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Welcome to USAGOLD's "Gilded Opinion" pages. We invite you to browse our index of outstanding gold-based commentary. Each article or essay is selected on the basis of its long-term relevance for understanding the role gold plays in the individual's portfolio, the overall political economy, or both.
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Numeraire to Saucissons?
by John Hathaway
Back in the days when Greenpeace
cast but a faint shadow across the affairs of the global extractive
industry, Newmont and its partner, Buenaventura began to explore
for gold at 14,000 feet in the Andes of Peru. The exact
year was 1982. By 1986, these efforts had borne fruit with
the discovery of Yanacocha. Production commenced in 1993,
and today, the Yanacocha Mine, owned 51.35% by Newmont, 43.65%
by Buenventura, and 5% by the World Bank, is the world's second
largest producer of gold. It is surely one of the most profitable.
On a daily basis, giant machines and 5,000 workers move 600,000
tonnes (metric) of waste rock and ore. Noteworthy is the
fact that each tonne of ore contains .028 ounces of gold per tonne.
This ratio means that by volume, each tonne contains .000088%
of gold. Gold mining of this type is essentially a giant
earth moving operation. Each year, approximately 200 million
tonnes of ore and waste are displaced. Ore grade material
is loaded by 240 ton trucks onto symmetric pyramids of crushed
rock called heap leach pads. These pads are sprayed with
a chemical solution, which contains, among other things, cyanide
to separate the gold from the rock. Environmental compliance
is to the highest standard. Cyanide and other potentially
harmful chemicals are contained and recycled via closed circuits.
Day by day, a chemical solution containing gold and silver trickles
to the bottom of the leach pads into collectors, which are then
transported to a local refining site. The solution is cast
into crude bars called dore, containing more than 90% precious
metals.
Yanacocha is the very model of a modern gold mining operation.
It is above ground (open pit), capital intensive, and highly efficient.
However, much of the world's gold is still produced from accident-prone,
labor-intensive underground mines. On a comparative basis,
underground mining is generally riskier, especially for those
who labor in high temperature stopes with unpredictable rock conditions.
Wages in underground operations represent a comparatively high
component of production costs. Labor disruptions, including
strikes, are not unknown. In the decades to come, even Yanacocha
could move to underground mining potential copper-gold deposits
now being explored.
The vast operations of the Yanacocha mine produce 2.7 million
ounces of gold per year, or roughly 3% of the world total.
That works out to revenues of around $1 billon. While the typical
gold mine is far smaller, it is safe to say that the lead-time
between discovery and date of initial production is comparable.
Given the proliferation of environmental concerns and the growing
presence of Greenpeace-like interest groups, it is unlikely that
these lead times have contracted. In this context, the sharp
decline in gold exploration by the mining industry since its peak
year of 1997 at the very least suggests a hiatus of several years
before the curve of global mining production resumes any semblance
of growth. Each year, global mine production removes 90
million ounces of gold from the surface or near surface of the
earth. If the industry kept track of its reserve to production
ratio, as does the natural gas industry, it would cause one to
think that the maintenance of the current rate of world production
is in jeopardy.
The dore bars, hard-won treasure from the earth's crust, have
only a notional market value at the end of the mining process
based on their gold and silver content. They are unsightly,
crudely shaped bars of bullion, which bear only slight resemblance
to the final products contained within. Therefore, the operators
of Yanacocha periodically load the dore bars onto jet freighters
at the Lima airport 375 miles away. The bars, representing
potential revenue to the mining operation, are shipped to Zurich
where they are loaded onto armored trucks. The trucks wind
their way south over the Alps and through the Gothard Tunnel to
arrive at a non-descript building tucked away between an outlet
mall and the railroad tracks in the Italian zone of Switzerland.
The
Argor-Heraeus refinery is not a particularly welcoming sight to
unannounced visitors. Ringed by a high wall topped with
barbed wire, the only entrance is a steel gate devoid of a company
logo or much else in the way of identification. In our case, we
had requested a visit in order to view the gold bullion purchased
for our clients in the past year. Dr. Wilfried Hoerner,
a shareholder-manager of the refinery, was our cordial and informative
tour guide.
In the ordinary course of business, drivers communicate with internal
security to gain access in order to unload their cargo.
