Kamal Ghorui
Gold wasn’t always the go-to option in times of crisis. That changed thanks to an American prez 55 yrs back
Egyptians buried their boy king Tut 3,349 years ago. If he walked out of his tomb today, he’d be worth $20mn at least. Not bad for a born-again teenager. Tut’s wealth would lie entirely in the 120-odd kilos of gold he was buried with. But if you were Tut, would you want to be resurrected today, or late this year when analysts expect gold to touch $6,000, or even $6,300, from around $5,250 now? Four years ago, when Russia invaded Ukraine, gold had nudged $2,000 – a record. On Monday, it moved up 5% in a day after Op Epic Fury. Another big war next year could push it to $7,000, or more. Who knows? Gold’s skittishness in the face of war and economic crises puts Tut in a real to-be-or-not-to-be quandary.
But it wasn’t always so. Until Aug 1971, Tut could have returned anytime without a cost-benefit analysis. If he was scientifically minded, he should have chosen 1717 to meet Newton who, as Master of the Royal Mint, set gold’s price at just under £4 per ounce. What’s with mathematicians and gold? Remember, eureka-eureka Archimedes figured out the density test for gold’s purity. Newton also invented the reeded edge of coins to prevent tampering. Anyway, the price he set for gold became gospel for the next 200 years. No war ever made it cheaper or dearer. Even when Napoleon overran Europe, gold demonstrated the law of inertia.
In WW2, US finally reset gold’s price to $35 per ounce, not so subtly telling Brits who was boss. But it wasn’t until Nixon refused to swap other countries’ dollars for gold in 1971 that gold got a life of its own. It was at $193 before 1979’s Iran revolution, and at $615 a year later. Why? Because in gold we trust. Money unmoored from gold is paper. Germans under Hitler, Venezuelans, and now Iranians have experienced this. So, when stocks and crypto look shaky, the safety of gold beckons. In fact, high gold prices are the most eloquent sign of global fear. Newton found that gold-to-silver price ratio in 18th century India was 12 to 1, as against 15 to 1 in Britain. Now, it’s crossed 60 to 1. Similarly, gold’s relationship with oil is also broken. Between 1970 and 2018, it exceeded 30 to 1 only about 2% of the time. Before the war, it had risen to almost 90 to 1, and now, after oil’s rise, it’s at 65 to 1. But this won’t last. Gold will race ahead. Tut had better wait for the next big war.
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