A history of gold from 4000 BC -
A brief history of gold -
A child finds a shiny rock in a creek, thousands of years ago, and the human race is introduced to gold for the first time.
Gold was first discovered as shining, yellow nuggets. "Gold is where you find it," so the saying goes, and gold was first discovered in its natural state, in streams all over the world. No doubt it was the first metal known to early hominids.
Gold became a part of every human culture. Its brilliance, natural beauty, and luster, and its great malleability and resistance to tarnish made it enjoyable to work and play with.
Because gold is dispersed widely throughout the geologic world, its discovery occurred to many different groups in many different locales. And nearly everyone who found it was impressed with it, and so was the developing culture in which they lived.
Gold was the first metal widely known to our species. When thinking about the historical progress of technology, we consider the development of iron and copper-working as the greatest contributions to our species' economic and cultural progress - but gold came first.
Gold is the easiest of the metals to work. It occurs in a virtually pure and workable state, whereas most other metals tend to be found in ore-bodies that pose some difficulty in smelting. Gold's early uses were no doubt ornamental, and its brilliance and permanence (it neither corrodes nor tarnishes) linked it to deities and royalty in early civilizations.
Gold has always been powerful stuff. The earliest history of human interaction with gold is long lost to us, but its association with the gods, with immortality, and with wealth itself are common to many cultures throughout the world.
Early civilizations equated gold with gods and rulers, and gold was sought in their name and dedicated to their glorification. Humans almost intuitively place a high value on gold, equating it with power, beauty, and the cultural elite. And since gold is widely distributed all over the globe, we find this same thinking about gold throughout ancient and modern civilizations everywhere.
Gold, beauty, and power have always gone together. Gold in ancient times was made into shrines and idols ("the Golden Calf"), plates, cups, vases and vessels of all kinds, and of course, jewelry for personal adornment.
The "Gold of Troy" treasure hoard, excavated in Turkey and dating to the era 2450 -2600 B.C., show the range of gold-work from delicate jewelry to a gold gravy boat weighing a full troy pound. This was a time when gold was highly valued, but had not yet become money itself. Rather, it was owned by the powerful and well-connected, or made into objects of worship, or used to decorate sacred locations.
Gold has always had value to humans, even before it was money. This is demonstrated by the extraordinary efforts made to obtain it. Prospecting for gold was a worldwide effort going back thousands of years, even before the first money in the form of gold coins appeared about 700 B.C.
In the quest for gold by the Phoenicians, Egyptians, Indians, Hittites, Chinese, and others, prisoners of war were sent to work the mines, as were slaves and criminals. And this happened during a time when gold had no value as 'money,' but was just considered a desirable commodity in and of itself.
The 'value' of gold was accepted all over the world. Today, as in ancient times, the intrinsic appeal of gold itself has that universal appeal to humans. But how did gold come to be a commodity, a measurable unit of value?
Gold, measured out, became money. Gold's beauty, scarcity, unique density (no other metal outside the platinum group is as heavy), and the ease by which it could be melted, formed, and measured made it a natural trading medium. Gold gave rise to the concept of money itself: portable, private, and permanent. Gold (and silver) in standardized coins came to replace barter arrangements, and made trade in the Classic period much easier.
Gold was money in ancient Greece. The Greeks mined for gold throughout the Mediterranean and Middle East regions by 550 B.C., and both Plato and Aristotle wrote about gold and had theories about its origins. Gold was associated with water (logical, since most of it was found in streams), and it was supposed that gold was a particularly dense combination of water and sunlight.
Their science may have been primitive, but the Greeks learned much about the practicalities of gold mining. By the time of the death of Alexander of Macedon (323 B.C.), the Greeks had mined gold from the Pillars of Hercules (Gibraltar) all the way eastward to Asia Minor and Egypt, and we find traces of their placer mines today. Some of the mines were owned by the state, some were worked privately with a royalty paid to the state. Also, nomads such as the Scythians and Cimmerians worked placer mines all over the region. The surviving Greek gold coinage and Scythian jewelry both show superb artistry.
