Gold has been part of our story since the beginning of time.
For at least 5,000 years, humans have been able
to find it, mine it, process it and shape it into all kinds of things.
It is mentioned in the second chapter of
Genesis. King Tut’s mask is said to be made of solid gold. Somewhere along the line in the shrouds of history, people
began using gold as a form of money. By Caesar’s time, almost every major nation in the known world was using gold coins
The ancient Romans went to enormous lengths to secure a steady gold supply for the Empire. On the
other side of the world, Chinese empires were running on gold currency. Things stayed this way for the next several hundred
years, until about the time famous Spanish doubloons started running dry in the late 1700s. No worries. A solution from our
friends in England was already well under way.
The Bank of England was formed in the late 1600s and was the first
central bank in the world. It wasn’t long before other countries realized the beauty of fractionalized banking and paper
Many early debates during the birth of America centered on the creation of a central bank, with Alexander
Hamilton pursuing the concept relentlessly. For the most part, the United States avoided the temptation until we finally caved
in 1913. Then it was only a matter of time before the gold standard was completely wiped off the face of the earth.
There isn’t a country left on the planet with a currency completely backed by gold. The central banks have financially
engineered a brave new world. If we need more money, we just print it—to heck with digging that stuff out of the ground.
It makes you wonder, then, why the shiny stuff has been taking off like a rocket the last few months.
taking into account the large stock-market rally since last March, the Dow Jones industrials index would still have to go
up another 47 percent from here to get back to its all-time high.
Gold was sitting a few dollars an ounce off its
best only a few days ago. At this point, there are even odds gold will hit a new high, then run another 10 percent to 20 percent
over the intermediate term. There is an obvious demand imbalance going on here that I think is beginning to invade the minds
of our central-banking friends all over the world. After all, gold is a store of value that they flat out can’t control.
Longtime readers know I have been bringing gold up for, well, a long time. I am not chasing it up here, though. It
is going to have to take off on a moon shot in order to turn me into a motivated seller, so the most likely outcome over the
next year or two is for me to be an interested observer. If it hits $2,000 an ounce, will Bernanke choke on his coffee? At
$3,000, do we take the dollars in our wallets and use them as wallpaper?
I don’t think $2,000 or more an
ounce is that probable within the next few years, but I am still left with the question as to why gold has been moving so
hard the last few months. I am in the camp that believes inflation is going to become difficult, but not for another year
Over the years, though, I have learned to listen to the market. Global investors are buying gold on weakness
lately and they seem to be on the verge of chasing it through the roof. It seems like gold and the human saga have at least
one more chapter in the story.•
Hauke is the CEO of Samex Capital Advisors, a locally
based money manager. His column appears every other week. Views expressed here are the writer’s. Hauke can be reached
at 203-3365 or at firstname.lastname@example.org.