To: Crimson Ghost who wrote (6856 ) 7/24/1999 3:16:00 PM From: Zeev Hed Read Replies (2) | Respond to
Hi George, it has been some time since we argued the fine points of the price of gold and its role as a monetary instrument. I doubt that CB hate or love gold, they have recognized quite sometime ago that tying the world economy to gold will lead to permanent inflation or world economic stagnation, they consider both detrimental to social well being and thus have decided to wean the world from dependence on gold for monetary purposes. Once this decision was reached, it is simply a question of how long it will take to get the 20,000 tonnes or so in their vaults to be absorbed in gold's more useful applications. Even at a use rate of 1000 tonnes per year in excess of production, it may still take a good 10 to 20 years. That does not mean that gold will stay at $250 for ever, but IMHO, it will not be a good long term investment for some time to come (I am repeating what I have stated on the Golddiger thread many times some two years ago). Just look at the world's gross economic activity (I would throw a WAG of $30 Trillion?) and compare this to the current value of gold in those vaults (about $150 Billions?). You get a situation that requires increased gold production rates to equal the rate of economic growth, and that is achievable only by either continuously increasing the price of gold (inflation) to allow for marginal resources to be exploited. It is not going to work and that is why the CB's abandoned gold altogether, not hate or love. They just did not tell us some 20 years (or more) ago when they finally decided to cut the umbilical cord between economic growth and growth of gold supplies.