The Roman Empire furthered the quest for gold. The Romans mined gold extensively throughout their empire, and advanced the science of gold-mining considerably. They diverted streams of water to mine hydraulically, and built sluices and the first 'long toms.' They mined underground, also, and introduced water-wheels and the 'roasting' of gold-bearing ores to separate the gold from rock. They were able to more efficiently exploit old mine-sites, and of course their chief laborers were prisoners of war, slaves, and convicts.
A monetary standard made the world economy possible. The concept of money, (i.e., gold and silver in standard weight and fineness coins) allowed the World's economies to expand and prosper. During the Classic period of Greek and Roman rule in the western world, gold and silver both flowed to India for spices, and to China for silk. At the height of the Empire (A.D. 98-160), Roman gold and silver coins reigned from Britain to North Africa and Egypt.
Money had been invented. Its name was gold.
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The Silver Price Will Rise 4.83 Times as Far as Gold Price
Unless you understand this one principle, you understand nought about precious metals' bull markets: monetary demand, and monetary demand alone, drives both gold AND silver. It's not Indian wedding demand or the popularity of silver jewelry that drives their prices, but sheer monetary demand, holding them as "money" because the alternatives -- national currencies -- are clearly failing.
WHEREFORE, before this bull market ends, you will need only 16 ounces of silver to buy one ounce of gold, which means from here that the silver price will rise 4.83 times as far as the gold price. Forget the siren song of the "gold-only" bugs, who have fallen for the myths of the money interest: both silver and gold are money, and always will be.
GOLD ENTERING A VIRTUOUS CIRCLE
September 3rd, 2010 by Egon von Greyerz
GOLD ENTERING A VIRTUOUS CIRCLE
Fundamental and technical factors for gold are now in total harmony and gold is entering a virtuous circle that will drive the price up at its fastest pace since this bull market started in 1999.
- It is a fact that gold in US dollars (and many other currencies) has gone up almost 400% in eleven years or 16% per annum annualised.
- It is a fact that the US dollar has declined 80% in value against gold since 1999.
- It is a fact that the dollar and most other currencies have gone down 98-99% against gold since 1913 when the Federal Reserve Bank of New York was created.
- It is also a fact that the Dow Jones (and many world stock markets) has declined over 80% against gold since 1999.
- It is a fact that gold has made a new all time monthly closing high in dollars in August 2010.
We expect gold to start a substantial rise now which will continue for 5-10 months before any major correction. Gold's technical picture is extremely strong with a continuous rising pattern of higher highs and higher lows with the steepness of the curve increasing. From much higher levels we are likely to see a correction that could last up to a year before the next rise which will last several years before we see a significant peak. Once gold has topped we do not expect the same kind of decline as after the 1980 peak since gold is likely to become part of a future reserve currency. At that point gold will be a solid but unexciting investment with very little upside potential. But that is likely to be a few years away.
In spite of a 5 times increase in the value of gold or an 80% decline against many currencies and stockmarkets in the last 11 years, most investors own no gold and still do not understand the importance and value of gold. In a world of constant money printing and credit creation leading to devaluing currencies and devaluing assets, gold reflects stability and is virtually the only store of value that cannot be destroyed by governments.
The average asset manager, fund manager, pension fund or private individual owns no physical gold and at best has a very small exposure to some precious metals stocks. And in spite of this gold has gone up over 400% in 11 years. How is that possible? For the simple reason with the relatively modest demand that we have seen in the last few years, there is not enough physical gold even at these levels. The increase in demand that we have seen has most probably been satisfied by central banks leasing or lending their gold to the bullion banks. Central banks supposedly own 30,000 tons of gold but unofficial estimates of their real holdings are at 15,000 tons or less.
So what are the factors that are likely to lead to a major rise in the gold price?
We have for several years outlined in our Newsletters the problems in the world that inevitably will lead to massive money printing and a hyperinflationary depression (see for example "Alea Iacta Est" and "There Will Be No Double Dip…" on the Matterhorn Asset Management website).
