Gold: Currency Or Confused Commodity ?  

Posted by Big Gav in

Alan Kohler at the Business Spectator has a look at the soaring gold ("the commodity of craziness") price and notes that its only worth what everyone thinks its worth (just like every other tradeable asset really) - Gold fever looks incurable.

It’s worth remembering that gold has broken through $US1000 an ounce again (actually it fell back to $994 this morning, but close enough) because of speculation about what might happen to the financially inconvenienced United States, rather than actual demand and supply of the stuff in question.

That’s not to say gold won’t keep rising, or that the price won’t be underpinned by investment demand – it will. But underlying demand is weak and getting weaker, and supply is on the rise – big time.

Whenever the gold price reaches these sort of levels people lose their enthusiasm for draping it around the necks and adorning their fingers with it, and gold miners start buying extra trucks and digging new declines to that orebody they’ve been eyeing off for a while.

Demand in India, the world’s biggest jewellery market, fell 31 per cent in the second quarter and in Turkey, the second biggest market, it fell 54 per cent.

Gold is the commodity of craziness. Gold miners, even those wearing suits in the city, are all possessed by the ghosts of wild-eyed, bearded prospectors from the gold rushes of the 1850s; gold investors are that unique breed of incurable optimists who don’t want to be paid any income on their capital; and big gold bling wearers are possessed by Mesopotamian princes and princesses. ...

The London Telegraph yesterday quoted Chinese officials as being “dismayed” by the prospects for the US dollar because of its policy of financing the deficit by printing money, and the United Nations Conference on Trade and Development (UNCTAD) has urged the creation of a new world reserve currency system replacing the dollar with a basket of several currencies.

These things do not mean China is about to dump US dollars – it can’t – or that the world is suddenly going to drop the greenback as the key reserve currency (UNCTAD is not that influential). But the trend is clear.

This has some gold analysts calling $US2000 an ounce on the price over the next few years. But while there’s no doubt the gold will continue to be underpinned by the demise of the dollar, it is not a currency. I can’t go into JB Hi-Fi with a lump of it and buy a TV.

Central banks around the world own about 26,000 tonnes of it, which represents 8.5 per cent of total reserves, but it’s not legal tender. It’s just a commodity they got stuck with because it used to be a currency a long time ago and will never be again.

So gold is also the commodity of confusion: is it an investment safe haven or just a commodity? Answer: it’s whatever everyone thinks it is, and right now it’s a haven.


Post a Comment


Locations of visitors to this page

blogspot visitor
Stat Counter

Total Pageviews




Blog Archive


australia (618) global warming (423) solar power (397) peak oil (354) renewable energy (302) electric vehicles (250) wind power (194) ocean energy (165) csp (159) solar thermal power (145) geothermal energy (144) energy storage (142) smart grids (140) oil (138) solar pv (138) tidal power (137) coal seam gas (131) nuclear power (129) china (120) lng (116) iraq (113) geothermal power (112) green buildings (111) natural gas (110) agriculture (92) oil price (80) biofuel (78) wave power (73) smart meters (72) coal (70) uk (69) electricity grid (67) energy efficiency (64) google (58) bicycle (51) internet (51) surveillance (50) big brother (49) shale gas (49) food prices (48) tesla (46) thin film solar (42) biomimicry (40) canada (40) scotland (38) ocean power (37) politics (37) shale oil (37) new zealand (35) air transport (34) algae (34) water (34) arctic ice (33) concentrating solar power (33) queensland (32) saudi arabia (32) california (31) credit crunch (31) bioplastic (30) offshore wind power (30) population (30) cogeneration (28) geoengineering (28) batteries (26) drought (26) resource wars (26) woodside (26) bruce sterling (25) censorship (25) cleantech (25) ctl (23) limits to growth (23) carbon tax (22) economics (22) exxon (22) lithium (22) buckminster fuller (21) distributed manufacturing (21) iraq oil law (21) coal to liquids (20) indonesia (20) origin energy (20) brightsource (19) rail transport (19) ultracapacitor (19) santos (18) ausra (17) collapse (17) electric bikes (17) michael klare (17) atlantis (16) cellulosic ethanol (16) iceland (16) lithium ion batteries (16) mapping (16) ucg (16) bees (15) concentrating solar thermal power (15) ethanol (15) geodynamics (15) psychology (15) al gore (14) brazil (14) bucky fuller (14) carbon emissions (14) fertiliser (14) ambient energy (13) biodiesel (13) cities (13) investment (13) kenya (13) matthew simmons (13) public transport (13) big oil (12) biochar (12) chile (12) desertec (12) internet of things (12) otec (12) texas (12) victoria (12) antarctica (11) cradle to cradle (11) energy policy (11) hybrid car (11) terra preta (11) tinfoil (11) toyota (11) amory lovins (10) fabber (10) gazprom (10) goldman sachs (10) gtl (10) severn estuary (10) volt (10) afghanistan (9) alaska (9) biomass (9) carbon trading (9) distributed generation (9) esolar (9) four day week (9) fuel cells (9) jeremy leggett (9) methane hydrates (9) pge (9) sweden (9) arrow energy (8) bolivia (8) eroei (8) fish (8) floating offshore wind power (8) guerilla gardening (8) linc energy (8) methane (8) nanosolar (8) natural gas pipelines (8) pentland firth (8) relocalisation (8) saul griffith (8) stirling engine (8) us elections (8) western australia (8) airborne wind turbines (7) bloom energy (7) boeing (7) chp (7) climategate (7) copenhagen (7) scenario planning (7) vinod khosla (7) apocaphilia (6) ceramic fuel cells (6) cigs (6) futurism (6) jatropha (6) local currencies (6) nigeria (6) ocean acidification (6) somalia (6) t boone pickens (6) space based solar power (5) varanus island (5) garbage (4) global energy grid (4) kevin kelly (4) low temperature geothermal power (4) oled (4) tim flannery (4) v2g (4) club of rome (3) norman borlaug (2) peak oil portfolio (1)