In gold we trust: 2019 Report
VERY few South Africans have not been affected in some way or another by mining, specifically gold mining. Many of my generation were intimately tied to gold mining: families migrating from one site to another in the heady gold boom days of the 50s and 60s when new shafts were being sunk; new towns being formed; moving from school to school; snapshots and anecdotes being added to the scrapbook of the mind; gold mining flowing through the veins of young and old and a mining sub-culture taking shape in a large part of the population: a camaraderie forged from a nomadic lifestyle and dangerous work.
Sadly few of us really understood the metal itself. Its role as a store of value and a means of exchange - money - was a given in a controlled international monetary system. For the rest, the connection between the lustre of the metal in personal adornments and the deep shafts and tons of rock from whence they came was seldom made.
It’s a moot point whether gold mining will ever return as the dominant contributor to South Africa’s economic welfare, but the current discussions and developments in the gold market are highly significant for the country.
While the US had cut ties between the dollar and gold way back in 1933, a new era dawned in 1971 when it also ended convertibility and refused to exchange dollars for gold at the ruling official price of about $40 per ounce.
From ‘barbarous relic’ to the fiat system
Supported by the late British economist John Maynard Keynes’ belief that the “gold standard was a barbarous relic”, money switched to a fiat system based solely on debt expansion, and gold was mostly tradeable only on the open market.
But it never truly lost its status as a store of value or a monetary asset. Gold has remained a reserve asset on the most important central bank balance sheets, and more recently we have witnessed the highest gold purchases by central banks since 1971 and an ongoing trend to repatriate gold reserves.
Good journalism is not so much about knowing everything, but in simply asking the right questions. My last Moneyweb column, Losing our marbles, attracted some very informed and insightful comments from readers.
It made me wonder whether the media generally and even most of our orthodox economists are simply not interrogating what is happening to our world money system enough.
For example, denying market manipulation in all markets, especially commodities, is contradicted by the US charging three JP Morgan metals traders for manipulating markets over an eight-year period. Cracks continue to appear in global finance virtually weekly. The latest being the crunch in the American repo market, where bonds are traded for cash usually overnight, and which the US Federal Reserve had to top up by more than $100 billion in recent weeks.
This takes me back to June 2016 and one of my earlier articles for Moneyweb called Crypto coins and pieces of eight, in which I wrote:
“If you strip gold of its ancient allure, its historic backing of paper currencies and its investment and adornment image, you could certainly posit the Keynes view that it is a ‘barbarous relic’.
“If you interrogate cryptocurrencies’ mysterious and anonymous founding, creation structure and block chain security, you could equally have some qualms.
“But [ neither] come near the degree of fiction that permeates fiat currencies. Debt is a fiction. It is nothing more than a promise to pay sometime in an ever-delayed future — a very empty promise considering the increasing extent to which the gap between debt creation and the means to pay is beyond redemption.”
Yet on the surface, faith in the US dollar as the leading ‘safe haven’ asset appears intact.
Trust
Much of this column, including the title itself, has been gleaned from a widely researched publication by the Lichtenstein- based asset management group Incrementum. This year’s 334-page In Gold We Trust report, while obviously strongly pro-gold, extensively covers the current monetary malaise and much more.
“In our opinion,” it says, “the currently high trust granted into the skills of central bankers and the supposed strength of the US economy are the main reasons for the somewhat weak development of the yellow metal. If the omnipotence of the central banks or the credit-driven record upswing are called into question by the markets, this will herald a fundamental change in global patterns of thinking and help gold to old honours and new heights.”
Therein lies the ultimate answer.
As the Incrementum report puts it: “Popular trust in the idea that monetary policies can sustain growth and employment and that central banks have inflation under control will be seriously tested in the next recession.
“The spread of the loss of trust to other pillars of the Western world, such as the media, the financial system and the judiciary, could have devastating consequences.”
