Tuesday, July 29, 2008

Hands full of gold

I would hate to speculate, but things are looking up from here

By Rob Carrigan, robcarrigan1@gmail.com

I originally wrote this more than a decade ago as the spot price of gold took an uptick. Sunday, August, 2020, the spot price was $2,035 per ounce, down slightly. Over time of course, it goes up and down with changes in the economy and political situations, which keeps investors checking the price of this precious metal every morning. Despite this level of speculation, gold continues to be the most popular investment precious metal for those that feel the need to get their hands on something tangible. For centuries, it has been a mysterious symbol of value and wealth.

As the price of gold holds the line at more than $900 an ounce, it becomes interesting to speculate. My own personal “what if” statement considers that price historically. “What if the price was always that high?”
In 2004, when Cripple Creek & Victor mining company poured its 2,000,000 ounce, all that value collected in one place would have been worth $1.8 billion (if I got all the zeros in the right place.) Those three buttons on the table that day— the ones they let you manhandle around —they might have been worth $1.08 million now. And what about earlier than that? The Cresson Vug alone, would price out at over $54 million.
A whole lot of gold was produced profitably in the district for less than $35 an ounce, the price reached in the early 1930s.
“On March 9, 1933, President Franklin Roosevelt pushed through the Emergency Banking Act, which authorized him to regulate and prohibit the export and hoarding of gold,” according to a chronology produced by Paul Morgensus of Hamilton, Montana, and provided to me by local historian Ed Hunter.
“Shortly after, on April 5, he issued an executive order to deliver all gold to the Federal Reserve… the action and subsequent actions caused total unrest among investors, bankers and others throughout the world. On July 30, Roosevelt made what became known as the ‘bombshell.’ He declared ‘rigid relationships to gold were old fashioned fetishes.’”
In January 1934, the president issued an executive order to establish the price of gold at $35 per ounce.
By 1940, the gold production had reached an all-time high in the United States; the eleventh consecutive year the industry had set a new production record.
“Gold is the only major commodity that isn’t produced primarily to be consumed in the economy — like iron, copper, pork bellies or oranges — but simply to be owned and admired,” observed the Wall Street Journal, in an April 12, 2006 article by E. S. Browning. “It is too heavy, soft and rare to have many practical uses outside of electronics and dentistry. Yet is one of the earth’s most prized objects, valued mostly because it is considered valuable.”
But it has been nearly as high before.
“The price, in retreat for almost two decades after peaking at $847 in 1980, has more than doubled in the past five years,” said the Journal article. In the last two years since the Journal article, the price has went from less than $600 to more than $900.
Of course the most interesting speculation resides in where gold’s price goes from here.

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