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In a gold lovefest, shades of 1980

Section: Daily Dispatches

By Jeff Sommer
The New York Times
Saturday, July 23, 2011

http://www.nytimes.com/2011/07/24/your-money/in-golds-popularity-shades-...

The worse things get, the better it looks for gold. That's been the pattern this summer.

Worried about Greece, the future of the euro, the debt ceiling in the United States, or maybe even about the entire global economy? Buy gold bullion.

Plenty of investors, at least, have been thinking that way, driving the price of gold to nominal, if not inflation-adjusted, highs.

Last week, as separate teams of high-level negotiators sought solutions to the Greek debt crisis and to the debt-ceiling morass in Washington, gold crossed $1,600 an ounce for the first time ever.
... Dispatch continues below ...



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Prophecy Platinum Reports 10.97 Million Ounces Inferred
and 1.04 Million Ounces Indicated PGM+Gold in Yukon

An independent resource report on the Wellgreen project in the Yukon Territory in Canada has just confirmed that it as one of the largest platinum group metals projects in Canada and one of the few outside South Africa, Prophecy Platinum Corp. Chairman John Lee says.

The report, compliant with Canadian National Instrument 43-101, was written by geologist Todd McCracken of Wardrop Engineering Inc., a Tetra Tech company. It incorporated drill data from 701 diamond drill holes (182 surface and 519 underground) totaling more than 53,222 metres. Using a 0.4 percent nickel equivalent cutoff grade, the Wellgreen deposit now contains a total inferred resource of 289.2 million tonnes at an average grade of 0.53 g/t platinum, 0.42 g/t palladium, 0.23 g/t gold (1.18 g/t PGM and gold), 0.38 percent nickel, and 0.35 percent copper. Separately, the deposit also contains an indicated resource of 14.3 million tonnes at an average grade of 0.99 g/t platinum, 0.74 g/t palladium, 0.52 g/t gold (2.25 g/t PGM and gold), 0.69 percent nickel, and 0.69 percent copper.

Prophecy Platinum Corp. trades on the Toronto Venture Exchange under the symbol NKL, on the pink sheets in the United States as PNIKD, and in Frankfurt as P94P.

For the complete press release on the Wellgreen report, please visit:

http://prophecyplat.com/news_2011_july14_prophecy_platinum_new_resource_...


While the price fell on signs of progress on these nettlesome issues, gold ended the week at $1,602.60. (That's well below its 1980 inflation-adjusted peak of $2,516, said Edward Yardeni, an independent economist.) Gold hasn't been flying this high since the halcyon days of supply-side economics early in the Reagan administration.

Ben S. Bernanke, the chairman of the Federal Reserve, is hardly a gold bug, but he has taken notice. In response to brisk questioning by Rep. Ron Paul, the Texas Republican who is running for president for the third time, and has advocated a return to the gold standard, Mr. Bernanke acknowledged that he is paying attention to gold prices.

"I think the reason people hold gold is as protection against what we call 'tail risk' -- really, really bad outcomes," Mr. Bernanke said at a Congressional hearing this month. "To the extent that the last few years have made people more worried about the potential of a major crisis, then they have gold as a protection."

In a recent column I noted that some experts don't consider gold an appropriate asset in a typical diversified investment portfolio, partly because it generates no earnings, yet holding it entails cost. Gold is, however, certainly a financial asset, held by many central banks and prized by many private investors around the world.

Jeffrey Sica, for example, president of SICA Wealth Management in Morristown, N.J., is bullish about gold and other commodities -- and bearish about nearly every other asset class.

"Right now, I think gold looks better than ever," he said. His reasoning mirrors Mr. Bernanke's, at least in this way: Mr. Sica say that he sees a painfully high probability of unfortunate events occurring in the months ahead, and that he believes gold will provide some shelter.

He departs sharply from the central banker's views, though, in saying that the Fed's expansionary policy known as quantitative easing "just hasn't worked." Furthermore, he expects the economy to weaken further, and the European sovereign debt crisis "to be with us for some time, regardless of whatever is arranged short term, and it will end up hurting many banks."

