Saturday, January 31, 2009
The Suwa sewage treatment facility in Nagano reports that it finds 1890 grammes of gold per tonne of ash taken from incinerated sludge. Compare that with the 20-40 grammes of gold per tonne of ore mined at the Hishikari Mine, one of Japan's and one of the world's top gold mines. That is roughly 50-100 times more gold per ton!
But where does that gold content come from? Officials in Nagano believe that it comes from the large number of equipment manufacturers in the area who use gold in their operations. Traces of gold that are lost as waste products are retrieved from the sewage.
The lucky prefecture gets to bank the gold, and expects to get about $150,000 dollars in revenue from the retrieved gold during this fiscal year. The exact amount of course depends on the price of gold at the time.
Friday, January 30, 2009
This blog is primarily dedicated to gold because of the central role it plays in the precious metals market. But I think it's important not to leave out gold's little cousin who has massive potential in the precious metals bull market. So as a brief introduction to this highly undervalued metal, here are some interesting facts about silver.
What is sterling silver made of?
Sterling silver is an alloy containing 92.5% pure silver, plus 7.5% of another kind of metal, usually copper and more recently sometimes germanium. These days, sterling silver fineness can be identified
by looking for a stamp that says "sterling" or ".925". This standard of fineness originated with British silver coins in the 13th century BCE, but has now become the main standard of
silver used throughout the world. Pure silver is very soft and malleable, so the 7.5% of additional metals fortifies the silver for use in jewelry and other objects.
What is fine silver?
Fine silver, also known as pure silver, is at least 99.9% pure. It is used in silver bullion but is too soft for use in objects that will be handled.
How long has silver been used as money?
Silver has been coined and used as representative money since around 700 BCE.
-Silver compounds are used to expediate healing in burn victims.
-Like gold, silver is an excellent conductor of elecricity and is used extensively on circuit boards and high voltage connectors. In fact, silver is the most conductive of all metals. Its conductivity is rated 100 on a scale of 1 to 100, while gold is rated 76, and copper is rated 97.
- Out of all the physical elements, silver is the best conductor of heat. It is therefore used extensively in solar panels, and also in your car's rear-window defogger.
-Silver is more optically reflective than all other metals, reflecting more than 95% of the visible light spectrum. Most mirrors, both personal and industrial, are therefore made with a silver reflective backing.
-Silver is more ductile (can be stretched) and malleable (can be flattened) than any element except for gold.
Just like gold, silver is valued not only for its perceived rarity and beauty, but also for its utility. It is an ever-present element of our modern lives.
Thursday, January 29, 2009
Gold has historically been used in jewelry, though in recent decades in the United States this trend has been on the decline. The biggest consumers of gold are currently industry and dentistry, totalling 11% of of total demand.
Gold is suitable for industry because of its malleability, its resistance to corrosion, and excellence in conducting electricity. These features make it an important component of televisions and computers. Gold is also a durable electrical conductor for switches because of its resistance to tarnishing.
In industry, some common uses for gold are:
Hair-thin gold wire connects circuits to semi-conductors in computers, and every time you push a key on your computer it touches gold circuits that send data to the unit's microprocessor.
The cables that connect your tv and DVD player are gold coated to ensure proper conduction and the relay of a clear signal.
Gold is also used in telephones, and helps change vocal vibrations into electirc current.
Gold coating is used on the contacts of your telephone cable and telephone jack, so that you can remove the cable and use it in various jacks with no compromising of the sound signal. This is because of gold doesn't tarnish
It is also used widely as a coating for metal items that must be prevented from rusting.
Gold is also widely used in dentistry because of its malleability and resistance to corrosion, and also because it is non-toxic to the body. Its softness is offset by the use of platinum, silver, and copper in alloys. The demand for gold dental work is decreasing, however, due to insurance companies' reluctance to pay for gold rather than cheaper metals, and the development of ceramic crowns which make gold often unnecessary.