There are three insurmountable problems:
- Real unemployment at 22% in the US will continue to go up
- The budget deficit will increase dramatically due to the problems in the economy and in a few years time the interest on the Federal Debt is likely to be higher than tax revenues.
- None of the problems in the banking industry have been solved but merely swept under the carpet by phoney valuations of toxic debt with the blessing of governments. The circa $20 trillion that were pumped into the world economy to save the financial system in 2008-9 have had a very short term beneficial effect but solved none of the problems.
The effect of this massive $20 trillion infusion has been ephemeral since we are entering the autumn of 2010 with virtually every single economic indicator and statistic in the US deteriorating rapidly. With interest rates already at zero there is no ammunition left but one. And it is this specific last bullet that will be used to infinity in the next few years and starting very soon, namely UNLIMITED MONEY PRINTING. Every single area of the US economy will need support or printed money, whether it is the federal government, the states, the municipalities, banks, pension funds, insurance companies, the unemployed, corporations, health care, housing market, commercial real estate, individuals, etc, etc, etc. The list is endless and many other countries will follow.
Before we talk about gold in hyperinflationary terms, let's look at where gold is likely to reach in today's money.
Three realistic Gold targets: $6,000 - $7,000 - $10,000:
- In the 1971 to 1980 gold cycle, gold went from $35 per ounce to $850 or up over 24 times. If we were to see the same increase in this cycle, gold would rise to over $6,000.
- The gold peak at $850 in 1980 corresponds to over $7,000 today adjusted for real inflation based on the inflation rate as calculated by John William's Government Shadow Statistics (shadowstats.com)
- Gold and gold mining shares were an average of around 25% of world financial asset between 1921 and 1981. Today, gold and mining shares are only 0.9% of world financial assets. If gold and mining shares were to go to 25% of financial assets, gold would go to over $31,000. But even if we assume that world financial asset would go down by 2/3rds from here that would put gold at over $10,000.
The three historical comparisons above (and see chart below) would put gold anywhere from $6,000 to $10,000 and this is without inflation, or more likely hyperinflation. In a hyperinflationary environment, the price gold will go to is really irrelevant since it depends on how much money is printed. In the Weimar Republic for example gold went to DM 100 trillion. What is more important is that gold is likely to go up at least 5 times from today without inflation and with hyperinflation gold will protect investors against the total destruction of paper money and many other assets.
Gold must only be held in its physical form and the holder of gold must have direct access to the gold. We consider ETFs, gold in a bank (whether allocated or unallocated), fractal ownership of physical gold, futures or any other form of paper gold as very risky and a totally unsatisfactory method for owning gold. Physical gold should preferably be stored outside your country of residence and outside the banking system. The holder must have direct access to the vaults where the gold is stored.
Silver has been lagging gold since its peak at over $21 in 2008. For the last few months the gold/silver ratio has been consolidating between 58 and 71. The ratio is currently around 64 and is likely to start a move down to new lows below the 2006 low at just 44. So this is very good news for silver which is likely to outpace gold substantially in the next few years. Silver is probably the most undervalued precious metal today and has great potential.
But there are many caveats for silver:
- It is an extremely volatile metal and is definitively not for the fainthearted.
- We only recommend physical silver owned directly by the investor.
- Physical silver currently weighs 64 times more than gold for the same amount invested and is circa 120 times bulkier (due to its lower density).
- Therefore silver is not as practical as gold as a means of payment.
- Also, silver is subject to Vat (value added tax) in all European countries. Thus silver cannot be moved freely across borders.
- Physical silver for investment purposes can be bought/sold and stored tax-free in Switzerland but if the investor takes possession, Vat must be paid.
- Due to the above factors investors should carefully consider the split between physical gold and silver.
At the beginning of July this year we sent out a message to investors that, based on our proprietary indicators, we expected stockmarkets to finish the correction up at the end of July and resume the major downtrend in August. We also said that gold would start its major rise in August. And this is exactly what has happened so far.
