The Fourth Summit of the BRIC nations, a major political event.

This is a huge story and yet has gone largely unreported by the major western media. On the 29th of March in New Delhi, the Fourth Summit of the BRIC nations took place (Brazil, Russia, India, China).

“The BRIC nations (Brazil, Russia, India, China and South Africa) should no longer use the US Dollar in their bilateral exchanges. That is what was decided on Thursday the 29th March, 2012, during the Fourth Summit of leaders of these five nations in the Indian capital”.

Source: algeriedz.info and rian.ru

The following was decided during this meeting: an essential step was taken towards a “multipolar” global monetary system. March 29th 2012 will undoubtedly not be the date remembered in history as marking the end of the era of the Dollar. Nonetheless, the change is major.

Towards an overhaul of the IMS

We are entering a phase of disintegration of the International Monetary System as we know it. Our monetary system dates back to the Bretton Woods agreement of 1944 which was brought to an end by the Jamaican agreement of 1976 (this ended the gold standard).

So what will happen now? Stock markets are starting to fall because the issuing of European bond funds is doing badly or is disappointing (depending on your degree of optimism about the outcome of this policy), which is the case for Spain and now Italy.

What one must understand is that according to the current economic system it is the surpluses of some which finance the deficits of others, thus creating a balance. In other words, western countries are in a chronic deficit which has been, and I stress has been, financed by the major Asian exporting nations on the one hand (China and India) and the oil-producing nations on the other.

For the last few years, nobody was lending to western states (by this we mean the US and Europe) which now find themselves in an irreversibly compromised situation.

It is this lack of external funds which is pushing the central banks, the FED and the ECB to massively intervene in the markets. The only option that remains for us is indeed the use of the printing press and the creation of money with all the negative consequences that follow.

Though this Fourth Summit of the BRIC nations is a founding step towards the overhaul of the IMS this is certainly not the ultimate goal.

Ground-breaking events in international relations

Discussing the topic of the monetary system without mentioning the political dimensions would be a mistake. The future International Monetary System will be shaped by the international balance of power and alliances between the major players in the context of the fight for access to energy and agricultural resources and in the broader sense to raw materials. A strong axis is taking shape amongst the BRIC countries, and Iranian diplomacy is also far from insignificant.

The trans-Atlantic relationship remains strong despite the strains and divergences. Lastly, one should not imagine that the United States of America will let their status as world leaders slip away without a colossal “fight”. American policy has always been based on a simple concept: “America First”.

We are thus entering a new phase in the current crisis:

In 2007, the subprime crisis led to a financial and stock market crisis.

The financial crisis led to an economic recession.

The economic recession lead to massive state intervention in the form of stimulus packages which resulted in massive debts for these states.

The debt crisis can only lead to a major monetary crisis.

The monetary crisis (which is on its way) will lead to the restructuring of the International Monetary System.

And… the manoeuvres have already begun. The global repercussions will be deeply felt, as the International Monetary System is to the global economy what tectonic plates are to geology. We are touching upon the essential part. The tremors will truly be felt.

Will you be ready?

We begin in Hungary where prior to the war almost one fifth of the population was Jewish and had been integrated into the countries fabric. The government was increasingly sympathetic to fascism and gradually tightened laws against the Jews eventually the Arrow Cross party became the fascist government of Hungary. As the war went badly for Germany things got worse and with the Soviet Army only 100 miles from the border Hitler launched an invasion of Hungary in March 1944.

Until 1944 the Hungarian government had not cooperated with the Nazi but this all changed as the facist dominated government were eager and willing to collaborate and the SS saw the opportunity to continue their work of mass murder to solve the Jewish problem. Consequently the estimated population of 800,000 Jews were forced to hand overall of their valuables to government official including gems, gold, jewelry, gold coins, silver, wedding rings in fact anything of value. With typical efficiency everything was bagged, boxed and identified with receipt given to the owners.

After handing over their valuables the majority of Jews at a rate reaching 12,000 per day were shipped off to the concentration camps of Auschwitz-Birkenau where most never survived.  Meanwhile the Hungarian authorities resorted all the confiscated valuables into categories destroying the identification of the original owners but the inventory was fairly exact.

Car from the Gold Train

By December 1944 the Red Army were on the outskirts of Budapest and a decision was made to evacuate the Jewish booty and this was supervised by a Hungarian Árpád Toldi, the commissioner of Jewish affairs appointed by the SS. The valuables, estimated at around $5 billion in today’s terms, were packed into  a 42 car freight train that was designated for Germany. As the train moved slowly westwards through Hungary and Austria. Toldi bought off bands of marauding troops with small batches of loot but large amounts of gold and precious stones were off loaded into  trucks along the route and stories of Nazi gold  springing up all along the route ensured the  “Gold Train”  became one of the many myths of Nazi treasure.