Gold has many non-dental medical uses as well. Precision lasers used in medicine have gold coating on their inside surfaces to control the beam's focus. Gold vapor lasers are being used to isolate and destroy cancer cells without harming neighbouring cells. And military medics carry gold lasers that can cauterize wounds in the field, potentially saving the lives of wounded soldiers. Doctors also inject tiny gold pellets into the prostate to fight prostate cancer. Another example is the use of gold salts that have long been used to treat rheumatoid arthritis.
These are just some examples, but we can see that gold is not only the most reliable form of money and longterm wealth protection, it is also a useful commodity that is essential to our modern and advancing way of life. This adds to the demand for gold and adds to its prestige as a precious metal.
Wednesday, January 28, 2009
The $900 per oz. gold price is somewhat misleading, because if we adjust for inflation then the january 21 1980 gold price of $850 per oz. (formerly the all time high) is still much higher, and there is still much more room for the gold price to increase. But the $900 per ounce mark is yet another sign that financial turmoil will continue to drive historical gold prices upward.
The new high is probably also an indication of decreasing supply, as 2008 saw South African gold production drop by 14%, pushing it into third place gold producing country behind China and the USA.
The continued threat to the US dollar will also likely continue to push gold past $1000 per ounce early in 2009.
According to some, the current price doesn`t accurately reflect the high demand for gold because of hedge funds selling off large amounts of gold to cover losses elsewhere. Once this stabilizes, a gold price of over $1000 per oz. is very likely.
The golden arrow is still pointing upward!
Sunday, January 25, 2009
This system stands in contrast to fiat currency, which is a currency with no guaranteed value in gold. A fiat currency has no intrinsic value, but the government declares it to be legal tender, meaning that it must be accepted as a means of exchange.
One of the main benefits of the gold standard is that it protects citizens from
hyperinflation and the debasing of the currency through excessive government spending. With a fiat currency, a government can print as much new money as it likes to pay for spending. This leads to a gradual decline in the value of the currency and
the citizens' savings. In 1966 Alan Greenspan said:
under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth… The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit… In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.
John Maynard Keynes similarily stated that
By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.
The problem with gold standard systems is that a country's gold reserves are limited, and in times of crisis when countries need a critical supply of money, gold can run out. A fiat currency on the other hand can be produced when needed, and even though this decreases the relative value of the currency, it provides the country with a supply of needed money. Examples of times when such supplies are needed are wars and times of severe economic depressions.
A brief history of the gold standard.
The United States had some form of gold standard (in which silver was also a standard currency) in the 1800s, with a full federal gold standard being adopted in 1900 with the Gold Standard Act. This came to an end in 1933, when President Roosevelt made the private possession of gold illegal, forcibly buying all privately owned gold at a price of $20 an ounce, and then revaluating gold at $35 an ounce. This was done as a source of reserve funds during the Great Depression.
During the Second World War, a need for a system that allowed for access to emergency money supplies while still insuring the integrity of currencies and international economic stability resulting in the creation of the Bretton Woods in 1944. This system essentially pegged all currencies of signatory states to the
US dollar, which was convertible into gold at a fixed rate. In order to keep currencies within 1% of their fixed exchange rates, countries agreed to buy or sell US dollars to whatever extent was necessary.
When did the gold standard end? And Why?
The collapse of gold standard came in 1971 when President Nixon cancelled the Bretton Woods agreement, cutting the link between the US dollar and gold. This was done because the United States no longer had enough gold to buy back all the US dollars held by foreign countries, and with the Vietnam War raging on, the United States was running a trade deficit for the first time in the Twentieth Century. The cancellation of the agreement eliminated fixed gold market prices at $35 per ounce, and eliminated fixed exchange rates amongst the world's currencies, which are now mostly "floating" (having variable exchange rates determined by market factors).
All major currencies now consist of fiat money, whose value are determined by market forces and the control of the government and central banks. Some people such as Ron Paul are calling for a return to some form of gold standard currency as a way of curbing government spending and maintaining the integrity of our currency and savings.