.org/node/5637

Paragraph 7, Sprott Asset Management report:

http://www.sprott.com/pdf/pressrelease/press_release_not_free_not_fair.p…

Paragraph 7, Cheuvreux report:

http://www.gata.org/files/CheuvreuxGoldReport.pdf

Paragraph 7, Citigroup report:

http://www.gata.org/files/CitigroupGoldReport092107.pdf

Paragraph 7, Redburn Partners report:

http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

THE ANTI-GOLD GOSPEL ACCORDING TO KALETSKY

Antal E. Fekete
Gold Standard University
e-mail: aefekete@hotmail.com

Anatole Kaletsky is the author of the most recent Anti-Gold Gospel (www.gavekal.com, January 21, 2008.) He is an establishment journalist, Associate Editor (formerly Economics Editor) of The Times. He says that he instinctively dislikes gold because “historically gold has been a terrible investment and, even in the short term, gold has failed as a store of value”. I am satisfied to leave this statement to stand on its own, and wish Kaletsky good luck in seeking a better store of value in fiat currencies.

It is patently disingenuous and unfair to compare the gold price to stock indexes. It would be fairer to compare stashed-away gold to passbook savings. A portfolio of equities takes managing. It may be beyond the reach of most wage-earners and pensioners while their savings is the main target of the pilferers who run the nation’s banks and monetary system. Who said pilferers were after wealth invested in the stock market?

I strongly object to the idea that “gold is an investment”. Gold is better described as a non-investment, more precisely a place where you park your savings when you cannot find satisfactory investment outlets either because interest rates are too low, or because the risk of holding equities is too high, e.g., after a bull run of the stock market driven by printing-press money. Gold is not an investment any more than a fire-insurance policy is. Governments have a sacred duty to protect the value of funds of the weak, who cannot fend for themselves in the investment arena. Without protection their funds would melt away like butter left in the blazing sun. Governments have failed miserably in discharging this sacred duty. The Biblical curse is upon them for “tormenting widows and orphans”.

Kaletsky, like everyone before him preaching the Anti-Gold Gospel, studiously avoids the question why the Treasury and the Federal Reserve should have the privilege of issuing obligations that they have neither the means nor the intention to honor. If anyone else tried to run a business on that basis, he would land in jail like Charles Ponzi did in the 1920’s.

Kaletsky also dodges the fact that gold is the only balancing item in the asset column that has no countervailing liability in the balance sheet of someone else. It is this feature that makes gold impervious to defaults, devaluations, and deliberate debasement of the currency. For this reason gold is universally sought after as a safe haven, especially when the seas get rough. There is simply no substitute for gold in this regard.

Gold is the indispensable regulator of debt in society. Kaletsky apparently believes that government bureaucrats should determine how much debt society is able safely to carry, and they should regulate the level of debt accordingly. Well, we have just tried this and found that whenever irredeemable promises are to be liquidated by issuing more irredeemable promises, debt proliferates beyond any limit. The derivatives monster and its bastard offspring, “bond insurance,” is the beacon luring the boat of the national economy to its doom on the reefs. Clearly, debt existing in the world today will never be liquidated through the normal processes of debt-retirement, that is, without detours into deflationary or inflationary territory (i.e., through default or depreciation). It is lunacy to think that the debt-pyramid can continue to grow indefinitely without causing a major catastrophe further down the line. All debt will be liquidated in the same way as subprime mortgages: through default ? or else, it will be inflated away.

By the way, did it ever occur to Kaletsky that there is absolutely no need for bond insurance under a gold standard? The reason is that interest rates and, hence, bond prices are confined to such a narrow range that bond speculation becomes unprofitable. Under a gold standard capital and talent are freed to pursue socially desirable goals.

Kaletsky’s argument that there is not enough gold in the world to serve as a means of exchange in our sophisticated global economy is the old war-horse of the Anti-Gold Gospel. All the output of the gold mines for the past half-century, plus all the monetary gold disgorged by the central banks in a futile effort to contain the gold price, has been gobbled up by gold hoarding. This is an unmistakable sign that people do not trust the integrity of government promises, nor do they buy the academic claptrap about gold being a barren asset and a barbarous relic. Obituaries of gold money have been premature. The golden corpse still stirs. People who sought refuge in gold have been amply rewarded for their foresight. More rewards are on the way. Others who did not avail themselves of the opportunity will have occasion to regret it. They are to be victimized by the welfare-warfare state and its unconstitutional power-grab in issuing irredeemable dollars. These dollars could not have been issued under a system of government of limited and enumerated powers. All present dollars have been issued unconstitutionally. They are the corpus delicti: proof of usurpation of unlimited power.

If constitutional money were re-established, then gold would come out of hiding and make itself available as a means of exchange. There is plenty of gold in existence to support a gold standard, provided that confidence in promises is re-established. There is no rigid rule limiting the amount of sound credit that can be safely built upon a given gold base, especially in this age of instantaneous and free communication. However, multiple credit construction and borrowing short to lend long as a banking technique must be renounced.

The last word whether gold is destined once again to become the pivot of the international monetary system, or whether it is hopelessly antediluvian and incompatible with economic progress, will not be pronounced by detractors of gold and devotees of fast-depreciating fiat money. Their time is up. Their schemes and nostrums have been tried. Now it is the turn of their victims to have their day in court to pass judgment on the fiat money experiment. “He laughs who laughs last”. The annals of monetary history do not know one single instance in which irredeemable currency survived the test of times. Either the currency was returned to its gold anchor in good time and its value stabilized, or it plunged to worthlessness within a generation. We are skirting these limits right now. The present experiment with the irredeemable dollar has been going on for just about a generation. You will not have to wait decades to witness the failure of this experiment.

The dollar is hemorrhaging on two counts: one is the trade deficit, and the other is the budget deficit. Both the political will and the economic know-how are missing to stop the bleeding. The U.S. is borrowing $800 billion annually from foreigners to fund its consumption of foreign-produced goods and commodities. The federal government is running an annual budget deficit of almost $600 billion. At one point foreigners will refuse to finance the burgeoning twin deficit, forcing the Federal Reserve to monetize all the additional debt. The danger is real that the value of the dollar, both international and domestic, will collapse at that point.