However, the majority of the loot ended up in allied hands. Toldi  had two trucks loaded with valuables and they headed towards the French zone where they were seized by French troops at St. Anton. According to a report written by the Central Board of Jews in Hungary and referring to available reports at the time the trucks seized by French troops contained:

31    cases of gold

2        case of gold coins

3        cases of gold watches

8        cases of brilliants

2        cases of selected brilliants and Pearls

The French returned these valuable to Hungary but they did not reach the hands of any remaining owners or relations, but were mostly were stolen by the communists.

The Gold Train eventually fell into the hands of the United States Army nesr the town of Werfen in Austria in May 1945 and according to the Central board contained the following:

10              45kg cases of gold

1                100kg cases of gold coins

18              35kg case of gold jewels

32              30-60kg cases of gold watches

1560          cases of silver of different weights

1                case of silver bricks

1                trunk of currencies and brilliants

100            artistic picture

3000          Persian carpets

2                wagons of mixed valuable

American soldiers guarding the gold train

The Central Board of Jews and the Hungarian government were aware that the majority of the contents were in American custody and passionate pleas for them to return the valuables to Hungary, where they could be returned to their rightful owners or surviving family members, were continually ignored. Despite the clear country of origin ownership,  Americans decide that the contents were  ownerless property and that it should be sold for the benefit of non-repatriable  refugees who could be accessed through the International Refugee Organization (IRO). It is a matter of fact that some of the property from the train ended in the possession of high ranking US Army officers but the majority was sold off through US Army exchange stores in Europe and the remainder auctioned off in New York in 1948  with proceeds going to the IRO.  Approximately 200 paintings seized from the train should have been returned to Hungary but they came into possession of the Austrian government and disappeared to this day they have not surfaced.

As a result of Bill Clinton’s creation and subsequent freedom of information in 2001, there was a lawsuit against the United States government. This was filed by Hungarian Holocaust survivors in a Florida district Federal Court for the government’s mishandling of the assets on the Hungarian Gold Train. In 2005, the government reached a settlement worth $25.5 million. The money was allocated for distribution to various Jewish social service agencies for the benefit of Holocaust survivors. Hungarian Jewish survivors did not receive any money directly so justice was not seen to be done.

Árpád Toldi

There was gold, gold coin, jewelry and precious stone that did not end up in allied hands, spirited away by Toldi during the long  journey and the amount returned to Hungary, from the French. that was stolen by the communists and ended up in Russian hands.  The trail has disappeared  leaving many unanswered questions, the most important of which where is the gold now ?.

Toldi himself tried to enter Switzerland with a convoy of trucks but was turned away at the border. After hiding for some time in the French zone he gave himself up to the French authorities and led them to some bags of precious stones.  After a few months detention he was released and then disappeared. It is rumored that he lived under the protection of high ranking French officials but not substantiated.

This is a terrible story where thousands of people lost their lives and their wealth. Could it happen today, unlikely, but less unlikely is a family losing its wealth through crisis.   If a family were to put aside some of its wealth in the form of tangible assets in a safe haven, such as well documented vault in a stable country such as Switzerland, then there is a strong chance of surviving that crisis

Maurice Hall

1980

In 1971, the United States suspended the free exchange of U.S. gold for foreign-held dollars, then in 1974 lifted its four-decade ban on the private purchase of gold. At that time, gold bullion was being traded in European markets at highs approaching $200 an ounce. In 1975, the U.S. government began to sell some of its holdings on the open market and in 1978, along with most other nations, officially abandoned the gold standard. After being released from government control, the price of gold soared and touched $850 in January 1980.  In the three years before 1980 gold price grew eightfold  as the result of mainly fear but also greed

In Dec 2009 the gold price soared to $1227 per ounce. So was this the zenith and comparable to the 1980 high? Was this the end of the bull market that was running for almost a decade?.

There are many differences between 1980 and today not least of which the world is not the same following the most significant financial crisis since the great depression of the 1930’s, global warming threatening our existence and the economic balance between East and West swinging to the East. In 1980 the cold war still raged, the Berlin wall separated East and West Germany, and Eastern Europe was in soviet control, the Russian bear was feared. We must also remember that gold in real terms is trading at only half of the high reached in 1980 as the $850 to day equates to approximately $2200 when inflation is applied.