It then reflects on this quote by Oliver Wendell Holmes: “Put not your trust in money, but put your money in trust.” — Moneyweb. Edgars Stores Limited Falcon Gold Zimbabwe Limited Fbc Holdings Limited Fidelity Life Assurance Limited First Capital Bank Limited First Mutual Holdings Limited First Mutual Properties Limited General Beltings Holdings Limited Getbucks Microfinance Bank Limited Innscor Africa Limited Lafarge Cement Zimbabwe Limited Mashonaland Holdings Limited Masimba Holdings Limited Medtech Holdings Limited Meikles Limited Nampak Zimbabwe Limited National Foods Holdings Limited National Tyre Services Limited Nmbz Holdings Limited Ok Zimbabwe Limited Old Mutual Limited Padenga Holdings Limited Powerspeed Electrical Limited Ppc Limited Proplastics Limited Rainbow Tourism Group Limited Riozim Limited Seed Co International Limited Seed Co Limited Simbisa Brands Limited Starafricacorporation Limited Truworths Limited Tsl Limited Turnall Holdings Limited Unifreight Africa Limited Willdale Limited Zb Financial Holdings Limited Zeco Holdings Limited Zimbabwe Newspapers (1980) Limited Zimplow Holdings Limited Zimre Holdings Limited Zimre Property Investiments Limited ZW0009011025 ZW0009012080
ZW000301DR35
ZW0009011041 ZW0009012288 ZW0009011652
ZW0009011710
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
0.1500
0.1020 0.7825 0.1920
50.0000
1.6000 2.3500 0.6600 0.4750 0.0850 4.5500 2.4525 0.2640 0.0250 0.6300 0.1100 0.1240 0.3600 0.0800 0.0288 0.1200 3.1200 1.7150 0.0696 0.1445 0.0072 1.5875 0.5585 9.0000 0.0216 0.4535 0.7350 38.0000 3.0000 0.3600 4.2500 0.7500 0.1150 2.3500 3.0000 2.5500 1.4825 0.0252 0.0242 0.8400 0.1300 0.1100 0.0465 0.7200 0.0002 0.0960 0.6000 0.0854 0.0350 1.5300 0.1095
0.0800
0.0240 0.3350 0.0550
29.3409
1.0323 1.0025 0.1400 0.1305 0.0200 2.2600 1.0475 0.1000 0.0250 0.2900 0.0704 0.0500 0.1030 0.0504 0.0160 0.0700 1.3000 1.0000 0.0241 0.0756 0.0002 0.4650 0.2930 5.6000 0.0173 0.2000 0.2010 7.0000 0.8500 0.1400 1.2700 0.1950 0.0233 1.7200 1.3000 1.3500 0.5500 0.0099 0.0160 0.5000 0.0502 0.0478 0.0087 0.3500 0.0002 0.0288 0.2400 0.0211 0.0250 1.9800 0.5025
0.1500
0.0850 0.6500 0.1300
50.0000
1.6000 1.5474 0.6600 0.4750 0.0810 3.7428 1.7475 0.1820 0.0250 0.6150 0.0850 0.1000 0.2400 0.0750 0.0288 0.1200 3.0806 1.7144 0.0696 0.1334 0.0072 1.5800 0.5525 9.0000 0.0215 0.4000 0.6122 33.9074 2.9100 0.3210 3.3636 0.7500 0.1150 2.1800 2.7576 2.0000 1.4220 0.0250 0.0240 0.7500 0.1150 0.1015 0.0460 0.7200 0.0002 0.0960 0.5524 0.0820 0.0350 1.9800 0.5025
0.1500
0.0850 0.6500 0.1300
50.0000
1.6000 1.5474 0.6600 0.4750 0.0810 3.7428 1.7475 0.1820 0.0250 0.6150 0.0850 0.1000 0.2400 0.0750 0.0288 0.1200 3.0806 1.7144 0.0696 0.1334 0.0072 1.5800 0.5525 9.0000 0.0215 0.4000 0.6122 33.9074 2.9100 0.3210 3.3636 0.7500 0.1150 2.1800 2.7576 2.0000 1.4220 0.0250 0.0240 0.7500 0.1150 0.1015 0.0460 0.7200 0.0002 0.0960 0.5524 0.0820 0.0350 1.9800 0.5025
0.1500
0.1020 0.6500 0.1300
50.0000
1.6000 1.5175 0.6600 0.4750 0.0850 3.7000 1.7400 0.1820 0.0250 0.6150 0.0850 0.1000 0.2400 0.0800 0.0288 0.1200 3.0000 1.7144 0.0696 0.1334 0.0072 1.5875 0.5525 9.0000 0.0215 0.4000 0.6500 33.4000 2.9100 0.3210 3.3636 0.7500 0.1150 2.1800 2.7575 2.0025 1.3975 0.0250 0.0240 0.7500 0.1150 0.1015 0.0460 0.7200 0.0002 0.0960 0.5524 0.0820 0.0350 0.0000 0.0000
0.0000
0.1020 0.6500 0.0000
50.0000
0.0000 1.5368 0.0000 0.0000 0.0850 3.7071 1.7424 0.0000 0.0000 0.0000 0.0000 0.1000 0.2400 0.0800 0.0000 0.0000 2.9824 0.0000 0.0000 0.0000 0.0000 1.5802 0.0000 0.0000 0.0000 0.0000 0.6468 33.4468 2.9082 0.0000 0.0000 0.0000 0.0000 0.0000 2.7575 2.0004 1.3975 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0960 0.0000 0.0000 0.0000 0.00 0.00
0.00
0.0170 0.0000 0.00
0.0000
0.00 -0.0106 0.00 0.00 0.0040 -0.0357 -0.0051 0.00 0.00 0.00 0.00 0.0000 0.0000 0.0050 0.00 0.00 -0.0982 0.00 0.00 0.00 0.00 0.0002 0.00 0.00 0.00 0.00 0.0346 -0.4606 -0.0018 0.00 0.00 0.00 0.00 0.00 -0.0001 0.0004 -0.0245 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0000 0.00 0.00 0.00 0 0
0
20.00 0.00 0
0.00
0 -0.69 0
0 4.94 -0.95 -0.29 0
0
0
0 0.00 0.00 6.67 0
0 -3.19 0
0
0
0 0.01 0
0
0
0 5.65 -1.36 -0.06 0
0
0
0
0 0.00 0.02 -1.72 0
0
0
0
0
0
0
0 0.00 0
0
0 0 0
0
5 1 0
2
0 11 0 0 1 17 5 0 0 0 0 8 1 1 0 0 4 0 0 0 0 8 0 0 0 0 5 2 5 0 0 0 0 0 1 4 3 0 0 0 0 0 0 0 0 1 0 0 0 0.0000 0.0000
0.0000
41,300 9,400 0.0000
1,800
0.0000 78,800 0.0000 0.0000 14,800 184,000 21,000 0.0000 0.0000 0.0000 0.0000 35,700 13,000 15,000 0.0000 0.0000 12,500 0.0000 0.0000 0.0000 0.0000 430,000 0.0000 0.0000 0.0000 0.0000 42,400 13,900 11,200 0.0000 0.0000 0.0000 0.0000 0.0000 2,900 39,700 66,500 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 39,000 0.0000 0.0000 0.0000 4,212.6000 6,110.0000
90,000.0000 121,098.7500
1,258.0000 682,114.2500 36,590.2500 3,570.0000 3,120.0000 1,200.0000
37,280.0000 679,504.2500 27,425.5000 464,910.0000 32,571.5000 7,996.7500 79,415.2500 92,934.0000 3,744.0000