Sunday, February 23, 2014

Review of "Gold: The Race For The World's Most Seductive Metal"

This is a new (2013) book, the title is long, so I will just refer to it as "Gold" from here on.  Author Matthew Hart has written other books, fiction and non-fiction (latter includes Diamond: The History of a Cold-Blooded Lover Affair).  He is a contributing journalist to various publications as well.

In his new book Gold: he takes us on a set of voyages through space and time.  He writes of mine visits in several countries, geology, some history of gold and on many of the arcane facts that you do not see in very many places, even in the gold blogs...  There are a lot of interesting facts and references that I will look into more myself, he is meticulous about referencing many of his claims ("Notes" for each chapter at the end of the book). Hart also provides many details of gold mining technology, which I now understand better, even better than from my visit to the Malartic Gold Mine in the Val d'Or (in Quebec in 2013) here, the first provides some information on how open-pit gold mines work:

http://robertmixblog.blogspot.com/2013/06/the-malartic-gold-mine.html

http://robertmixblog.blogspot.com/2013/06/trip-to-val-dor-malartic-quebec.html

His Chapter One is mostly a hair-raising tale of South African gold mining at present (dangerous!) and the incredible corruption in that country.  There are illegal miners everywhere, many working under appalling conditions.  Yet the cops won't arrest them (except the occasional bust, much like what we see here re "drug sweeps").  Why?  Apparently they are connected very high up.  There is a lot of gold smuggling out of South Africa.  South Africa looks to be an unhealthy place...  Hart closes his chapter with a brief look back to a part of Bulgaria, where the first (6000 years ago) decorative gold works were found, the first appearance of gold as money are the familiar gold coins from Lydia around 635 BC.  Hart, near the end of Chapter One:

"Yet by the fourteenth century, 200 years later [after Lydia], the entire world supply would have fit into a six-foot cube."

Keep that pictured in mind, as the world supplies would later grow much greater.  A six-foot cube really did mean that gold was mostly for Kings.  Now that cube is roughly 60 feet per side, around 1000 times as much.

In Chapter Two, Hart writes of the first big Gold Rush, that of Spain into the New World, particularly Peru.  I have written several articles describing gold in Peru, but Hart provides many facts I did not know re Peru and gold, bravo!  It is clearer to me now why so many in Peru hate Spain...  His description of Pizarro's conquest of the Incas (and looting of their gold) is the best short account (15 pages) I have yet read.

In Chapter Three he goes on to write of the effects of all that gold (Europe's gold supply quintupled in the century before 1565), and Spain was not equipped to handle that gold, most wound up elsewhere in Europe.  But, the all of that gold did kick-start international trade, and soon bills of exchange came along (the first commonly-accepted "paper gold").  Gold and silver both played roles in the money of Europe and the early USA, there was also a lot of fluctuation in what we now call the "gold:silver ratio", this happened mostly when there were new discoveries of one or the other.  Hart then goes on to describe the effects of the California Gold Rush as well as the other major monetary events in the 1800s, including the demonetization of silver, that causing a lot of pain.

Chapter Four offers a good history of Nixon's closing of the gold window.  Hey, I was (barely) aware of what was going on around me in 1971, but I missed all of the drama, the profound worries that our contry's precarious state (losing its gold) and Nixon (cancelling the ability of foreigners to take our gold at $35.00 per oz) caused around the world.

Chapter Five describes an important, even on a global scale, US gold field that I knew very little about, the "Carlin Trend" in Nevada.  While I knew that gold was mined there, I did not know how much.  The Carlin Trend's discoveries and the technology to produce gold from lower grades of ore meant that as gold prices rose, more gold would be found.  This was an excellent chapter, filling in many blanks in my knowledge of gold in general.  In this chapter and others, he describes the origins and development of several of the famous gold miners most of us know...  Hart also provides into gold geology, most of which I had never run into before...  It looks like most of the world's gold is found in districts, some very large (hundreds of square miles), in which geological forces have created rich zones of ore.  South Africa's Witwatersrand ("Rand", "Reef") is the most well known, a 300 mile crescent with gold fields scattered around.  The Carlin Trend, while not as rich is also hundreds of square miles big.  (Even Peru is thought to have a big gold province, as I mentioned from hearing from locals in two previous articles):

http://robertmixblog.blogspot.com/2013/10/the-wonders-of-amazonas-peru.html

http://robertmixblog.blogspot.com/2013/03/review-of-panorama-cajamarquino.html

Chapters Five and Six review the rise of Newmont and Barrick, Six giving many details of what became the world's largest gold producer (Barrick), which later ran into problems by hedging its future production.

China is now the world's number one gold producing country.  They have produced gold for millennia, but did not really get down to business until the reforms of Deng Xiaoping.  Chapters Seven and Eight review Chinese gold production and the author's own visits to China to learn more.  China also has a problem with illegal miners.  Almost all of this information was new to me.

Chapters Nine and Ten cover much of the ground that FOFOA (fofoa.blogspot.com, for new readers, he is my favorite gold analyst) covers in great detail, this would include the gold ETF "GLD" as well as institutions involved in keeping and trading large amounts of gold (the IMF and the BIS (Bank of International Settlements, the "central bank's central bank" in Basel, Switzerland).  Hart does a pretty good job of describing the functions of the various players in the gold arena, and even covers some ground of interest to me and various others who like gold: What happens if everyone who has "paper gold" wants the real thing?  Hmm...

In Chapters Eleven and Twelve, Hart returns to the field, this time to Africa, in particular Senegal and the benighted country of the Democratic Republic of Congo.

Hart says that it looks like there is plenty of gold still out there, including likely new gold fields to be discovered.  Bringing in more gold production will depend on many things, perhaps the most important will be the price of gold.

***

Throughout the book Hart seems to have some disquiet for gold..., like that it is dirty in origin (well, yes it is).  I have myself seen and heard many tales of violence and environmental contamination from many countries producing gold.  My guess is that Hart perhaps is not an owner of gold!  Yet, thousands of poor laborers work illegally at informal (and even formal) gold mines to scratch out a living.

I enjoyed this book immensely.  Hart provides much information I had never encountered, in every single chapter.  He provides Notes and links to search out further information.

Hart does not explore topics like current gold prices and prospects for the current prices to go up or down, nor technical analysis and other speculation-related topics.  He discusses speculation a little bit in his discussion of the GLD.

Verdict:  Highly recommended.  Perhaps the best book out there for non-specialists to learn about various facets of the huge yet poorly known (secretive by design) gold business.  I especially value his discussions of the geology of gold deposits.  A must-have for anyone who wants to more about gold.

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