From the May 01, 2009 issue of Futures Magazine • Subscribe!

Golden rule?

A few months ago our parent company moved a Web site that had been run by the conference group over to the media division. And because the site focused on metals and pretty much anything brought up from the ground, the company thought Futures would be the best adoptive parent. And though the Futures’ audience focuses on actual trading strategies of financial and commodity futures, options, forex and stocks, the readers of ResourceInvestor.com are into the intricacies of all metals, from precious to rare earth, and are focused on the performance of companies that mine or produce metals or commodities. In other words, they will buy the commodity, but are more interested in the stock. However, there is one hard asset area in which they are particularly interested: precious metals. That means gold and silver. It really means gold.

It’s been awhile since I’ve meshed with the gold bugs of the world. In my early days at Futures I had to cover some Jim Blanchard conferences and actually heard some pretty big speakers, such as Milton Friedman. But most of the speakers talked of gold and its importance to the economic world. Gold was always heading higher and paper money was continuously getting slammed. It’s an attitude that hasn’t changed over the years, but one thing has: reality. And the reality is, right now gold is king.

Last February the price of gold reached more than $1,000 and has since bobbed and weaved between $865 and $968. During this time, I’ve seen an interesting trend amongst female columnists: gold was a topic worth pursuing. It started a couple weeks ago when I saw a column by the Chicago Sun-Times’ Terry Savage, a local celebrity and former trader (she also sits on the CME Group Board). Terry is very sharp in her advice as she brings a keen eye to investing. And what she told Sun-Times readers was to buy gold, even at this level (hopefully none bought Sun-Times stock, as the company filed Chapter 11 a week or so later). A little while after that, I saw a column in the New York Times by Maureen Dowd, who actually had gone to California to check out a new rage: panning for gold in the California foothills, following the steps of the old 49ers. (Don’t paint your wagon yet, as she reported that dust was about the only thing miners were finding.)

Then Gillian Tett of the Financial Times wrote that during the Swiss Davos economic conference there was talk by some panelists about bringing back the gold standard. She quotes one speaker as saying that as two-thirds of the world’s assets “are denominated in a fiat currency issued by a country whose authorities are taking policy actions which seem inevitably to lead to debasement,” looking at returning to some sort of gold standard wasn’t out of the question. She also mentioned a paper making its way around the Internet written by a pre-Fed (1960s) Alan Greenspan that was called “Gold and Economic Freedom.” In it, he supported the gold standard. Of course that was then. I highly doubt he feels that way now.

Although I’m sure many columnists have covered everything gold, I highlight these three as their angles were different. Will gold spiral to thousands of dollars an ounce in the months ahead, when global money printing finally catches fire and flames inflation? Maybe. To hear gold bugs tell it, paper currency has been the bane of modern economics and the only way to fix it is by building a new monetary system, one based, of course, on gold. Paul Mladjenovic, a guest author this month, outlines current events’ impact on both precious and base metals prices (Can metals be strong in good times and bad?). Chances are gold will always glimmer, but returning to that standard is about as likely as finding gold in them there hills.

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