Friday, June 23, 2006


Investing In Gold 'The Old-Fashioned Way'

The USA Today reports on a new trend in the gold industry. "Surging gold prices the past two years have riveted the financial world, just as they did in the days of the Forty-Niners. But today, the gold market is far more industrialized and complex than it was in 1849. Even prospecting for gold has become rather more civilized than in the rough-and-tumble days of the California gold rush."

"'It's a family-type atmosphere,' says Ken Rucker, general manager of the Gold Prospectors' Association of America in Temecula, Calif. 'My daughter has been panning since she was 5.'"

"Amateur prospectors still find gold in the California gold-mining country, though not in the quantities that the Forty-Niners did. 'They got the easy stuff,' Rucker notes. That hardly stops people from looking: Membership in the GPA, he says, has soared to 40,000, up nearly 25% from last year."

"Most gold is produced in mines. Heap leaching, a commercial process that involves extracting gold from huge piles of low-grade ore with a cyanide solution, has boosted U.S. gold production since the 1970s. Most gold from South Africa, the world's No. 1 gold producer, comes from deep mines. The average cost worldwide to produce gold is about $238 an ounce, according to the World Gold Council."

"The gold market remains small compared with the stock or bond markets. There are about 155,000 metric tons of gold in the world, of which about 53,100 tons are readily available for investment. The rest is used for jewelry, coinage, dentistry and other industrial purposes."

"At current prices, that puts the gold market at nearly $1 trillion. By contrast, the stocks in the Wilshire 5000, a broad stock index, are worth $14.7 trillion."

"The price of gold, as with any commodity, is determined by supply and demand. World gold production was 2,464 tons in 2004, the latest year for which figures are available. That's down about 5% from 2003. Gold-mining companies opened fewer mines when prices were low. And it can take years to open a new gold mine."

"Gold is traded worldwide, in small coin shops and big exchanges. The price changes minute by minute. But most investors check the London A.M. and P.M. gold fixings. Twice a day, five major gold dealers, Bank of Nova Scotia-ScotiaMocatta, Barclays Bank, Deutsche Bank, HSBC Bank USA and Société Générale, consult with their clients and agree via phone on a price for settling trades among themselves."

"You can always invest the old-fashioned way, using a dredge or a pan in a stream. Rob Goreham, a prospector and gold-mining equipment dealer in Columbia, Calif., takes out groups of four to six on charter gold-dredging expeditions. 'I provide all the equipment,' he says."

"But it can be a rugged trip getting to the sites in remote areas. 'It's not for the faint of heart,' Goreham says. If you want to try it on your own, contact the GPA first, he suggests. 'It's the best source for people who don't have a clue about mining.'"

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