Kaletsky says that the gold standard is totally anachronistic in our age of rapidly advancing technology and growing populations. He might as well say that good faith behind promises have been rendered obsolete by technological progress, and the more people there are the more the government is justified to cheat them out of their savings through currency debasement. Kaletsky is entitled to his belief that people will meekly continue in their assigned role of being victimized by spendthrift governments. However, the New Year 2008 brought with it signs aplenty that the open season of governments’ preying upon savers and producers of real goods and real services is coming to an end. People wake up and realize that they are surrendering real goods and real services in exchange for irredeemable promises.

The consequences of this awakening will be most painful. The responsibility for the coming credit collapse in the wake of the unconstitutional paper dollar rests with the U.S. Treasury, and its partner-in-crime (partner-in-check-kiting if you will) the Federal Reserve. It may serve as a useful reminder to recall that the French, some seventy years before their bloody revolution, experimented with irredeemable currency under the management of the Scottish adventurer, John Law of Lariston. When Law’s system unraveled people wanted to lynch him. He had to leave Paris in a hurry. Under the cover of night. In a disguise. Disguised as a woman.

The finance capital of the world, denominated as it is in dollars, is in danger of being wiped out. There is only one way to take out insurance against this contingency: buying gold. As I have explained above, the reason can be found in the balance-sheet concept of gold. The only financial asset that will survive any consolidation of balance sheets, any default, any devaluation, any depreciation is gold.

Gold holdings are the most negatively-correlated asset class to traditional financial assets. Portfolio-diversification can be achieved by balancing financial assets such as bonds, equities, and currencies by holding gold. The best timing to set up a gold hedge is when cyclical trends change, as they do right now. The Dow/gold ratio is presently indicating a change. It has turned from increasing to declining mode, which is a red-alarm signal warning wealth-holders that it is time to hedge financial assets and even to go overweight in gold.

The rising gold price and its implications have been largely ignored by the financial press and the investing public so far. The proposition that gold is still a monetary metal and still has a monetary role to play is ridiculed, while some central banks around the globe (e.g., that of Russia, China, India, Argentina, Brazil, to mention but the most important ones) are quietly remonetizing gold as they diversify out of dollars and build gold reserves from scratch. They keep this activity under cover as much as possible since it is not their intention to upset the golden apple-cart.

It is not too late to set up gold hedges as portfolio insurance. Private and institutional investors (including pension funds and insurance companies) have investments to protect worth some $180 trillion. Not more than $600 billion worth of gold bullion is presently earmarked as hedges for portfolio insurance. (Note that gold-mining shares are not eligible for this purpose.*) In other words, only about one-third of one percent of all the investments is protected by gold hedges while more than 99 percent is unprotected. Even this is a gross overestimate because most of the hedged portfolios are heavily overweight in gold, leaving that much less gold for the unprotected and thinly protected ones. Be that as it may, if global investors decided to allocate even a modest three percent of their assets to purchase portfolio insurance, the consequence would be that $6 trillion paper assets would be chasing gold bullion worth $0.6 trillion, or one-tenth, at the present price of gold. This means ten bidders for every ounce of gold available. Portfolio insurance is still cheap, but the cost may quickly go up ten-fold or more, once the stampede starts.

Kaletsky would serve his readership better if he advised caution at this juncture. It is still too early to dismiss the possibility that the Titanic of the world economy, having collided with the derivatives iceberg tearing a subprime hole in the hull, may go down. Golden life-savers may yet come handy.

GOLD STANDARD UNIVERSITY LIVE

Session Three will be held in Dallas, Texas, February 11-17. For further information, go to http://www.professorfekete.com .

* Gold mining shares are not eligible as portfolio insurance since they have an ambiguous correlation to traditional financial assets. While from time to time they may be negatively correlated, and there is no question of their ability to benefit from promising trading opportunities, long-term wealth preservation demands fully allocated, segregated, and insured gold bullion. The counterparty risk involved in owning gold mining shares is not zero. Worse still, the full extent of this risk is unknown. To complicate matters further, many a government (such as that of Ecuador) keeps a jaundiced eye on its gold mining industry and is trying to determine the most opportune moment to expropriate foreign shareholders. Gold bullion is not dependent on anyone’s promise, representation, or ability to perform (nor, if properly stored, is it dependent on the propensity of the government to expropriate), in a word: gold bullion is not someone else’s liability. Therefore it is the only agent that can provide the necessary protection against both contingencies: systemic collapse and slow monetary debasement, while incurring the lowest possible level of risk.

Acknowledgement

The author hereby wishes to acknowledge his indebtedness to various writings of Nick Barisheff of Bullion Management Services, Inc., Canada.

January 27, 2008

Listen to this very carefully America!
Global gold supply experienced a two per cent fall in the 12 months to September 2007, according to a new report.
The Gold Investment Digest from the World Gold Council (WGC) said that mine supply fell to 2,145 tons, while mining production stayed stagnant at 2,504 tonnes, Mineweb reports.
This tightening could see gold bullion rise in value as a result – marking good news for those with gold investments.

De-hedging could stay at the fore this year as a result of AngloGold Ashanti’s revealing last month that it is to close out its 330-ton hedge book, the Gold Investment Digest said.

It stated: “According to Virtual Metals, the global hedge book was reduced by a further 2.1 million ounces (65 tons) in third quarter 2007, reducing the hedge book to 29.1 million ounces (905 tons) from 101.4 million ounces (3,153 tons) in mid-2001.”

Earlier this month, the WGC noted that the recent surge in gold prices can not only be attributed to short-term factors such as the weak dollar and high prices, but also to longer-term drivers including the higher cost of gold extraction and strong demand for jewelry.