Trucks bearing dore bars from Yanacocha and other world gold mines
are joined by those loaded with the sweepings from the factory
floors of Swiss and other European watch and jewelry manufacturers,
and scraps of jewelry discarded from the souks in the Persian
Gulf, Africa and Asia. The flow of scrap and dore is periodically
augmented by high purity 400-ounce gold bars from the vaults of
world central banks, as they continue their multiyear campaign
to reduce their exposure to this non-earning, albeit appreciating,
reserve asset.
Inside, the source materials are ground, chopped, melted, purified,
extruded and reconstituted in a series of low and high tech stages.
State of the art security is impressive. The combined
material flow is recast into new shapes of "four 9's"
gold, the highest purity, or alloyed with silver, copper and other
metals depending on customer specifications. Final output
includes coin blanks, 1 kilo bars favored on the Indian Subcontinent,
rods and bars for jewelry manufacturers, and even semi-fabricated
watch cases. In this way, central bank gold, once the numeraire
for all paper currencies, is decommissioned from its official
monetary status so that it may satisfy the growing world appetite
for luxury goods.
Twenty-five years ago, the elite mainland Chinese wore mechanical
steel wristwatches. Today, the affluent wear Rolexes, Patek
Philippe or similar brands. Twenty-five years ago, local
moonshine was the adult beverage of choice in many reaches of
Asia. Today, first growth Bordeaux is served in the better
restaurants throughout the Orient. Perhaps this explains
the more than ten-fold price appreciation in first growth vintages
over the past two decades. The traditional quick and dirty
benchmark for assessing the purchasing power of an ounce of gold,
bespoke men's suits, has gone haywire. According to Alan Flusser,
renowned author and designer of exclusive menswear, a bespoke
gentleman's Saville Row suit could be purchased in the early 1980's
for around $800. Today, the number is over $3000.
A look at college tuition, exotic sports cars, luxury real estate
and other items on the "cost of living it up" index
would tell a similar story of scarcity against rampant growth
in the global appetite for the finer things in life. Gold
stands alone in the bargain dustbin of luxury goods.
The managers of the Argor Heraeus refinery purchased the facility
in 1999 along with a consortium that included the Heraeus Group,
Commerzbank, and the Austrian Mint (at a later stage.) Their
growth plan for the business is to integrate further downstream
into "value added" fabrications for their customer base.
The refinery is strategically located for "just in time"
deliveries to Swiss watchmakers and the Italian jewelry industry
in centers such as Geneva and Vincenza. Absent in the company's
expansion plan is any provision for the possible needs of those
who might be short the metal including Wall Street traders, commercial
players, holders of derivatives, or managers of mining company
hedge books.
The
Argor Heraeus facility is not your typical sausage factory.
It is as technologically advanced and environmentally compliant
as any precious metals refinery in the world. In their own words,
"The Swiss environmental regulations are among the most severe
in the world and Argor Heraeus for its part is dedicated to constant
research and development in order to guarantee state of the art
technology in this field". The entrepreneurial management
group focuses on increasing throughput and adding value for their
customer base. They are motivated by the desire for profits
and growth and therefore pay close attention to matters of cost
cutting, efficiency, environmental compliance and process improvement.
The monetary and macroeconomic aspects of gold appear nowhere
on their agenda. The refinery's exact capacity is classified
but it represents between 10% and 20% of world gold output.
At periods of peak demand, customer requirements are met
thanks only to a supply of 400 ounce bars from central banks.
There was a time when the prevailing opinion of policy makers
and individuals alike that gold and money were synonymous.
However, times change and opinions with them. Central bankers
are not immune to these forces. Today, most have little
use for gold and view it as an antiquity. Their collective
opinion matters since central bank gold reserves amount to 33,000
tonnes, about 20% of the above ground supply. They are steady
sellers of the metal and for that, jewelry consumers, coin collectors,
and value investors have much to be thankful. If it
were not for central bank distaste for gold, its rarity as a natural
element and difficulty of procurement would result in a much higher
price. While supply and demand analysis suggest that gold
is scarce and would trade at a higher price if not for central
bank sales, it is equally important to view gold as just one asset
among many in the universe of equities, bonds, real estate, and
other commodities. As such, it is in constant competition
for capital flows against anything else that can promise to deliver
an investment return.
Viewed as a portfolio asset, the supply of gold is not the 2,500
tonnes produced by the mining industry each year plus scrap and
other recycled metal. Instead, one must consider the entire
above ground supply, marked to market, and theorize that at any
given moment this quantity could be bought or sold in its entirety.
The "market cap" of gold, like the market cap of Microsoft,
is subject to daily reappraisal on its investment merits.
