PULLMAN -- You can be forgiven if the price of gold escaped your notice in 2008.
What with the national election, the critical illness of American car companies, the housing market crisis and new fighting in Afghanistan, you had a number of stories to follow this past year. But because the price of gold is a useful business and financial thermometer, you may want to review it here at the close of this momentous year.
When gold is high, it means most folks are worried about the economy (and it also means, by the way, that us geologists have jobs). When the price of gold is low, business fears are fairly mild (and geologists have time to clean the attic).
The basic comfort about gold is that people believe it will always have some value. And, unlike houses, the you’ll always be able to sell your gold if you really want to.
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A couple years ago, I picked up a genuine gold bar and held it in my hot little hands. I was visiting a large, open-pit gold mine in Nevada where a friend works. Round Mountain is big enough that it pours its own gold bars right on site. The gold isn’t pure -- it has some silver mixed in it -- because that’s the way it comes out of the rocks. But even such rough-and-ready bars are golden in color and quite impressively heavy.
It’s exhilarating to be in the presence of a couple thousand pounds of gold. But despite gold’s attractions, it has some real limitations. You can’t eat gold. And even a pile of gold bars don’t reproduce, they don’t build you durable goods, and they don’t grow next year’s corps. “Good as gold” is just that -- as good as gold, but no better.
The geologic good news about gold is that it’s spread around the world quite a bit more evenly than petroleum is. That means one small part of the world doesn’t dominate production as the Middle East does with oil. Gold is produced in some mines exclusively for its own sake, and it’s produced as a byproduct of other metal mining in mega-operations producing copper and the like.
In a few places around the world, there’s so much gold in ore you can see the stuff with your naked eye -- quite a treat. But a lot of gold ore is “invisible” in the sense that the gold particles are so small you can see them only with a strong hand lens or a microscope. That’s the kind of gold we mine in the U.S., because our highest-grade ore is long since gone.
As it happens, gold keeps well. You could have a stash in your garage and it would last unchanged throughout your life. (Just for the record, don’t try the same maneuver with gasoline, even though it’s cheap these days. Gas degrades into a varnish-like substance, more is the pity.)
If you find deep comfort in the image of a personal stash of gold, here’s a quick review of recent prices.
Five years ago, as the U.S. was invading Iraq under considerable uncertainty about the global war on terror, gold was trading for $400 per troy ounce. Today, the price is about twice that. Earlier in 2008, gold hit $1,000.
There’s nothing like naked economic fear to help boost the price of gold.
But fear is exactly what complicates the decision to invest in gold. Speculators -- and their fears -- are a heavy factor in the price. And human psychology is notoriously difficult to predict. Only if you are good at betting against the crowd -- buying gold when nobody is worried about life and it’s cheap, and then selling it when people are in full panic about global Armageddon -- are you likely to make a passel on gold.
Psychology, however, comes into play in a second way. If you really are likely to sleep better because of a few gold coins you have buried behind the doghouse, then those bits of metal could be “worth their weight in gold.”
Just send me your treasure map.
* E. Kirsten Peters is a native of the rural Northwest, but she was trained as a geologist at Princeton and Harvard. Questions about science or energy for future Rock Docs can be sent to firstname.lastname@example.org. This column is a service of the College of Sciences at Washington State University.