Νά λοιπόν που τα ελληνικά ΜΜΕ άρχισαν να “αντιλαμβάνονται” αυτό που έχει αρχίσει να συμβαίνει στις παγκόσμιες αγορές μεταλλευμάτων εδώ και 5-6 χρόνια. Την άνοδο της ζήτησης -άρα και της τιμής- του χρυσού!
Το παρακάτω άρθρο είναι από το Βήμα της 20/1/2008 και αποτελεί -καλή σχετικά- μετάφραση από αντίστοιχο άρθρο της Wall Street Journal: The World Melts for Gold (άρα οι ξένοι πάλι μας ανοίγουν τα μάτια…)
Απολαύστε το:

Το κίτρινο μέταλλο ξαναβρίσκει τον ρόλο του στην παγκόσμια οικονομία
Ο χρυσός επανέρχεται. Απέναντι στους φόβους, στις αστάθειες, στις ανισορροπίες, στις αναταραχές της οικονομίας και του κόσμου, και πάλι ο χρυσός αναζητείται ως ασφαλές καταφύγιο. Ακόμη και οι επενδυτές, που τόσα σύνθετα «προϊόντα» έχουν κατασκευάσει, μοιάζουν να επιστρέφουν, όπως οι παππούδες μας, από τους αιθέρες των τίτλων και των παραγώγων στην ευτέλεια του υλικού μας κόσμου. Οπως το εξηγεί στον «Figaro» ο πλέον προβεβλημένος διαχειριστής χρυσού της BlackRock στο Λονδίνο, ο Γκράχαμ Μπιρς, «οι επενδυτές έχουν γίνει νευρικοί με τις χρηματοπιστωτικές αγορές και αρχίζουν να ψάχνουν για σίγουρα μέρη για να επενδύσουν. Ο χρυσός αρχίζει να ξαναβρίσκει τον ρόλο του ως καταφυγίου». Πέρα από τα σκαμπανεβάσματα, μέρα με τη μέρα, για την άνοδο της τιμής του χρυσού, που ξεπέρασε και τα 900 δολάρια η ουγκιά στην αρχή της εβδομάδας, έστω και αν μειώθηκε κάπως μετά, οι κινήσεις αυτές των επενδυτών μπορεί να βρίσκονται στη ρίζα της. Οπως εξηγεί ένας άλλος ειδικός επίσης στον «Figaro», ο Γκυ Κοτέν, ο οποίος συγκεντρώνει τα κύρια αιτήματα για χρυσό απ’ όλα τα τραπεζικά δίκτυα της Γαλλίας, «εδώ και δύο εβδομάδες βλέπουμε πιο πολλούς αγοραστές από πωλητές». Και όταν η ζήτηση ξεπερνά την προσφορά, όπως λένε οι οικονομολόγοι, τότε η τιμή ανεβαίνει. Η άνοδος όμως της τιμής του χρυσού είναι πιο μακροχρόνια. Εχει ξεκινήσει από τα τέλη της προηγούμενης δεκαετίας, έστω και αν τώρα μοιάζει να επιταχύνεται.Η τιμή του χρυσού μόλις τώρα έπιασε τα 850 δολάρια, δηλαδή το ανώτερο επίπεδο όπου είχε φθάσει το 1980. Και από απόψεως αγοραστικής δύναμης εξακολουθεί να υπολείπεται πολύ από το τότε επίπεδο. Σε σταθερά δολάρια, δηλαδή παίρνοντας υπόψη τον αμερικανικό πληθωρισμό τα 28 τελευταία χρόνια, η τιμή του χρυσού φθάνει τώρα μόλις τα 400 δολάρια, σύμφωνα με τους υπολογισμούς του ινστιτούτου συγκυρίας COE-Rexecode. Βέβαια, το ίδιο ισχύει και για το πετρέλαιο, το οποίο, έτσι, στα 100 δολάρια σήμερα, απλώς ξαναβρίσκει τις τιμές του χειμώνα του 1980, όταν είχε 40 δολάρια το βαρέλι, αν μετρηθεί σε σταθερά δολάρια. Μαύρος και κίτρινος χρυσός φαίνεται να ακολουθούν μακροχρόνια παράλληλη πορεία – έστω και αν στη συγκυρία η ζήτηση και η προσφορά των δύο είναι αρκετά διαφορετικές. Αλλωστε, ακόμη και πιο παλιά να πάμε, πριν από την κρίση της δεκαετίας του 1970 και προτού ο Νίξον σταματήσει τη μετατρεψιμότητα του δολαρίου σε χρυσό, το 1971, ακόμη και τότε που η ουγκιά είχε εξ ορισμού 35 δολάρια, η τιμή του βαρελιού πετρελαίου κυμαινόταν και τότε στο επίπεδο του ενός δεκάτου με ένα δωδέκατο της αξίας της ουγκιάς του χρυσού. Είναι ο λόγος για τον οποίο μερικοί χρησιμοποίησαν την αναλογία αυτή ως τον «κανόνα» της αξίας: δέκα φορές περισσότερο θα άξιζε, έτσι, η ουγκιά από το βαρέλι – που θα σήμαινε ότι, με 100 δολάρια το βαρέλι, ο χρυσός θα πρέπει να «πιάσει» τα 1.000.