As sellers of gold, central bankers came to the realization in
1999 that episodic but relentless attempts to liquidate were depressing
the price of the metal. In an attempt to create a more transparent
market, but stopping well short of the sort of the promotion and
inflated claims often utilized in the investment world to unload
a large position, the banks agreed to sell at a measured pace
of 400 tonnes per year for an initial five year term. That
initial term expires September '04, but seems likely to be renewed
as new sellers want to join the action. Most vocal of among
these has been the Bundesbank, whose 15,000 employees might regard
an ongoing gold sales program as a path to job security against
a background of declining relevance for European central banks.
In any investment situation, it is essential to determine whether
the seller is right or wrong. To be charitable, it is quite
likely that the motivation and mandate for central bank selling
transcends the narrow investment exercise of whether a sale at
current prices is well advised. As government (and mostly
anachronistic) institutions manned by bureaucrats, central banks
do not rank particularly high in the realm of investment acumen.
It therefore does not require a major ration of courage to suggest
that it is better to be a buyer than a seller of gold at this
particular juncture in history. The inevitable investment
inference is that gold is too cheap and that money, as the modern
world has come to understand the term, is over-valued. The
same observation would apply to the handmaidens of paper money,
i.e. equities and bonds.
It is a truism that all the gold ever mined exists above ground.
It is never consumed but forever recycled into different shapes---
artistic, monetary and otherwise. During a recent restaurant
experience, I was served an entrée garnished with 24k gold
leaf. However, let's assume that the truism is essentially
correct. That works out to 140,000 tonnes, which in turn
equates to a market cap of $1.5 trillion. Only a small part
of that total is represented by monetary gold.
Using highly conservative assumptions, monetary gold including
coins, bars, and quasi jewelry and central bank reserves account
for perhaps 50% of this total. The remainder, which exists
in the form of Rolexes, museum artifacts, gold leaf on frescoes,
and tooth fillings, is not in play for the sake of this discussion.
Neither is most of the central bank gold. However, for discussion
purposes only, let's assume that it is. Based on this reasoning,
the market cap of financial gold, assuming a $400 price, is a
paltry $750 billion.
As an investment, gold has only two things going for it.
First, and the one we prefer, is the possibility that it can rise
in value, perhaps substantially, against other things, in particular
stocks, bonds, and its paper money price. The second, and
potentially very appealing feature to a wider population of investment
constituencies, is uncorrelated performance. Pension fund
investment managers, for example, who oversee multi-billion dollar
portfolios of stocks and bonds have a mandate to defend the purchasing
power of plan beneficiaries not for tomorrow, or next year, but
for generations. Whether gold rises or falls in the short term
is irrelevant to such managers, as would be the case in contemplating
the imminence of a fire when purchasing insurance.
Unlike most alternatives, however, gold generates no investment
return of its own. There is no coupon or internally generated
rate of return to explain investment appeal. That appeal
rests exclusively on the premise that no return is better than
a negative return. Gold does well during prolonged bear
markets in financial assets.
The market cap of gold today at $750 billion seems pitifully small
when measured against world financial assets of $60 to $70 trillion.
If only a sliver of that total were reallocated to physical gold,
the price impact would be highly disproportionate to the fraction
of reallocation. There are numerous ways to illustrate the imbalance.
In the following discussion, we use US equities plus government
debt including agencies as a proxy for global financial assets
since historical data on global financial assets proved hard to
come by.
In 1982, gold traded briefly above $800/oz. By subtracting
cumulative production since 1982 of roughly 38,000 tonnes, the
above ground supply in that year was 102,000 tonnes of which 35,820
tonnes was held in the official sector. Since gold had been
a strongly appreciating asset for the previous decade and a half,
it would not be implausible that more than today's 50% ratio of
above ground gold was held as an investment. We will assume
60%. If so, the 1982 market cap of investment gold at $800
would have been $1.6 trillion. In 1982, according to Morgan
Stanley, the market cap of US equities was $1.5 trillion while
US dollar denominated debt of all descriptions was $4.7 trillion.
At that particular swing of the pendulum, the market cap of gold
represented about 25.8% of US financial assets.