Political Fear – The Soviets had  signed a “bilateral treaty of cooperation” with Afghanistan in 1978, but by the next year relations had deteriorated and  the Soviet Invasion of Afganistan, which began around Christmas 1979, was a terrible global shock., Russian forces seized all major governmental, military and media buildings in Kabul, including their primary target – the Tajbeg Presidential Palace, where they killed President Hafizullah Amin and announced on Radio that Afghanistan had been liberated

It was a slap in the face to a cold war America.

At the same time the Russians were building up their strength  in southern Yemen close to Saudi Arabia and the oil fields. Also in Bulgaria’s border with Yugoslavia, a liberal communist country, whose 87 year old president Tito solely responsible for binding the  Serbs, Croatians and Muslims together since the end of WWII was very ill.

Iranian fundamentalists took over the US embassy in Tehran in November 1979 anther slap for America.  Ayatollah Khomeni became supreme leader in December and relations ships with Sadam Hussein’s Iraq were at an all time low eventually leading to the Iran –Iraq war.

Economic Fear – The 70’s were a period where inflation was spiraling out of control, stagflation unemployment, oil embargoes and subsequent spike in oil prices spread gloom and despair.  In 1979 inflation in the US was at 12% and was in double figures in most western countries  In the UK the winter of 1978-9 was known as the “winter of discontent” and during 1979 nearly 30 million working days were lost due to strikes.  Debt in the USA had risen to almost $1 trillion and the dollar was weak.

Another catalyst that shook the markets was Bunker Hunt’s run on silver. Hunt, an oil billionaire, his brother and friends by October 1979 had bought up all the silver paper propositions to the tune of 192 million ounces.  In early January 1980 , it became evident that COMEX intended to change the rules to only allow 10 million/oz of contracts per trader and that all contracts over that amount must be liquidated before February 18th. Of course, the CFTC promptly backed up the ruling. The escape hatch for the Hunts and some of the other large longs was simply to convert their futures contracts into physicals, On January 17th silver hit $50/oz, Bunker had continued to buy. At that point in time the Hunt’s silver position was worth $4.5 billion dollars. This caused chaos as there was no silver to be had to supply and the Hunts were driven to ruin.

Oil revenue to Gold – The rapid rise in oil price produced a sudden surge of wealth in  Saudi Arabia and the Gulf States  and enormous sums were diverted into gold. This was further accelerated by the fall of the Shah which exposed vulnerability of people in power in the Middle East and led them to protect their positions. It was common for Saudi dealers to bid for 50-100,000 ounce in a morning and one bank was asked to buy 300,000 ounces for a single client.  Speculators also used the opportunity to dupe the market to increase the price of gold by bidding for huge sums  through a Gulf bank giving the impression that Arabs were pouring money into gold, a story carried by media for some time.

Greed – Of course speculation reached the phase of public awareness which is always the last phase close to the peak just before the decent.

The world was in turmoil and inflation was out of control so everyone was scared. When people are scared fiat currency is not enough. They return to traditions going back to the beginning of civilization to secure wealth in physical gold that gives portability and liquidity. During times of crisis and fear gold rises and individual governments can’t stop it; but in peaceful times governments are able to maintain control. The future of the American economy and American power did not feel at all certain. As a safe haven in times of panic and strife, gold simply reflected that fear. As soon as the emotion subdued and rationality returned  the buying panic quickly subsided and turned to selling phase taking down the price.

The Fall – Prices will rise as supply cannot meet demand but in 1980  when the price touched $850 all over the world people began dishoarding their coins and  old jewellery in an unprecedented scale to the extent that dealers were running out of money to pay for the re cycled gold and Refinieries  had more than enough scrap gold. Thus supply quickly out grew demand.

In early 1980, Paul Volcker’s (Fed Chairman) new Fed policy began to bite. U.S. interest rates began to skyrocket. As they rose, the Dollar first slowed its descent, then stopped falling, and then began to rise. Both the public and the investment community which had stampeded into Gold was lured back into paper by this huge rise in interest rates – and by the prospect of a higher U.S. Dollar. The threat of financial meltdown was averted. There was a rush out of Gold and back to Dollars. The Dow was already rising in 1979 and really took off in 1982.

The gold price dropped off dramatically after its January 1980 high in short because people lost their fear as inflation the bane of the 1970s was finally coming under control, interest rates and the stock markets rose making other investments more attractive. Supply was greater than demand and the Middle abruptly exited the gold market.