* Ζήτηση

Ωστόσο, όπως ισχύει σε όλα τα εμπορεύματα, η μακροχρόνια αξία τους δεν καθορίζεται από τις διακυμάνσεις της τιμής τους στις διάφορες κερδοσκοπικές αγορές (προθεσμιακές, αξιών κτλ.) αλλά από τις συνθήκες παραγωγής τους. Ακόμη και για τον χρυσό, που ως τέτοιος μπορεί να κρατηθεί για αρκετό διάστημα και να υποστεί αλλαγές στην τιμή του από απότομες μεταβολές στην αγορά, τα πράγματα δεν είναι διαφορετικά. Από τις περίπου 3.500 τόνους που ζητούνται ετησίως στον κόσμο, μόνο το ένα έβδομο ζητείται για «επένδυση», δηλαδή ως απόθεμα αξίας, ενώ η διπλάσια περίπου ποσότητα προέρχεται, όχι από φρέσκια παραγωγή, αλλά από ανακύκλωση. Φαίνεται ότι οι επενδυτές έχουν αρχίσει να ενδιαφέρονται για τον χρυσό, σε φυσική μορφή, τα τελευταία χρόνια και είναι ο ένας από τους λόγους που εξηγεί την αυξημένη ζήτηση. Με τα νέα προϊόντα Exchange Traded Fund μπορεί μάλιστα ο «επενδυτής» να τοποθετήσει σε χρυσό, κρατώντας τη δυνατότητα να τα ξαναπουλήσει στα χρηματιστήρια. Σύμφωνα με τον Ερβέ Λιεβόρ της Axa Investment Managers, «σε λιγότερο από πέντε χρόνια τα ETF συσσώρευσαν χρυσό που φθάνει στο ένα έβδομο των παγκοσμίων αποθεμάτων του». Πολύ μεγαλύτερα αποθέματα όμως από το σύνολο των ιδιωτών επενδυτών διαθέτουν η καθεμία από τις κεντρικές τράπεζες των ΗΠΑ, της Γερμανίας, της Γαλλίας, της Ιταλίας και της Ελβετίας, καθώς και το Διεθνές Νομισματικό Ταμείο.Οι επενδυτές, είναι αλήθεια, τοποθετούν όχι μόνο σε χρυσό αλλά και σε άλλα προϊόντα που συνδέονται με αυτόν, όπως σε μετοχές των αντίστοιχων ορυχείων. Συνολικά ωστόσο, συμπεριλαμβάνοντας αυτές τις αξίες, η αναπροσαρμογή για να συμπεριληφθεί ο χρυσός στα χαρτοφυλάκιά τους φθάνει, στην καλύτερη περίπτωση, το 10%, σύμφωνα με έναν άλλον ειδικό, τον Ερίκ λε Κοζ της Carmignac Gestion. Στην πράξη το συντριπτικά μεγαλύτερο τμήμα της ζήτησης χρυσού γίνεται όχι για χρήμα ή για «επένδυση» αλλά για το ίδιο το μέταλλο ως τέτοιο. Ενα μικρό τμήμα χρησιμοποιεί η οδοντιατρική και ορισμένοι άλλοι βιομηχανικοί κλάδοι, αλλά η κοσμηματοποιία από μόνη της απορροφά ουσιαστικά όλη την παγκόσμια παραγωγή χρυσού. Η ζήτηση επομένως κυρίως συνδέεται με την ανάδυση νέων και πιο πλούσιων κοινωνικών στρωμάτων, ειδικά στις χώρες που παραδοσιακά αποτιμούσαν τα χρυσά κοσμήματα ως ιδιαίτερης αξίας: η Ινδία, έτσι, παραμένει πρώτος καταναλωτής παγκοσμίως, αλλά και η Κίνα, που μαζί με την Ινδία αποτελεί το ένα τρίτο του παγκόσμιου πληθυσμού και συμβάλλει σε αυτή την τωρινή αύξηση της κατανάλωσης, αλλά και παραγωγής. Η Κίνα αναμένεται εφέτος να ξεπεράσει ακόμη και τη Νότιο Αφρική και να γίνει πρώτος παραγωγός χρυσού στον κόσμο.

* Παραγωγή

Το ότι η Κίνα φιλοδοξεί να πάρει τα πρωτεία από τη Νότιο Αφρική στην παραγωγή χρυσού οφείλεται ωστόσο και σε έναν άλλον λόγο, που συνδέεται με τις συνθήκες παραγωγής: είναι το γεγονός ότι ο κλάδος είναι εξαιρετικά κατακερματισμένος. Από τις 2.500 τόνους χρυσού που παράγονται ετησίως, μόνο το 30% παράγεται από τις πέντε μεγαλύτερες εταιρείες, με την πρώτη, την αμερικανική Barrick, να παράγει 360.000 κιλά και τη δεύτερη, τη νοτιοαφρικανική AngloGold Ashanti, να παράγει 175.000. Υπάρχουν χιλιάδες μικροπαραγωγοί χρυσού στον κόσμο, πράγμα που εν μέρει οφείλεται στα σχετικά μικρά κεφάλαια που απαιτεί η είσοδος στον κλάδο, για δαπάνες αναζήτησης χρυσού. Επιπλέον, συχνά ο χρυσός είναι υποπροϊόν άλλων μεταλλευμάτων, και έτσι μερικά από τα σημαντικότερα χρυσωρυχεία είναι, βασικά, ορυχεία χαλκού, ιδιαίτερα τα μεγάλα, στη Νότιο Αφρική, στην Αμερική ή στην Αυστραλία. Τέλος, η διασπορά του κλάδου επιτρέπει τη συγκεντροποίηση, όπως έγινε με την πέμπτη εταιρεία παγκοσμίως, τη Harmony Gold, που σήμερα διαθέτει 21 χρυσωρυχεία και απασχολεί περίπου 55.000 εργαζομένους, αλλά το 1995 δεν διέθετε παρά μόνον ένα ορυχείο.

Ωστόσο η συγκεντροποίηση του κλάδου, που στην ουσία μένει να γίνει, αν γίνει, καθορίζεται από τις ανάγκες της ίδιας της ζήτησης και τις τιμές που είναι διατεθειμένη να πληρώσει. Στην πραγματικότητα, ύστερα από καμιά τριανταριά χρόνια πολύ μικρών επενδύσεων για έρευνα, η τελευταία ξανάρχισε να αυξάνεται στις αρχές της δεκαετίας μας, προφανώς καθοδηγούμενη από τις αυξημένες ανάγκες για κατανάλωση χρυσού. Αν πιστέψουμε τις στατιστικές του Παγκοσμίου Συμβουλίου Χρυσού (WGC), η ανθρωπότητα από τις αρχές της ως το 1950 είχε συνολικά εξορύξει κάπου 55.000 τόνους χρυσό. Μέσα στις λίγες επόμενες δεκαετίες προσέθεσε δύο φορές τόσα, δηλαδή άλλες 100.000 τόνους, που σημαίνει ότι η παραγωγή χρυσού επιταχύνθηκε εντυπωσιακά. Ωστόσο η αυξημένη αυτή παραγωγή οδηγεί, για μια σειρά ορυχεία, σε αρκετή αύξηση του κόστους εξόρυξης. Το βαθύτερο χρυσωρυχείο στον κόσμο, που βρίσκεται στη Νότιο Αφρική, έχει βάθος 3,3 χιλιομέτρων! Και, με την αύξηση της τιμής του χρυσού, επίσης γίνεται αντιμετωπίσιμη η εξόρυξη ακόμη και σε βάθος 4,5 χιλιομέτρων!