In 1934, the Roosevelt administration felt compelled to raise
the price of gold to $35/oz in order to restore confidence in
the financial system. Federal and non-federal debt totaled
$159 billion while the market cap of all equities was $30 billion
for a total financial asset proxy of $189 billion. Subtracting
the 47,000 tonnes of cumulative production from 1934 to 1982 (World
Gold Council web site) suggests that the above ground supply was
55,000 tonnes. Official sector gold reserves in that year
totaled 20,172 tonnes, or 37% of the total. Using a 60% ratio
of above ground gold supply hypothetically in play, the market
cap was $39.6 billion or 21% of US financial assets.
During these two noteworthy episodes when investors fretted most
about the value of their paper assets, they placed a hefty premium
on gold's safety. As nearly as we can measure the
degree of concern exhibited in those two instances, the safety
premium for gold translated into somewhere between 21% and 25%
of US financial assets. Today, that fraction is 1.6% ($750
billion over $46 trillion, based on an equity market cap of $15
trillion and total debt outstanding of $31 trillion.)
With stocks trading at 26x trailing earnings and a 1.6% yield
(S&P 500), investors in general do not seem to be fretting.
However, certain investment world luminaries are beginning to
sound downright alarmist. Warren Buffet, in the November
17th issue of Fortune, suggested radical measures to deal with
the trade deficit in the form of a complex scheme of import credits
to stimulate exports. Whatever its other faults, his proposal
is no more than a clever disguise for a substantial devaluation
of the dollar vs. other key currencies. Forgoing the social
engineering impulse, John Templeton recently advised investors
to "get out of US stocks, the US dollar, and 'excess' residential
real estate." His sell recommendation was based on
the belief that "the dollar will fall 40% against other major
currencies.and that this will lead the nation's major creditors,
notably Japan and China, to dump their US bonds." (as reported
in the Herald Tribune October 16th) The certain aftermath
would be a run up in interest rates, a decline in stocks, and
"the beginning of a long period of stagflation."
Echoes can be found in the musings of George Soros, Bill Gross
of Pimco, and James Grant.
What about those non-US creditors who already hold 46% of US treasury
debt as well as 20% of all agency debt? A continuation of
the status quo means they would end up holding considerably more
US paper both in absolute and relative terms in years to come.
Maybe it works for them. By so doing, they gain access to
the US market and thereby provide jobs, exports, and even the
prospect of economic growth for their domestic constituencies.
Fiscal prudence has never been high on the agenda of any government,
so why would the central banks of our trading partners feel moved
to act based on the prospect of a substantial devaluation of their
most important reserve assets? We (the US and its trading
partners) are all in this together. Dollar devaluation would undermine
our collective prosperity. A 26x multiple on stocks
and record low bond yields say worries over dollar valuation are
misplaced. Long live the virtuous circle!
Thoughtful investors wonder what could ever replace the dollar.
The US is still the world's most important economy, beacon of
freedom, and strongest military power. No other nation or
group of nations have or most likely could ever construe a superior
currency. Still, there are the unanswered issues of valuation
and capital imbalances. We are reminded of Cisco and similar
equities at the top---over-owned and over-valued. As with
Cisco, the skeptic is powerless to predict the turning point but
quite capable of identifying what is unsustainable. One's
inability to imagine an alternative to the current dollar's reserve
currency status provides no assurance as to its permanence.
Some small reasons for concern might include China's recent contemplation
of a non-dollar peg for the yuan. Zhou Xiaochuan, governor
of the People's Bank of China, said in September '03 that there
was room for debate on whether the yuan should be tied to a cocktail
of currencies. What should one make of the September sale
of $3 billion of US Treasuries by China, Korea, and Thailand,
as noted by Stephanie Pomboy (MacroMavens 10/24/03)? Was
this just a subtle reminder to the visiting US Treasury Secretary
Snow of who held the cards in the currency debate or were they
just testing the water? It seems inconclusive. With
a far smaller stake in the debate, perhaps Russia was able to
speak more freely when Deputy Finance Minister Alexi Ulyukayev
said "he wants the structure of reserves to change to reflect
the structure of the nation's foreign debt and trade contracts."
This could be accomplished by reducing the portion of its $63.8
billion reserves held in dollar-denominated assets by 3 to 5 percentage
points in favor of euros. However, the Russian stance also seems
inconclusive.
Perhaps investors and corporate managers should continue to contemplate
business as usual, as did Pravda, until one day before the regime
change. In this respect, the managers of the Barrick Gold
hedge book can take solace in the company of large numbers.