We now expect major falls in all stockmarkets worldwide over a sustained period. We would not be surprised to see the Dow down to the 1,000 area (in today's terms) before this bear market in over. But it will not be a straight line and there will be extreme volatility. When hyperinflation sets in, stockmarkets will have a major but temporary surge.
The only stocks that investors should hold are precious metals stocks and possibly some resource and food stocks. But it must be remembered that stocks do not represent the same degree of wealth preservation as physical precious metals held directly by the investor.
Currencies should in the next few years be looked upon as a necessary evil and not as a store of value. All currencies will continue to decline against gold, just as they have in the last 11 years and in the last 100 years. Due to money printing by most governments, we will have a fierce game of competitive devaluations by virtually all central banks. We have seen the Euro and the pound weaken substantially and the next currency the speculators will jump on is the US dollar. The dollar is grossly overvalued, partly due to the weak Euro, and is likely to weaken significantly due to the problems in the US economy.
Currencies only reflect relative value and not absolute value since they can be and are printed until they reach their intrinsic value of zero. It is a fallacy to measure the value of a currency relative to another currency since they are all losing value. Currencies should only be measured against real money which is gold. This is the only method that reveals governments' deceitful actions in destroying the value of paper money. Therefore it is a mug's game to speculate or invest in currencies since they will all decline in an extremely volatile and unpredictable market.
So are there currencies which are likely to perform better on a relative basis for funds that have to be held in paper money? We believe that Norwegian kroner, Swiss Franc, Canadian Dollar, Singapore Dollar, Australian Dollar and Renminbi will perform relatively better than many other currencies.
Government Bond Markets
The bond market is the biggest bubble in financial markets worldwide, in our opinion. Investors around the world are worried about the state of financial markets and therefore believe that government bonds represent a safe haven. These investors will receive the most enormous shock on two accounts. Firstly, no government will be able to repay the debts outstanding. So there will either be government defaults, moratoria, or money printing that totally destroys the value of the bonds. Secondly, interest rates are likely to go up significantly to at least 10-15%, totally destroying the value of the bonds.
We are now entering a period when most major asset classes and in particular stocks, bonds and currencies are starting a major decline. Since most financial assets in the world are invested in these three categories plus real estate which will also decline, we are likely to experience major shocks and crises in the financial system and the world economy. Wealth protection is now more important than probably at any other time in history. Physical gold and possibly other precious metals directly controlled by the investor will be a vital part of a wealth preservation portfolio.
Recommended Gold and Bullion Dealers...
All Pro Gold
Scottsdale, Arizona 85255
Dr. Fred Goldstein, President
1017 CJ Amsterdam, The Netherlands
+31 (0) 20 521 9424
Fax: +31 (0) 20 521 9333
Anglo Far-East Bullion Co.
Level 23, Monticello, Anastasio Ruiz N
Panama City, Panama
Contact: Alex Stanczyk
9-11 Allee de l'Arche
Tour Ernst & Young
Contact: Jean-Franois Faure, President
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
Bullion Custodial Services Inc.
280-60 Renfrew Drive
Markham, Ontario L3R 0E1, Canada
Rob Kirby, Sales Agent
5 Sager Drive
Rogers, Arkansas 72756
Contact: Ron Maines, Principal
Centennial Precious Metals
Denver, Colorado 80246-0009
Michael Kosares, Proprietor
CMI Gold & Silver
3800 N. Central Ave.
Phoenix, Arizona 85012
Bill Haynes, President
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor
El Dorado Discount Gold
13014 N. Dale Mabry Highway
Tampa, Florida 33618
Contact: Steve Forehand
17860 North U.S. Highway 41
Lutz, Florida 33549
David Kim, CFA, Proprietor
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120 The Strand
GZR1027 Gzira, Malta
Proprietor: Fabrice Drouin Ristori
Gold & Silver Inc.
429 Santa Monica Blvd.
Santa Monica, California 90401
14 Fitzwilliam Square
Dublin 2, Ireland
... and ...
No. 1 Cornhill
London EC3V 3ND, England
Emancipatie Boulevard 29
Contact: Eric Hommelberg
Net Transactions Ltd.
