DEBT IS THE HEALTH OF THE NATION:

Gold's Enduring Mystery (Robert J. Samuelson, December 7, 2005, Washington Post)

[G]rowing wealth in India, China and the Middle East has revived jewelry demand; that's up 12 percent this year after a 5 percent increase in 2004. Jewelry is often more than adornment; it's also a store of wealth. Consider India. "For thousands of years, [gold jewelry] has been a means of savings," says George Milling-Stanley of the World Gold Council. "Seventy percent or more of consumption is among the rural population. They don't have access to banks, stocks or bonds. They don't trust government or paper currency."

Higher demand collides with constricted supplies; wham, prices rise. That stimulates more speculative demand, but it also enlarges supply by causing past investors in bars or jewelry to sell and take profits. Governments also have large gold stocks; their sales and purchases influence prices, too.

Though new mines often require a decade to bring into production, supply could ultimately overtake demand. Or prosperity in India and China might multiply by many times the world's gold bugs. They may regard gold as a more trustworthy form of saving than any currency, even though gold investments don't pay interest or dividends. Whatever happens, the fears and anxieties that give gold its speculative appeal could intensify or dissipate. Gold is an unending mystery, because its value lies less in what it does for us (unlike sugar, copper or oil) and more in what it symbolizes. It is almost as unfathomable as the human drama itself.

it can be thought of in these terms: their demand for gold is a function of rising wealth among peoples who can't trust their own government institutions with their money.

Posted by Orrin Judd at December 7, 2005 9:48 AM