Το κόστος παραγωγής στα χρυσωρυχεία αυτά, που είναι απαραίτητα για να ικανοποιηθεί η αυξημένη κατανάλωση, είναι εκείνο που θα καθορίσει και τις τιμές τελικά και μακροχρόνια. Ωστόσο στις σημερινές συνθήκες, της μεγάλης διασποράς των επιχειρήσεων, η παραγωγή χρυσού αφήνει γενικά σημαντικά περιθώρια κέρδους.

GOLD: HOW HIGH IS HIGH?
by Antal E. Fekete,
Gold Standard University Live
January 18, 2008
Now that the sound of cork-popping and other signs of celebrating the New Year, and the new record highs in the price of gold, are dying down, some questions arise the answering of which brooks no delay. How high is high? Is it the nominal price or the so-called ‘real’ price of gold that gives us a valid reading of whence we came, where we are, and whither we go? Chrysophobes have already started their dissonant chorus reminding gold bugs that the last time gold was trading at these levels, in January, 1980, it was a sign marking the onset of a bear market taking the price down by more than 75 percent, lasting over twenty years. Goldbugs take comfort in the thought that the previous peak in the price of gold was much higher in “real terms”, so that the current price is not so high after all. However, this begs the question. The previous peak was the result of a blow-off, and further rise from here may make a new blow-off loom large on the horizon, with all the unpleasant consequences.The chorus of chrysophobes will obviously get much louder as we may see fresh record prices in four digits. Just how serious is the danger that a blow-off could trigger another bear market lasting for decades?

Gold Standard University offers a unique perspective on the gold price issue, a perspective which is deliberately ignored, even denigrated, by virtually all investment advisory services. Ours is the perspective of monetary science as it existed prior to 1936, before Keynes and other charlatans gained academic recognition and prominence for peddling their pet monetary nostrums. Let’s review some of the principles that are indispensable in separating grain from chaff.

THE VALUE OF GOLD

Gold is the senior monetary metal (silver being the junior). This has nothing to do with the denials, declarations, and desires of devaluation-happy governments. It has to do with the fact that the value of gold, unlike the value of other earthly wares, depends far less on scarcity, and is threatened far less by increasing supply. One may even say that the value of gold is exempt from the effect of the law of supply and demand. Often the rising price of gold causes a contraction of supply. A blow-off may indeed cause a withdrawal of all offers to sell. After that happens, gold is not for sale at any price. But again, a blow-off may bring out an avalanche of supply. The essence of the gold price is volatility. The essence of the value of gold, however, is stability. We conclude that the price of gold has nothing to do with the value of gold.

WHAT MAKES A MONETARY COMMODITY?

Monetary economics is the science of monetary commodities, which are necessarily quite different from the non-monetary variety. The latter are produced in order to satisfy consumption demand. The former are produced to satisfy demand for the ultimate asset that has no counterpart in the liability column of the balance sheet of someone else. Τhe only default-proof asset is a holding of monetary metals.

The value of gold is more stable than the value of any non-monetary commodity, although this fact is deliberately obscured by the managers of global irredeemable currency, anxious to confuse the issue. They have the power to engineer temporary surges in the value of their product, irredeemable promises to pay, in order to put gold into the worst light. What makes a monetary commodity? It is the fact that existing supplies are very large relative to the flows of new metal from the mines. A discovery of new gold fields makes little impact as its effect on supply is small. On this basis gold has been far and away the leading monetary metal for most of the Modern Age. It still is.

GOLD IS GOLD AND PAPER IS PAPER

The managers of the global fiat currency system are helpless in facing the challenge of gold. They can have their high-profile auctions, trying to demonstrate that gold is scrap and is being sold as such. But what these gentlemen accomplish is only to undermine the value of their fiat currency through the dilution of the assets backing it. Those who can read balance sheets understand that selling a monetary asset that is nobody’s liability such as gold, and replacing it with the irredeemable promises of coin-clipping governments, makes the balance sheet of the central bank weaker, not stronger. After all is said and done, gold is gold and paper is paper.

A paper promise cannot be better than the good faith behind it. This good faith is not a consequence of a quantity-rule advocated by the monetarists. It is a consequence of the promise being redeemable in something other than another promise. Gold is not a promise: it is the fulfillment of promise. You need not trust gold if you don’t trust the issuer who stamped it. The weight and purity of gold can be readily tested with scales and acids.

The history of good faith behind monetary promises could hardly be more dismal, as the monetary annals of the twentieth century reveal. There is not a single currency without at least one instance of breach of faith during the twentieth century. The Swiss defaulted on the Swiss franc once, in 1936. The U.S. defaulted on the dollar twice: in 1933 and in 1971. The British defaulted on the pound sterling at least three times: in 1931, 1948, and in 1968.

By 1971 it looked so bad that the world’s governments agreed to make the deciphering of their monetary record difficult through the stratagem of “floating”. The word is a misnomer designed to camouflage “sinking”. Floating obscures the underlying fact of competitive currency devaluations. The dam burst and the world’s stock of money started on an exponential track. Prices of consumer goods took flight. Interest rates were destabilized. Derivatives markets proliferated.

MONETARY DEBAUCHERY HAS ITS OWN DYNAMICS

But it was in the twenty-first century that monetary debauchery started in earnest. The scope of monetary destruction that goes on right now makes earlier episodes pale in comparison. Worse still, monetary debauchery has its own momentum and is not responsive to monetary brakes. Everybody talks about the unprecedented rate of new money creation. Nobody is talking about the equally unprecedented rate at which money is being destroyed. No sooner had new money been printed than its value depreciated. The point has been reached that the more new money is created, the more its value declines; and the more it declines, the more new money has to be created. What you have is an irresistible spiral into the abyss.

