Category Archives: Gold History

The Volcker Rule and its Effects on the Precious Metal Industry

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Before moving on into the topic of how the Volcker rule affects the precious metal industry, it is crucial that the Volcker rule itself be understood first. The Volcker rule is basically a reformation act that restricts the banks in the United States from taking high risk investments, especially high risk investments that do not benefit the customers of the bank. In view of the major scandals involving banks using people’s money to make short term gains that saw profit flow into the banks but not to the customers, but when things go wrong, the customers bear the burden of the loss.

In other words banks are prohibited from investing in short term or long term hedge funds, speculative markets that are highly risky and it also prevents banks from investing in the precious metals industry (gold bullion / silver bullion). Banks are currently actually looking for loopholes in the legislation rather than comply to it, but according to the legislators the loopholes do not exist. How this would affect the precious metal industry is multi tiered, as some analyst say that banks are the biggest buyers and sellers in the precious metal commodity trade industry and that they are the main ‘market forces’ applied through hedge fund managers and their absence would create a huge void in demand and drive prices down. On the other hand there are those who believe that the absence of these speculative strong forces would provide stability to the prices of gold as most of the trading done by these market forces are for short term gains and in retrospect most of the gold bought by them are never held fopr more than a few days.

Looking into the average investor who looks towards the shiny yellow metal as a safe haven to secure wealth, the absence of these speculative forces will actually bring about the true essence of the gold value and allow the average investor to sleep peacefully knowing that there are no hedge fund managers trying to manipulate the gold market prices. Many have applauded this move, especially the savers, as many have seen what has happened in recent years to big financial institutions that were financially ruined and in the process ruined many other lives of individuals who had trusted these financial institutions to keep their life saving safe.

The reformation brought about by the Volcker rule is expected to bring confidence back into the precious metal industry as smaller investors will no longer have to contend with big players who use other people’s money to fill their coffers. Nevertheless, prior to this there have been numerous other ‘so called’ rules that were supposedly supposed to protect the small people, however in light of what transpired during the global financial meltdown and other similar situations, how long this rule lasts before it is overwhelmed or manipulated by the powers that be would not be long, and those who want to place themselves within the safe zone amidst a financial crisis would typically be the ‘Average Joe’ with a fistful of gold.

Golden Conflicts

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It is not new to the world when certain factions misuse natural resources to finance or advocate conflict which has become a common phenomenon over the last few decades: from crude oil in the Middle East, timber in Cambodia, blood diamonds in Sierra Leone and Angola and even gold in low income countries. Very often natural resources provide a means to finance as they are internationally tradable assets which are mobile and easy to dispose off. Without appropriate measures, these assets may find their way towards funding armed groups that are conditioned to overlook human rights and grossly neglect humanitarian laws.

The Democratic Republic of Congo for Instance was responsible for 0.8 % or 22 tonnes of newly mined gold, but because of the countries weak governance coupled with the fact that most of the gold mines are artisanal small scale mines, they are often subjected to the whims and fancies of armed groups who frequently extort them, therefore the possibility of the gold produced in the Democratic Republic of Congo getting into the gold supply chain is minimal. These are only some of the issues as incidences of forced labour by armed groups, low wages, adverse working conditions, negligent mining practices and conflicts continue to be highlighted and the only way to deter these incidences is by obstructing gold mined under these conditions to get into the supply chain.

However this is not an easy task as gold from independent small mines are usually melted down and mixed with gold from other sources (usually with recycled gold – 35 % of the annual gold supply comes from recycled gold) and sent off to end users through a complex transactions which make them virtually impossible to be traced back to its origins. It is largely due to the availability of ready buyers that these armed groups are brazen about their activities as once the gold artisanal and small scale mines reach a refinery, their origins cannot be traced and therefore refineries have become a strong element in the value chain of armed groups and establishing a relationship with a refinery that would accept their gold (knowingly or unknowingly) is all that they need.

Recently the World Gold Council has launched a ‘conflict free gold program’ which aims to stop or prevent gold from conflict zones or high risk areas from reaching refineries and subsequently end users as this would be an effective measure towards eliminating these conflicts and bring reprieve to those who bear the brunt of these armed groups.

However, it is undeniable that artisanal mining is a vital economic activity in some places and if it was not for the gold, the communities in these places would be left without nothing and based on the fact that a significant proportion of mining in these places are illegal and operate beyond government supervision it is prone to smuggling which is often backed by armed groups.

Proving that a gold batch is from these situations or sources is the first step, but a difficult one undeniably.

Canadian Gold Tales: The Canadian Wild West

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Towards the end of the nineteenth century around 100,000 people overpowered the Klondike area arranged within as far as possible searching for gold, is a noteworthy piece of American history. Presumably, a couple made their riches, yet most lost all that they had. The Klondike’s record is one of disturbance and obsession that passed on them to the region, and in addition brought the most exceedingly terrible out of a huge part of them. Gold fever held people all over the place all through the United Sates and when news of Klondike gold spread like crazy flame and people like George Carmack, Skagway criminal Soapy Smith and others, for instance, Mountie Sam Steele got to be enlivened.

Brutality, starvation and even the unforgiving atmosphere of the Yukon and were not satisfactory to keep mineworkers away. Stories of the Klondike has wound up central to Canadian history and also the gold business as it arrived that excavators started obtaining and offering cases instead of burrowing for the gold themselves as a result of the way that, if whenever there was a spot on the planet where burrowing was in every way that really matters unbelievable for individuals with picks, hammers and tomahawks – it was the Klondike. The masses extended so fundamentally (from 500 to 30,000 within months) that the immediately manufactured wooden structures as often as possible seethed to the ground and to compound matters unsanitary conditions killed various.

On the other hand, various don’t have the foggiest thought regarding exchange drivers behind the dashes for unheard of wealth of the Klondike, it was not on account of the interest of the significant metal alone, it was in like manner as a result of the mistake of the cash related structures in the US, banks were falling level all through the United States and various were about section 11 in the midst of that time, and when news of the gold disclosure went to these people, it was all in all the principle decision they expected to recoup their financial strength. Another component that empowered the Klondike dash for unfathomable riches was furthermore the high rate of unemployment that stretched out from San Francisco to Seattle. Each one of these segments was the key components that drove such countless prospect for gold in the Yukon.

However within a few years, gold had been found in Alaska and the scene was an extraordinary arrangement also obliging to prospect for gold in examination to the Klondike that enacted another move, the Klondike district was left for a time span, before people started mining the Klondike scope of and on. At whatever point a noteworthy gold piece was found in the Klondike and news spread, “littler than anticipated” undertakings for incredible riches consistently came about, however these downsized dashes for inconceivable riches when in doubt, did not last over a month preceding mineworkers left.