While there may be what he calls a "relief rally" if the immediate crises seem to be resolved, he says that there has been a "general loss of confidence in the ability of central banks and governments to manage the economy. That will continue to give gold and other precious metals a boost," he adds.

Even at central banks, gold's standing has risen in some respects lately. In June, UBS held a gathering of managers of central bank reserves, multilateral institutions and sovereign wealth funds, and found that a plurality believed gold would be the best-performing asset class through the end of 2011.

What's more, said Larry Hatheway, chief economist for UBS Investment Bank, a majority said they expected that the dollar would no longer be the most important reserve currency in the world in 25 years. Instead, they expected that "a portfolio of currencies" would replace it. Less than 10 percent envisioned gold ascending to that role.

Still, the World Gold Council, which tracks gold stocks, says the world's central banks already hold roughly 29,000 tons of gold. Only about 166,000 tons have been mined throughout world history, the council says, so the central banks hold a significant portion of it.

Why? Most of it is a legacy of the time when major currencies were pegged to gold -- in the days before Aug. 15, 1971, when President Richard M. Nixon took the United States off the gold standard. With more than 8,000 tons, the United States has more official gold stocks than any other country, the council says.

The United States ought to use that hoard to return the dollar to a gold standard, says Jeffrey Bell, who is trying to make this an issue in the 2012 presidential campaign. Mr. Bell has advocated the gold standard for years -- and did so as the Republican senatorial candidate in New Jersey in 1978.

He was defeated by Bill Bradley, sometimes known as Dollar Bill because of his solid performance as a basketball player for the New York Knicks.

Mr. Bell recalls ruefully: "I used to hold up a dollar bill at campaign rallies and say there's nothing behind this now, we have to put something solid behind it. History shows that I lost."

Lewis E. Lehrman, a friend and ally of Mr. Bell's, says a gold standard would require the government to balance its budget and its current account. He says that, among other things, it would have made it impossible to accumulate the enormous private-sector debt load that led to the financial crisis of 2007.

Mr. Lehrman, once the president of the Rite Aid Corp. and now a philanthropist and historian, ran for governor of New York in 1982 but was defeated in the general election by Mario Cuomo. In a telephone interview last week, Mr. Lehrman said, "The debts in the American banking system that were amassed simply would not have been feasible if you had direct convertibility of currency into gold."

He acknowledges that returning to a gold standard won't happen overnight. But, he says, it will happen, "because the failure of all of the other approaches will become evident to the American people."

The last apex of the back-to-gold movement was perhaps in 1980. It may have been a signal that the price of gold was about to peak. Could we be approaching a turning point now? "You could make that argument," Mr. Bell says. "The big question is whether the government and the Federal Reserve will be able to get the economy under control without a return to gold."

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Gold Rush 2011
GATA's London Conference
Thursday-Saturday, August 4-6, 2011
Savoy Hotel, London, England

http://www.gatagoldrush.com

Toronto Resource Investment Conference
Thursday-Friday, September 15-16, 2011
Sheraton Toronto Centre

http://cambridgehouse.com/conference-details/toronto-resource-investment...

The Silver Summit
Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington

http://cambridgehouse.com/conference-details/the-silver-summit-2011/48

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Wednesday-Saturday, October 26-29, 2011
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Golden Phoenix Q2 2011 Conference Call Posted at Company Internet Site

The second quarter 2011 conference call of Golden Phoenix Minerals Inc. (GPXM) has been posted at the company Internet site for immediate playback. The call includes updates on the start of gold production at the company's Mineral Ridge gold project in Nevada, the letter of intent to acquire the Santa Rosa gold mine in Panama, and the company's due-diligence efforts to secure a senior stock exchange listing.

The conference call is 18 minutes long and you download an mp3 of it here:

http://www.goldenphoenix.us/audio/GPXMCC071211.mp3

Or play back the call here:

http://goldenphoenix.us/conferencecalls/

Golden Phoenix is a U.S. mining company with international exposure to gold, silver, and strategic metals. The company's business model combines project generation and royalty mining that offers the potential for exploration upside, coupled with the backing of production and future royalty streams. View company videos here:

http://goldenphoenix.us/