Their view, it may be inferred from their posture regarding their
most recent financial statements, would differ from our view that
gold is seriously mispriced and unlikely to revisit levels that
would vindicate indefinite extension of Barrick's 16mm ounce short
position. The company reported a negative mark to
market of its hedge position as of 9/30/03 of $1.2 billion, based
on a spot price of $385. Since the company's net worth was
well above the $2 billion threshold at which counter parties could
call for an early close out of hedges and long term debt to net
worth was even more distant from the trigger of 1.5:1, financially
induced hedge book stress seems remote. Notwithstanding
the relative underperformance of ABX shares since the bull market
in gold commenced in August, 1999, or repeated investor calls
to reduce hedge exposure, the company has elected not to exercise
its right "to accelerate the delivery of gold at any time
during the life of our contracts." Instead, during
the most recent quarter, it exercised its right to defer delivery
while the spot price floats substantially above the average of
$311/oz that would be realized by satisfaction of its hedge book
obligations.
Comex option writers agree with Barrick. They have written
call premiums for near term expiration at 400 to 450 amounting
to nearly 5.6mm ounces, or more than 160 tonnes of gold, a very
sizable bet by historical standards, that these strike prices
will go unbreached. Months ago, when these calls were written,
400 seemed distant and the premium income like easy money.
2.6mm ounces are at nearby strikes, 400 to 420 that expire in
early December.
The stance of Barrick and the option writers is consistent with
the prevailing financial market view that any foray by gold above
$400/oz would likely be a short-lived and anomalous event.
Implicit is the thought that the dollar will remain unchallenged
as the world's reserve currency. Also implicit is the thought
that world financial policy makers, especially the Federal Reserve,
possess the wisdom, the skills, and the power to promote global
prosperity and stave off contractionary market forces that from
time to time threaten global financial stability.
In this view, the Fed's increasingly transparent attempts to manipulate
financial markets through barrages of liquidity would be seen
as clever adaptation to the realities of the 21st century economy.
A contrasting take would be that of James Grant, editor of Grant's
Interest Rate Observer, who wrote: "Our age in finance
is an age of heresy. Budgets go unbalanced, currencies go
uncollateralized, current account deficits go uncorrected, securities
go unanalyzed and bubbles go unpopped (until too late)". (10/24/03)
The impressive headline numbers on the economy's recent performance
cannot hide a disproportionate dependence on consumer spending
and service jobs. For example, despite 7% GDP growth, corrugated
box shipments, usually a good proxy for coincident economic activity,
were flat during the period. Manufacturing employment continued
to decline despite overall job growth. GDP, having moved
far afield from the manufacturing sector would be better measured
in terms of cell phone traffic, hamburgers flipped, casino winnings,
or box office receipts. Traditional measures of economic
health such as inventory to sales ratios, the purchasing managers
index and similar ratios have become less relevant. To understand
the economy, one must comprehend the engine that drives consumer
spending. That engine is the wealth effect. Its principal
moving parts are financial asset prices, employment levels, consumer
sentiment and personal income. Of these parts, financial
asset prices are the core, and the others mere derivatives.
In its November 14th Economic Newsletter, the San Francisco Fed
asked whether the Fed should "react to the stock market."
Fed senior economist Kevin Lansing concluded that "although
central banks control only short-term interest rates, their ability
to influence longer-term rates and other asset prices is part
of the transmission mechanism of monetary policy. Movements
in asset prices can have important consequences for real output
and inflation."
Over the past several years, the Fed's excursion into extreme
liquidity has disembodied financial asset prices from their fundamentals.
The Fed wants investors to forget that the invariable precursor
to positive equity returns has been bear markets, complete with
high dividend yields, low p/e multiples and pervasive skepticism.
With bond yields at multi decade lows despite record fiscal and
trade deficits, what positive outcome to these historically troublesome
issues is necessary to prevent the bloodshed that normally results
from overvaluation? If generous bond market valuations cannot
be sustained, how can the equity markets continue to flourish?
Lack of inflation is essential to low interest rates. The
basis for low inflation is high productivity, or outsourcing of
manufacturing to Asia by another name.
Factory orders, unemployment claims, capacity utilization and
housing starts do not hold the key to the future, celebrated though
they may be by the wise men of CNBC. What we need to know
in order to peer into 2004 and thereafter is where stock and bond
prices are headed, for it is these and these alone that will affect
consumer psychology and behavior. Consumer spending held
up despite a cyclical downturn thanks to the Fed's aggressive
cycle of interest rate cuts, justified by fears of deflation.