32 Commercial St.
St Helier, Jersey JE2 3RU
British Channel Islands (UK)
Matterhorn Asset Management AG
CH 8001 ZURICH
Tel: +41 44 213 62 45
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
Jaxville Gold and Silver Trading Co.
Parkland Square, Lower Mall
Red Deer, Alberta, Canada
Jack Fortin, Owner and Operator
Jaggards Pty Ltd. (Established 1963)
Bullion and Rare Coin Dealers
Level 8, 74 Pitt St.
Sydney, NSW, Australia
contact: Robert or Yen
at +61 2 9230 0886
13241 Grass Valley Ave.
Grass Valley, California 95945
178 West Service Road
Champlain, N.Y. 12919
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Liberty Coin and Precious Metals
1125 Camino Del Mar, Suite C
Del Mar, California 92014
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Coin and Precious Metals Dealers Who Have Supported GATA and Have Been Recommended by Supporters:
Liberty Coin Service
Bank of America Building
Frandor Shopping Center
300 Frandor Ave.
Lansing, Michigan 48912
Patrick A. Heller, Owner
Contact: Allan Beegle or Tom Coulson
800-933-4720 or 517-351-4720
41A Route des Jeunes
1227 Geneva, Switzerland
+41 (0) 225 180 200
Fax: +41 (0) 225 180 199
Plaza de Carlos Trias Bertran 4, 2
28020 Madrid, Spain
The Gold and Silver People
1300 4th St., Suite 303
Santa Monica, California 90401
Contact: David Weishaar, Senior Account Executive
12303-118 Ave. NW
Edmonton, Alberta T5L 2K2
Michael Riedel, Proprietor
Miles Franklin Ltd.
801 Twelve Oaks Center Drive
Wayzata, MN 55391
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
Northwest Territorial Mint
2505 S. 320th St.
Federal Way, Washington 98003
Pacific Coin Exchange
300 Carlsbad Village Drive, Suite 207
Carlsbad, California 92008
Proprietor: Phil Onori
Precious Metal House
3-1136 Centre St., Suite 626 Thornhill
Toronto, Ontario L4J 3M8
Toll-free in North America: 1-888-764-4151
Precious Metals International Ltd.
Anderson Square Building, 3rd Floor
George Town, Grand Cayman
P.O. Box 866
Cayman Islands, British West Indies
Proprietor: Richard S. Love
Resource Consultants Inc.
6139 South Rural Road
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
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Royal Crown Precious Metals Ltd.
Suite 1500, HSBC Building
885 West Georgia St.
Vancouver, British Columbia V6C 3E8
Andreas Runge, President
Scottsdale Silver & Gold
20701 North Scottsdale Road
Scottsdale, Arizona 85255
1-888-SIL-BARZ or 1-888-745-2279
Seekbullion Gold and Silver Auctions
8420 S. Continental Divide Road
Littleton, Colorado 80127
Peter Spina, Owner
Sheldon's Finest Coins
P.O. Box 194
30 Noelle Court
Lincoln Park, New Jersey 07035-2256
Ed Sheldon CPA, Proprietor
Silver Gold Bull Inc.
4819 45th St. / Box 2612
Rocky Mountain House, Alberta T4T 1L6
877-646-5303 or 877-646-5304
Silver Trading Co.
445 Montgomery St.
PO Box 876
Shreveport, Louisiana 71107
Larry LaBorde, Proprietor
Royal Bank South Tower
200 Bay St.
Suite 2750, P.O. Box 90
Toronto, Ontario M5J 2J2
or toll-free 888-861-0775
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dean Heskin, CEO
Westpoint, Tennessee 38486
Franklin Sanders, Proprietor
Treasure Island Coins Inc.
1002 43rd St. SW
Fargo, North Dakota 58103
True Metals Group
728 West Ave., Suite 1100
Cocoa, Florida 32927
Daniel and Karina Ward, Owners
Worldwide Precious Metals (Canada) Ltd.
Suite 1488, 777 Hornby St.
Vancouver, British Columbia V6Z 1S4
President: John P. Downes
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