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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (93490)	8/11/2001 12:02:47 PM
From: Tommaso	Read Replies (3) \| Respond to of 95453

The main reason that gold (rather than silver, platinum, or even copper or lead, or flasks of mercury) retains its vestigial prestige as a store of value is that during the first two-thirds of the last century the most powerful governments guaranteed a market for much of the production, buying it in at a fixed price that guaranteed some profit to miners, using it to (more or less) "back" their currencies. Now, no government of any importance is willing to do that, and even the Swiss seem drifting towards a total disconnect of the Swiss Franc with gold. Under these circumstances, the only thing left to give gold any value is the private (or in some cases, corporate) sector. Little political power inheres there. I suppose that as a somewhat rare collectible, Gold can serve as a disaster hedge and an inflation hedge--though some, such as John Train, see rare stamps, paintings, and jewels as even better. With metal detectors in every airport now, gold would be an actual liability rather than fungible wealth. I don't like the idea of taking a two 10-ounce cartouches of maple leaves, weighing more than a pound, out of my pocket and putting it in the basket with my car keys and my Swiss Army knife so as not to cause a strip search. And I certainly wouldn't want to leave it in my suitcase. With powerful earth-moving machinery and heap-leaching on rubberized pads (where it is environmentally acceptable), gold can be produced cheaply in large amounts. I wonder if some of those who seem hypnotized by gold have ever, as I have, read the annual reports of a lot of gold companies showing how their operations work. So where is protection from inflation and currency risk to be found? Probably in an array of inflation-adjusted bonds and perhaps in bonds denominated in currencies that have not been quite so overproduced as has been the US Dollar. Home ownership may already have been pushed close to the limit as a hedge. Where is a lot of money to be made speculating on monetary crisis? This is a lot harder to answer. It seems to me that oil is priced much lower than people are actually willing to pay, for what it would do. In my own case, driving a 1995 Tercel that gets nearly 40 mpg, gasoline at $5.00 a gallon would affect me very little as a driver. But the extra $1,000 or so a year I spent on gasoline at $5 a gallon, when aggregated with everyone else's increased spending, would mean an enormous transfer of wealth, much of which would go to those invested in oil. So though I own gold bullion, gold mutual fund, gold options, and gold mining stocks as the defensive part of a total financial position, I don't do so in anticipation of becoming one of a small number of rich survivors who can survey the financial wreck of everyone else with smug schadenfreude. Indeed, in one day the United States Congress could take all that away from me, judging it to be unearned, parasitical wealth.