Gold Panic

gold cast bar
Fifty-One Thousand Sexy Dollars

Brace yourself for more irritating, hyperactive adverts on TV, more men with laptops and weighing scales in shopping malls, and more burglaries. Gold has reached a new record price of over $1600 per ounce. This means that, for the first time ever, gold is now actually worth its weight in gold.

But I shouldn’t get surreal, the reality is ridiculous enough. Buying gold is the global economy’s answer to popping valium and praying. Whenever the markets don’t know what’s going to happen or what to do next, they run to the yellow metal. There is no clear reason why, it just has this talismanic ring to it. Weight. Historical value. Shininess.

Also of course, it’s an actual thing. All those brave traders out there, wildly speculating all day on derivatives and futures and other fanciful ways to bet on how other people will make bets on how you will bet suddenly realise that all they own are pieces of paper written in the conditional mood, and succumb to an urge to possess something that you can actually hold and touch and hug. Or at least, a piece of paper that says you possess something you can hold and touch and hug.

This superstition-based value is highly dysfunctional. The problem with the flight to gold is that there is not enough room in gold. You’ve heard that factoid about how much there is in the entire world? Enough to fill just two Olympic swimming pools. It depends of course on how deep those pools are, but this is roughly right. There are something like 155,000 tonnes of gold lying around. Assuming that ounce price is for troy ounces, the normal ISO (International Silly Old) unit, and that comes to about eight trillion dollars ($8 000 000 000 000).

That’s hardly the current account deficit of a small South American republic these days. With the Euro in dire straits, there is clearly a lot more money needing somewhere to hide than that, and all the gold in the world is not a big enough hiding place.

Unless, of course, its price goes up even further and even faster.

You can almost hear the new wars starting in Africa, as it becomes lucrative once more to arm some children and turn over a neighbouring country. (Arms manufacture is always a good secondary bet when gold goes up.) Oh and if you have any gold fillings, now would be a good time to cash them in. Before someone else does, with a brick.

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