Is Gold Just a Trinket?

But enough of oil; give us gold. On the subject of gold, our intrepid resources analyst, Jason Stevenson, remains ensconced at the Precious Metals Investment Symposium in Sydney.

We look forward to his summary of the event on his return.

Meanwhile, it didn’t take long. Gold falls 5% and the anti-gold mainstream commentators crawl out from the woodwork.

For an example of the latest lame effort to denounce gold, an article in the Financial Times, titled ‘Gold can only ever be a fashion victim’, should offer gold investors a few laughs.

A few choice tid-bits include:

Indeed, gold is the perfect medium for pseudo-analysis and the posture of investment authority because there is only ever one piece of relevant information — the price at which gold is bought and sold today.

In long-stable parts of the developed world, maybe a bag of gold coins buried in the garden offers a sort of nihilist insurance policy, allowing those who worry about scenarios somewhere between zombie apocalypse and the internet being switched off to sleep a little easier.

None of which is to say fashion is not legitimate business. The point is to recognise fashion is all that the gold price is and ever can be. To fight its fans with facts and figures is to offer attention, which is all the poseur ever really wants.

So nod if you want, maybe offer a smile, then change the subject.

The full article is available on the FT website, if you have a subscription.

So, gold is nothing but fashion. We’ll argue that. But let’s suppose it is fashion. Given a choice, we wonder what the author of the FT article would prefer.

Supposing your editor approached the author and said, ‘Dear sir’ (for we shall effect the tone of a 19th-century gentleman in order to match the author’s prose), ‘We should like to offer you a gift. That gift shall be of jewellery.’

No doubt the gentleman would sceptically respond, ‘Go on.’

So we would continue, ‘I mentioned a gift. But due to the goodness of our nature, and because we’re not au fait with the gentleman’s tastes, we should like to give you a choice.’

The gentleman responds, ‘Go on.’

So we do: ‘You have a choice of two items. The first item of jewellery is a finely crafted 24kt gold chain and gold pendant, designed and made by the finest jeweller in the land. The second item is a leather necklace with brass pendant. Which would you care for?’

We don’t need to conclude the story for you to get the point. Based on the article, the author would naturally choose whichever is most pleasing to his eye — regardless of the intrinsic value of each item.

Furthermore, we’re sure the author prefers his pounds and pence over his troy ounces and grains. Although, we’re not sure why, given the performance of the pound compared to the pound value of gold:

Source: Bloomberg
Click to open new window

Since the beginning of the year, the pound sterling price of gold has risen 34.7% (white line). Over the same period, the value of the pound against the US dollar has fallen 19.7%.

The next time the author dares to discuss gold again in public, he is free to smile, but we’d wager that those with the biggest smile will be those with the foresight to own gold.

Gold up, gold stocks up more

As the British pound sterling has fallen, gold has risen, and UK-listed gold stocks have soared. Tiny UK gold stock SolGold plc [LON:SOLG] is up 841% this year.

Investors in that stock are no doubt smiling at that result.

Our resident ‘mystery gold stock picker’ doesn’t have any UK gold stocks on his radar, but why would he when there are hundreds listed here on the ASX.

And while he can’t guarantee an 841% gain, those are the types of multi-digit gains he’s aiming to achieve. For details on how he plans to do it, go here.


Kris Sayce,
Publisher, Money Morning

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