The Race for the World's
Most Seductive Metal
(Simon & Schuster)
- Centuries ago, the Chinese refined gold by feeding it to ducks. "Later they collected the droppings, panned out the gold a second time, mixed the refined material into another batch of chaff, and down the hatch again."
- When the London Bullion Market Association polled its members for the first time --- three years ago --- they found that in a three month period, "the value of gold traded was $15,200,000,000,000."
- The day's price of gold, called "the London Fix," is done by representatives of but five banks: the Bank of Nova Scotia, Barclays Capital, Deutsche Bank, Société Générale, and HSBC.
- Digging for gold at Sutter's Mill in 1850 was anything but glamorous. Workers were slaves, Mexican miners "living in peonage," and Chinese "coolies." "White Americans weren't slaves," writes Hart, "but they toiled from 6:00 A. M. in freezing water that flowed down from the melting snow at higher elevations."
- There are plants that indicate precious metals underneath. An old Chinese text has it, "If in the mountain grow spring shallots, there will be silver under the ground; if leek in the mountains, gold."
- Termites can help too, at least those found in Africa. "One of the richest mineral discoveries in history, Botswana's Orapa diamond pipe, was located with the help of mineral clues carried up by termites."
- Gold mine companies regularly hire on gunslingers to run off illegal miners. One is "Bad Brad," who became famous on a South African TV reality show. The author describes Brad this way: "thirty-seven, about the size of a phone booth, [with] dark blond hair and flat green eyes."
- Another famous character in the world of mining is Robert Friedland, "the billionaire American minerals magnate known as Toxic Bob." He won that honorific because of the 1993 leak of cyanide-and-heavy metals from his mine in Summitville, Colorado. A New York Times article stated that the spill killed all of the flora and fauna in a 17-mile stretch down the Alamosa River.
Gold is crawling with such factoids, but the real draw is the overall picture of gold, gold mining, the way gold captures all, and what some would think might be the most tedious part of it all, a matter of accounting and statistics. In the great gold era of California --- 1848 to 1857 --- 848 tons turned up. Worldwide, the figure was an additional 280 tons a year. By comparison, "it was forty times the volume at the end of Spain's century of plunder and 200 times the volume from before."
Compare those figures with recent ones. In the final pages of Gold, the author moves about the world to check on new production. In Dakar we find the Teranga Gold Corp., which was producing 130,000 ounces a year. They now have plans to double that output. The Oyu Tolgoi in Mongolia has an annual stake of 45 million ounces. In the Ashanti Goldfields of Ghana, the production is up to 1.6 million ounces a year. In Uganda, one mine produced sixty kilograms of gold a month.Furthermore, a strange beast called "invisible gold" has revived mining in areas where it was thought no longer worthwhile to dig it out and refine it. When the price of gold went from $35/ounce to over $825 in the late 1970s, it became economically feasible to go back to the old mines and use up-to-date techniques to extract gold from tailings, old mines thought to be "used up," even to knock down pillars left behind years ago to shore up the roof. The newest thing in gold mining is going beneath the sea, searching the depths of the ocean.
The Chinese, of all people, are distorting gold production worldwide. Lenin announced in 1921, "When we are victorious, we will make public toilets out of gold." China doesn't seem to be producing any golden toilets, but the number of producing mining companies in that country is somewhere between 20,000 and 60,000. (It's difficult to count, for much of the mining there comes from mom-and-pop operations. Dad digs, Mom refines, and the kids stack the bars.)
According to Wikipedia and the U.S. Geological Survey, world gold production is now 2700 metric tons a year, but these figures are eight years old. And production figures are confusing: ounces, kilograms, metric tons, tonnes, and the like. "Illegal" mining, of course, can never be counted, and Gold shows that even the sites of "legal" mines --- Barrick Gold, Newmont Mining, and the 500 mining companies listed on the Toronto Stock Exchange --- are riddled with people who come in the night, sneak underground or work on the other side of the hill to get their supply.
The greatest mining operations are in South Africa, Russia, the United States, Canada, China, Australia and Peru. But even Iran, Poland, Finland, Armenia and Fiji(!) turn up with production figures that are sizable.
The most fascinating chapters, at least for me, were of the political plays in gold and gold pricing. When he was president, Franklin Roosevelt used to lie abed of a morning and when the treasury secretary arrived, they would jolly up a price, their own gold fix, one time upping the daily value at twenty-one cents because, as FDR said, "it's a lucky number."
Gold of course is meaningless. It's pretty, malleable, and doesn't go stale or rot. But the price is arbitrary. In his last chapter, Hart writes, "Except for a few practical uses, gold is a notional construct. It has no meaning but its price." Is gold as a material "worth more than something else?" For our ancestors, it was often buried or placed in the river as a momento of the dead. It was of value "not for this world, but for the next."
Gold was the last good-bye, a wish that would have to last forever. Maybe its immutability stood for the endurance of the human spirit in the face of death. Something of that association must have come down to us, and in the face of another apocalypse, people reached for gold.
"If you decide to buy gold you pay the spot price," a gold executive told the author. "There is no reference, no other thing like it to compare it to."
It's easy for me to engage in negotiations about value when there's a reference point. But what's the reference point with gold?
Between 1970 and 2010, the spot price --- the London fix, the daily price for an ounce of gold --- jumped from $37 to $1,410, a 900% rise. A year later, in September 2011, the value was almost $2,000 an ounce. Two years later, it had dropped to $1,200. In one month, April and May of 2013, it had gone from $1,600 to $1,350.
These are just figures, but if you believe in gold enough to buy, say, $100,000 worth of what they call Spiders (SPDR Gold Shares, traded in Chicago), you would have lost $25,000 almost overnight. Two years later, it is still hovering around that $1,350 price.
Gold is worthless, and yet, it has us all. We're trapped in the mystique of it, as much as the Spaniards were when they came to the Americas, as much as those laboring in the "illegal" mines in Uganda, Mali, South Africa, Ghana (often at risk of their lives) ... or panning for gold for fun in the Russian River. Or going in for the kill: making huge investments like Placer Dome did in China (they got cleverly screwed out of their holdings by the government); or merely by investing in a couple of SPDRs.
If you go for the mines, you have to know that it may kill you there underground. If you want to use ducks to refine it, fine: but it takes time. To get the gold out of milled rock quickly, you have to use mercury. Mercury "amalgamates" with the gold. "The problem is that mercury poisons those who handle it and ruins the environment," Hart writes. One geologist told him that in China, in Hunan province, miners use sulfuric acid, in what he refers to as "an insanely hazardous technique."
"We came across little valleys filled with the white smoke of acid fumes," he said. The hill miners used cyanide too. Men on motorcycles carried drums of cyanide up mountain tracks. The miners built leach pits downstream from the digs and poured in cyanide. It leaked, poisoning people and causing widespread cattle deaths.
Gold is a rich lode, and the one thing you will learn from this close study that it is a very strange commodity You might want to stay the hell away from it, for it will eat you alive ... if the cyanide, mercury or sulfuric acid don't get you first.
For my part, I'll stick with the ducks.