As I was saying, the price of gold has nothing to do with the value of gold. It has to do with the disappearing value of fiat currencies in which the gold price is quoted. A falling price of gold ought to be interpreted correctly, like the fall of a piece of rock. Is that rock pulling the earth, or is it the earth that is pulling the rock until the latter crashes into the former, through the mutual attraction of masses?

A falling gold price is the market’s reaction in anticipating large-scale dumping of gold on official account. The dumping is politically motivated: it is designed to misinform and mislead. Naturally, the market obliges: it brings down the price to facilitate central bank unloading. But once dumping stops, as it obviously has to at one point, the market immediately adjusts the gold price back to its pre-dumping level or higher. Only ignoramuses swallow the propaganda line that gold is passé, and the millennium of global irredeemable currency is here.

GOLD AS INSURANCE

Selling gold after a surge in the gold price is akin to canceling fire insurance after surviving unscathed a devastating fire destroying homes and property in the neighborhood. It can be confidently predicted that higher gold prices will bring out a lot of selling by woolly-thinking people, as if insurance against the danger of collapse of the international monetary system were no longer necessary after an initial tumble in the gold value of paper currencies.

The reason for this illogical behavior is greed that is often greater than the desire for security. A large part of the gold bug population is motivated by „get-rich-quick” mentality more than by the mentality of insurance policy holders. This type of behavior should not detain us here. We do know that there were passengers aboard the sinking Titanic willing to sell their life-savers for cash. “Profit-taking”, so-called, will ultimately dry up as the collateral risk (what I euphemistically call the dead-cat bounce of the dollar) will become clear even to people ignorant of the difference between monetary and non-monetary commodities.

SUPPLY-DEMAND EQUILIBRIUM PRICE OF GOLD

One of the most controversial propositions that we here at Gold Standard University have to face, and the idea that appears to die hardest, is the supply-demand equilibrium price of gold. The price of monetary metals is not governed by supply-demand considerations. Such a supposed equilibrium is just the figment of the imagination, lacking any scientific merit. The fact is that supply and demand in the case of monetary metals is indefinable. By their very nature the monetary metals are subject to the most intense and most concentrated speculative attacks, both from the long and short side of the market. Speculators in gold are not poring over production and exploration results. Rather, they are trying to divine how the largest holders of gold are going to react to a surge in the gold price. Accordingly, from sellers they become buyers and vice versa on a moment’s notice, moving the price as they do.

There are no scientific principles to support predictions about human behavior. There are only statistical laws, and we might as well admit up front that they are very imperfect. A statistical law is the more valid the larger is the number of cases it can catch within the net of sampling. It follows at once that when it comes to predicting the consequences of a single isolated, non-repeatable event, such as gold scoring a certain new record, statistical analysis is useless. As any upright scientist will admit statistical analysis has a congenital weakness: its validity and usefulness diminish in proportion with a decrease in the number of samples. There is simply nothing science can do to eliminate or to assuage this weakness. Of course, quacks are ready to exploit our incurable ignorance and will try to impress the gullible public with mathematical hocus-pocus. They will pretend to make “scientific” predictions about the consequences of isolated, non-repeatable single events in the realm of human behavior.

I am a professional mathematician. Here I stand as a new Luther and bear witness that mathematics has not been in the past, is not at present, nor will it ever in the future be able to make predictions about human behavior based on minimal samples. I am fully aware of the significance of my statement and I am willing to stake my professional reputation on it. It is not possible to predict whether a surge in the gold price will bring out more sellers than buyers, or whether it will bring out more buyers than sellers.

Proliferation of mathematical symbols and studied gestures by pseudo-mathematicians do not science make.

THE SIREN CALL OF PROFIT-TAKING

However, monetary economics is able to predict that the ranks of so-called ‘profit-takers’ in the gold market will be drastically thinned out by persistent losses they stand to suffer (as have the ranks of naked short sellers in the gold mining industry). Ultimately, when a certain threshold in the price of gold is passed, profit-taking will dry up altogether (as short selling by gold mines has A.D. 2007).

I say ‘so-called profit-taking’ because we are dealing with an oxymoron. Can one really take profits in the gold market by taking paper currency, destined to lose whatever value they may still have?

The call to take profit is a siren song. To neutralize it, you had better follow the example of Odysseus who had himself chained to the mast, and had the ears of his oarsmen plugged with wax.

SILVER AND GOLD BASIS

When the profit-taking mentality is thoroughly defeated and discredited by the market, gold will go to permanent backwardation making the gulf between cash gold and paper gold unbridgeable. The gold basis will go negative, burning the bridge leading back to contango. From then on gold is not for sale at any price. Just when this will happen is impossible to predict. There are a few clues nevertheless. One is the silver basis that acts as a precursor of the gold basis. Whatever little information we may glean from the markets, it all has to do with the basis. It is therefore all the more surprising that investment advisers cavalierly ignore the basis as an analytic tool, just as they ignore the coming backwardation.

Likewise it is impossible to pinpoint where the threshold price, past which the supply of gold will dry up completely, is located. History and theory confirm that there is such a threshold, but we are left to guessing how high it may be.

BRIBE AND BLACKMAIL IN ECONOMICS

Governments have forcibly removed gold not only from the banks, but from academia as well. As a result, the level of ignorance in the world about gold is appalling. Gold has been relegated from economics to superstition, witchcraft, and soothsaying. It is treated like a narcotic agent. “Gold is addictive. Gold ought to be taken away from man’s greedy little palms by a paternalistic government”, as advocated by Lord Keynes’ New Economics. The advice is disingenuous. It is not given in the interest of people. It is given in the interest of the pilferers and plunderers of people. Here is how one author, Howard Katz, describes economics as it has transformed, nay, corrupted, American institutes of higher learning.