The desired boom in housing, mortgage refinance, and auto sales
kept the cyclical downturn from accelerating. The unintended
consequence was a bubble in yield instruments of all types as
risk averse investors sought refuge from equities. Now that
the refinancing boom has waned, will housing and autos decline
and choke off an incipient upturn in business spending?
Clearly, the Fed is not waiting for an answer. Their response
to the sharp downturn in mortgage refinance has been aggressive
expansion of the monetary base.
The Fed has become a prisoner of its policies. It cannot
tolerate an economic downturn. Flood upon flood of liquidity
has not put to rest long-term issues of solvency. The price for
relief from short-term stress has invariably been increased debt
issuance. The consequences of a possible protracted bear
market in equities and bonds have become intolerable. In
attempting to avoid the experience of Japan, it has launched a
direct attack on saving and financial prudence. "Under Greenspan,
the Fed has evolved into a kind of national financial fire department.
It is not merely the lender of last resort but also the damage-control
coordinator of first resortRepeated and predictable acts of intervention
can't help but change behavior.. The more dependably the
Fed fends off disaster, the bolder and more leveraged investors
become." (Grant's-Nov. 7, '03)
The willingness and/or ability of international trading partners
to hold US paper defines the limit of the Fed's discretion.
While the Fed has demonstrated its capacity to cause financial
markets to defy gravity, and in so doing, induce desired real
world economic results, we remain skeptical that it can do so
indefinitely. The limits of our trading partners to sop
up additional spillage of dollar denominated debt cannot be known,
but that there is a finite limit to that capacity cannot be disputed.
As stated by Morgan Stanley economist Steven Roach, "the
model of a sustained US-centric global growth dynamic rests critically
on a very stylized depiction of the world economy. It implicitly
presumes that ever-mounting current account deficits in the world's
growth engine do not trigger a depreciation in the value of the
US dollar." He goes on to say that "a still sluggish
world is listing increasingly toward trade frictions and the pitfalls
of competitive currency devaluation.That underscores the mounting
tensions that another bout of US-centric global growth most assuredly
produce. For that reason, alone, I believe that the global
economy is now nearing the end of an extraordinary seven and a
half year period of unbalanced growth."(Sept. 15, '03).
A slowdown in the rate of purchase or outright sales of foreign
held treasury and agency debt could easily lead the trade weighted
dollar index to a level of, say, 65 or 75 versus the current 92.
An index at that lower level would depict a far different world
than the one we know. It would be a world of higher interest
rates, lower bond and equity prices, inflation, faltering economic
activity and permanently higher gold prices. In the words
of Roach, "it boils down to flows versus analytics."
In other words, it may be difficult to make an abstract analytical
investment case for the yen or the euro. However, it is
not difficult to imagine, in light of the existing imbalances,
that safety-seeking investment capital might flow to liquid alternatives
based on convenience and expedience.
In his day, Otto von Bismarck warned the squeamish to avert their
eyes from the manufacturing of sausages by sausage makers and
laws by politicians. Today, that advice could be updated
by including the deconstruction of money by central bankers.
Saucissons, in the mining lingo of the early 20th century, referred
to the flexible casings used for explosives in mine operations.
Numeraire, of course, refers to gold's historical role as the
reference point for all paper currencies once used by the entire
commercial world including central bankers. The numeraire
function, according to economist David Ricardo, was essential
if "one wish(ed) to make intertemporal or interlocal comparisons
(in the) problem of measuring value." Over the last
three decades, it has been the practice of central bankers to
demonetize gold, thereby making intertemporal and interlocal assessments
of value much more difficult, if not impossible. In theory, a
dollar standard might have worked, but in practice it has not.
Without a global monetary compass, unrestricted issuance of government
and corporate debt, trade imbalances, misallocations of capital,
periodic banking crises, and currency turmoil should come as no
surprise. It seems more than likely than ever that the world's
central bankers will eventually convene to reprice gold to a level
sufficient to persuade a world of paper skeptics that the metal
must be reinstated as the numeraire. That level will exceed
whatever the market is at that time by a substantial amount.
Our guess is the market at the time of an official sector bid
will be well into 4-digit territory.
by John Hathaway
November 18, 2003
http://www.tocquevillefunds.com/press/archives.php?id=53
Copyright © 2003 by Tocqueville Asset Management L.P. All Rights Reserved.
Reprinted by USAGOLD with permission of Mr. Hathaway and Tocqueville Asset Mangagement LP. No further reproduction without permission.
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