Gold - the More Things Change the More They Stay the Same

May 16, 2012, 5:29 PM

The story of gold is as rich, lustrous and complex as the metal itself. It is as ancient as the Egyptian Pharaohs and modern as the mirrors coated with gold which astronomers use to capture images of the universe. The metal's mounting value is connected directly to its economic role as a stable alternative to paper currencies. Its rise should speak volume about the health of the global monetary system.

John Maynard Keynes, the economic guru of many of today’s economists, called gold a “barbaric relic.” Lenin went even further. He suggested an ingenious way to demonetize gold. Under Communism, gold would be used to plate the inner surfaces of public urinals. Lenin of course, had the means of preventing the people for making off with the urinals. He had the secret police. But neither Keynes nor Lenin has proven to be right. In fact, the way it’s going, it looks like it is paper money that is going to the toilet.

We have collected for you some off-the-wall, unusual and even bizarre anecdotes about gold that show you that some things never change.

History is replete with famines, but have you ever heard about the Great Bullion Famine? It seems to have implications to today’s economic situation.

During the years 1370-1420, various major mines around Europe become completely exhausted and gold and silver mining declined. Another big problem facing the West at that time was a trade deficit with China and India. (Sound familiar?) Exotic luxuries such as spices, silks, and cotton were highly prized in Europe, but European products such as wool from England were not valued in the east. But what was valued in the East, then, as now, was gold and silver. Those sent to the east in payment for goods never returned in payment for exported European goods. Mints closed down all across Europe because of the lack of bullion. Gold coins gradually disappeared from circulation due to hoarding and the market was invaded by debased "black money", and the public turned increasingly to surrogate currencies and to simple barter.

The scarcity of bullion was one of the triggers of the Age of Discovery as Portuguese explorers sailed down the African coast to open new routes to sub-Saharan gold. Christopher Columbus in the diary of his first voyage mentions gold 65 times. After the discovery of silver in Latin America the bullion famine ended. But the Spanish monarchy had to learn the hard way that too much of a good thing can be a curse. They had dug up so much silver that the metal itself dramatically declined in value. What they failed to understand is that the value of precious metals is not absolute. Money, just like about everything else, is only worth what someone else is willing to give you for it. An increase of the supply, or today we call monetary expansion or quantitative easing, will merely make prices higher, or what today we call “inflation.”

So, from the Great Bull Famine came a period called the “Price Revolution” which affected all of Europe from the 1540s for about 100 years. The cost of food rose dramatically. Rising food costs is also something that we are seeing today.

Niall Ferguson, in his book, The Ascent of Money, wrote that when an American exchanges his goods or his labor for a fistful of dollars he is essentially trusting … Ben Bernanke not to repeat Spain’s error and manufacture so many of these things that they end up being worth no more than the paper they are printed on.

If we go much further back to a more significant document than Columbus’s diary, the Bible, gold is mentioned 417 times according to Answers.com. It makes its first appearance in Genesis 2:11 in the Garden of Eden story describing the first of the four rivers that flowed through the Garden. “The name of the first is the Pishon. It is the one that flowed around the whole land of Havilah, where there is gold.” Moses used gold beaten into plates and sheets for the construction of the Tabernacle, as described in Exodus. Later, in Kings I, 10:16, David set aside 100,000 talents of gold to build the Temple in Jerusalem.

How much is 100,000 talents of gold? Since a talent is considered to be about 75 pounds, in today’s prices that would come to about $150 billion.

His son, King Solomon, did even better. Being the wisest among men, he knew that gold is a good investment. According to Kings I, King Solomon, received in one year an income of 636 talents of gold. That would come to approximately $1billion in today’s values. Not shabby. Solomon used part of his holdings to construct his famed temple, allegedly overlaid with gold.

Here’s yet another story about gold. It seems that the once glorious Republic of Venice was in decline in 1590 and, as we all know, desperate times call for desperate measures. Why not latch on to an alchemist, Marco Bragadini, who the Venetians had heard had discovered how to make gold. Venetian soldiers were sent to deliver this golden goose to Venice and the Venetian senate ordered scientific tests to verify the power of the alchemist. Bragadini filled a crucible with quicksilver, added a pinch of his secret powder and set it to fire. Soon the quicksilver turned to gold; it was all true. Bragadini informed the senate he could produce six million ducats or whatever they would require. The months wore on but production was meager. Sensing a growing impatience with his operations Bragadini fled. He was caught and the Pope, who considered him a spawn of the devil, ordered his execution.

Here are a few numbers associated with gold from the World Gold Council website.

The atomic number of gold is 79, which means there are 79 protons in the nucleus of every atom of gold.

The total number of tons of gold mined since the beginning of civilization is 165,000, which would fit into a crate of 20.4 meter on a side (about 8500 cubic meters). More than 90 percent of that has been mined since the California Gold Rush.

The number of grams in a troy ounce of gold is 31.103

The percentage of gold mined today to be used as jewelry is 60 %.

The percentage increase in the price of gold from Dec 2000 to October 2010 is 394.

The number of times gold has reached a new high in 2010 is 35.

From ancient times until today, gold continues its amazing adventure as the most alluring metal on earth.

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