“Something is rotten in the state of economics. In the middle of the 20th century a group of bankers bribed some of the nation’s top colleges to peddle a reactionary economic theory (which was to make bankers a lot of money). This theory swept American higher education with the result that pretty well everybody who has graduated with a degree in economics no longer has the slightest idea of what he is talking about… There is nothing wrong with the science of economics, but there is something terribly wrong with the kind of trash handed out by our nation’s colleges today. It is people dumb enough to imbibe such trash who are the reporters and columnists in most of the media, and these are the people giving most Americans economic advice.”

THE AFTERMATH OF THE NEXT BLOW-OFF

Gold Standard University is fighting back. It is not motivated by the lure of making a fortune in gold speculation. Not as if it condemned efforts to salvage capital from the crumbling old monetary regime to transfer it to a new one. But salvaging won’t be a bed of roses as the idea of making a fortune in gold speculation seems to suggest. Gold Standard University is motivated by values held in the highest esteem. It is motivated by truth, the cause of which has been so pitifully betrayed by economists in taking bribe money from banks; and the dissemination of which has been so miserably compromised by economics departments in reacting to blackmail (namely the threat to discontinue grants and to purge truculent economists).

Making statements about the future course of the gold price is a most treacherous undertaking. Gold Standard University is committed to tell you all that can be supported scientifically. Making predictions about the timing of price moves up or down is beyond the pale. However, I am willing and happy to share with you my insight, for whatever it is worth, on the gold price issue as well as on the burning question how long the agony of watching the death throes of global fiat currency will take. I promise that I will always carefully delineate facts from opinion.

We can dismiss the suggestion out of hand that the next blow-off, if and when it comes, will ring in a new bear market in gold. At any rate, it will be very different from that witnessed in 1980. The credit of the United States was immensely stronger then. There was room for drastic increases in the rate of interest that helped restoring the dollar to strength. Higher interest rate is a very strong and very effective medicine ― that is, if the patient has a constitution that it can be administered. If the patient is too weak, strong medicine would be lethal.

BANK CAPITAL AND THE DERIVATIVES MONSTER

The dominant fact to understand is that yield varies inversely with the value of the underlying asset. Therefore increasing the rate of interest would further erode the capital structure of the American banking system, already badly shattered by the subprime crisis. It is out of the question that the Fed could follow the Volcker-recipe, 1980 vintage, of letting interest rates go double-digit. Contrariwise, if the Fed were able to lower interest rates by hook or crook, that would be a reprieve for the banks with melting capital. It is my considered opinion that the Fed is doing what it does because the effect of a falling interest rate on bank capital is instantaneous. By contrast, pumping money into the banking system works by way of trickle-down. Talk about “stimulating the economy” is for the birds. The real reason why the Fed has to lower interest rates in a hurry when logic would call for increasing them is the emergency to stave off an implosion of bank capital.

How can the Fed engineer a falling trend in interest rates? This is the point where my own analysis diverges from that of others. Interest rates will fall because bond speculation in which the banks engage is risk-free, on the strength of the open market operations of the Federal Reserve. The banks preempt the Fed in buying the bonds. The consensus is that the ailing dollar can be bailed out only through a regimen of rising interest rates. But the banks bet at the roulette table that interest rates will fall, against everybody else betting that they will rise. Why, the $500 trillion strong derivatives monster serves one purpose and one only, that the bull market in bonds may continue indefinitely. In other words, the infinitely elastic supply of interest rate derivatives is there to make sure that the shorts in the bond market will burn their fingers right to the armpit. Interest-rate derivatives did not come about by accident. Like the original Tower of Babel, the Tower of Derivatives is being built deliberately. It was conceived and nurtured by megalomaniacs, in this instance the managers of the global fiat money system. They understand that bank capital hangs precariously on the cliff of vanishing confidence. They are confident that they can patch up even the largest holes in the balance sheet of banks on capital account, provided that the derivatives monster will not unravel in the meantime. The big unknown is whether the escalation of counterparty risk will trigger the self-destruction of derivatives before the managers are through.

Here is the strategy. The Fed will keep halving the rate interest as many times as necessary. Each halving nearly doubles bank capital. It worked in Japan where the authorities have kept the brain-dead banks in business through thick and thin. The Japanese merry-go-round has been supported by the yen-carry trade; the American merry-go-round will be supported by the derivatives farce.

Both represent a game of musical chairs. It is a matter of opinion how long the music can go on. I am reminded of the sinking Titanic aboard which the orchestra continued playing even after all lights went out. I don’t see that the music would stop this year even if the lights go out and industrial production starts to sputter. The conundrum of a weak dollar cum strong bonds will continue to baffle all the experts, and lead a lot of gold bugs astray.

IS ANOTHER DECADES-LONG BEAR MARKET IN GOLD POSSIBLE?

The 1980-2000 bear market in gold was made possible by the Volcker-coup in pushing interest rates past 20 percent. It was designed to trick people out of their gold position. The Volcker-coup was an expensive gamble that succeeded, because the economy was fairly strong in 1980, a condition completely lacking today. If Bernanke tried to mount the Volcker-coup now, the economy would go into a tailspin. We may conclude that another bear market in gold is well-nigh impossible.

GOLD STANDARD UNIVERSITY LIVE

To summarize, in my opinion a blow-off in the gold market is not imminent. The dollar, however weak, is not yet a pushover. It will fight back, supported by a strong bond market. The bag of tricks of the managers of global fiat currency is not empty. They haven’t yet played the Amero card, for example.

I advocate a new approach to investing in gold. This approach rules out profit-taking, but involves arbitrage between the two monetary metals. Cues must be taken from the silver and gold basis, not from the gold/silver ratio which is rigged.

Come to Session Three of Gold Standard University Live to be held in Dallas, Texas, from February 11 through 17. I will conduct the course and the seminars in person. Bring your questions with you. Details about the session can be found on the website http://www.professorfekete.com/GSUL.asp

Be part of the uplifting undertaking to resurrect monetary science. Discover the truth about money as the giants of monetary science, Adam Smith, Carl Menger and others have handed it down to us, before bribe and blackmail have overtaken the search for and dissemination of knowledge in economics.

The world’s finance capital is on its way to total annihilation. The essence of the subprime crisis was not the slack in lending standards. The essence is that the worm of doubt is eating confidence away. Banks no longer trust the promises of other banks. Under a gold standard trust could quickly be restored by paying out gold. That’s what gold is for, to restore trust whenever doubt arises. But gold has been removed from the banking system. Now irredeemable promises can only be redeemed by issuing more irredeemable promises. In such a system the erosion of confidence cannot be checked. Lack of confidence becomes cumulative. It is like kicking garbage upstairs. When the attic can take no more, the day of reckoning has dawned, and the garbage comes crashing down.

What can the individual do under these circumstances? He can salvage the pieces of his capital from the moribund international monetary system through the Yellow Brick Road. When you invest in gold, you transfer your capital, bit by bit, from Sodom and Gomorrah where it is doomed by the coming rain of fire and brimstone, to Emerald City of the New Gold Age.

See you in Dallas!

by Jeff Randall

“If you don’t trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?”
– Kenneth J. Gerbino
The price of gold tells us a lot about ourselves. It holds up a mirror to the way we are governed, our economy and its prospects. It reflects not only the physical dangers of floods, famine, terrorism and war, but also the financial perils of systemic addiction to debt and budgetary incontinence.
“The modern mind dislikes gold,” said Joseph Schumpeter, “because it blurts out unpleasant truths.” With gold trading at about $900 an ounce – more than 200 per cent higher than it was at the turn of the millennium – today’s message from the bullion market is not comforting.

In the eight years since the arrival of the 21st century, the FTSE-100, the London stockmarket’s main index, has lost about 15 per cent in value. The shares in companies that comprise “Footsie” usually pay dividends, sometimes more than five per cent a year. Gold pays none: never has, never will.

So why have investors been abandoning conventional assets, such as government bonds and stakes in blue-chip businesses, in favour of a metal that appears to offer no reward for holding it? The answer, I’m afraid, is crumbling faith in the world’s central banks, and in particular the US Federal Reserve, where the presses have been working overtime.

Some argue that the soaring gold price has been driven by temporary anxiety over global instability. The metal is a safe haven in troubled times. But answer me this: when was the last time the world felt like a cosy hideaway? Ever since mankind turned up, Planet Earth has never been a safe place.

Wars in Iraq and Afghanistan, a more muscular Iran and the unpredictability of Moscow are contributing to nervousness. But what’s really upsetting investors is the speed at which money is being printed by governments, especially America’s, that cannot face the problem of funding wild expenditure plans solely from reserves or taxation.

In that sense, the gold price’s journey towards $1,000 is a resounding vote of no confidence in authority. It’s the market flashing a red light.

This week, the BBC’s World Editor, John Simpson, reported under cover from Zimbabwe, where the cost of a meal for himself and some friends in a Harare restaurant was 290,000,000 Zimbabwean dollars. Ever the gentleman, Simpson left a ten-million-dollar tip. In this nightmare state, as Simpson put it, “everyone is a millionaire”, yet also, “grindingly poor”.

This is an extreme version of what happens when a currency is debauched. Zimbabwe is at the very end of a road down which all excessively wasteful administrations travel. It is a long haul, and not many go all the way like Robert Mugabe. Nevertheless, the price of gold is signalling fears that the US dollar, and to a lesser extent sterling, is on course for painful corrosion.

Currencies come and go, but gold has been a store of value for more than 5,000 years. Gold is rare, but, thanks to Gutenberg, paper money is not. Presented with an opportunity to churn out extra cash at little expense, it takes a special kind of government to resist. Few seem able to do so.

According to former Fed chairman Alan Greenspan: “There is no inherent anchor in a fiat-money regime [a currency not underpinned by gold]. What constitutes its ‘normal’ inflation rate is a function solely of a country’s culture and history.” For many, that flexibility has proven ruinous.

Inflation wrecks currencies in the same way that termites destroy wooden houses. The world’s two most successful currencies, the US dollar and the British pound, both of which are still used by other nations to hoard wealth, have each lost more than 95 per cent of their value in the past 100 years.

Since 1971, when Richard Nixon broke the dollar’s formal link to gold, America has pumped out trillions of new dollars. Money from thin air. China alone is sitting on more than $1,000 billion of reserves, as American consumers pile up debts to buy “essentials” from factories in Shenzhen and Guangdong. No wonder the buck has lost its fizz.

By contrast, there is a finite supply of gold. This keeps it honest. As financial commentator Peter Burshre pointed out: “Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War [American War of Independence], the Civil War, the presidency of Franklin Roosevelt and today.”

Gold doesn’t always appreciate in price, of course. In 1980, it was selling at more than $800 an ounce. Twenty years later, it had dropped to $275. It is theoretically possible to get rich by betting on fiat currencies and against gold. But the scoring average of all those who try is pretty poor.

Ask Gordon Brown. He achieved what most expert dealers can only dream of. In 1999, he spotted the bottom of the gold market, a 20-year low. The trouble was, Brown’s order was “sell”. As Chancellor, he told the Bank of England to dump nearly 400 tonnes of British gold reserves, since when the price has shot up. That decision cost the Treasury billions.

Control-freak politicians abhor gold because it ignores them; it won’t do what it’s told. It defies economists and laughs at central bankers.

Sophisticates claim that, in a world of electronic money, gold is a barbarous relic. But as the sub-prime horror ravages the international banking system, millions of ordinary savers know better. While ministers debate the merits of flooding the global system with liquidity to ease the credit crunch, Delhi taxi drivers are buying gold, accelerating the shift of wealth from west to east.

“Practically all governments of history,” said Friedrich von Hayek, “have used their exclusive power to issue money to defraud and plunder the people.” Gold stands in the way of this process; it is a protector of property rights.

If you are still not convinced, let me remind you of what Hitler had to say: “Gold is not necessary. I have no interest in gold. We’ll build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That’s the bastion of money.”

The Third Reich was supposed to last 1,000 years. It fell apart a long way short of that, but gold is still here.

At some stage, the recent price surge will cool. When? No idea. But I do know that, to equal the last peak of $846, in November 1980, the price today would have to reach $2,500.

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