2010

The financial crisis that rose its ugly head in 2008 and continued through 2009 is comparable to the fear generated in 1979-80 and was one of the reasons for the rise in gold as people sought a safe haven. The dollar has been weak, a norm for a corresponding high gold price and this was catalyzed by India buying 200 tonnes from the IMF to drive the price to the December high.

The Future – The difference between 1980 and today is that in 1980 we were exiting a terrible decade and the future looked bright economically. Today the future is far from bright and whilst we have managed the worst financial crisis since the depression and are even complacent; but the truth is we are not out of the crisis. The economy is recovering slowly and is still very volatile and in the UK we have £1.4 trillion in sovereign debt to face. According to the IMF spiralling sovereign debt in Europe, the US, and Japan has emerged as the top threat to the world economy and risks setting off a fresh financial storm. The eurozone is heading for one per cent growth this year, limping out of recession under the threat of a sovereign debt crisis. The main risk is that, if unchecked, market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown sovereign debt crisis, leading to some contagion. The economies of Ireland, Spain and Portugal will shrink. The US’s ratio of total debt to GDP is likely to exceed 90% this year, making it more indebted even than Spain and Portugal. It is similar to Weimar Germany but for different reasons and has printed trillions of dollars of fiat currency which will eventually lead to debasement. The dollar is weak and is likely to get weaker. The Chinese Yuan is undervalued but it is not in China and the worlds interest to drop the dollar just yet but the time will come and dollar will fall. The Chinese are on the unmistakable path towards challenging the dollar and the ultimate aim is financial supremacy The dollar’s status as the worlds reserve currency is under threat and both Russia and China are pushing or an alternative in which gold must surely take a part.

Today we have a world of low interest rates where it is almost impossible to obtain an interest rate that does not lose on the capital invested each year when taking into account inflation and tax. With the right gold product tax on profit can be eliminated.

In 1980 Central banks were auctioning off gold, today central banks are turning to gold as many countries increase their gold reserves. Last year India bought 200 tonnes from the IMF to meet its international commitments. China has increased its reserves to 1054 tonnes and announced its intent to continue buying.

India is currently the largest consumer, China the largest producer and second largest consumer and Russia were not players in 1980 and it is these countries where the demand is currently driven. China is consuming all it can produce and quietly everything it can buy with out upsetting the price.

Public Awareness – In 1980 public awareness led to speculation and to frantic selling of gold, de hoarding which was contributory to the drop in price as the amount of scrap gold created an over supply. Today you can hardly open a newspaper or watch television without seeing an advert to persuade you to sell your old gold. This is the reverse of 1980 as the refineries need the re cycled gold to ease the demand. Also investment has not yet reached the public awareness stage. From the chart below  you will see that there is no slide just a correction which is normal

In conclusion gold is still a safe hedge, the world is uncertain with threats of sovereign debt, inflation and the weakening of the dollar. Gold is finite all the gold ever produced would fit into a 20 metre cube. As mining becomes more difficult production costs are rising to almost $800. The demand from the East cannot be met so demand is greater than supply and there will be more pressure on supply as the gold fields dry up. I have seen an analogy where more gold can be extracted per ton by harvesting old mobile phones than the majority of modern mines. Were are currently in a period of correction fed by a certain amount of complacency but trends indicate that we should see a breakthrough of $1300 by Q4 2011.

Maurice Hall

Karl Heinrich Marx

For the Soviet system, inspired by Marx, currency was the manifestation of social evil, the relationship with commodity production.  There were certainly some countries where this practice was even more radical than the Soviet system.  This was particularly true of Cambodia and the Khmer Rouge, where trade itself, including bartering, was the objectification of evil itself.  To some degree, it surpassed even Marx’s theories.  In his book the “Critique of Political Economy,” Marx spoke about exchange values and not exchange itself.  It is for this reason that André Malraux called “PolPotism” the Marxism of imbeciles.

That said, the conclusion that Pol Pot and his friends and family made from Marx’s theories, is not that far away from Marx’s ideas, because for Marx the historical process itself results in the production of useful values.  For this reason, Pol Pot’s followers condemned the production of exchange values; therefore exchange itself.  This explains the terrible reality of the demographic collapse in Cambodia during the implementation of what some have called a “murderous utopia.”  The dismissal of exchange can only lead to the disappearance of all systems for satisfying needs; therefore an empire of death, collective suicide.  Of course, in this system characterised by the dismissal of production for trade, access to goods and services has always been conditioned by a hierarchical order of socialist societies, the needs of leaders, including their ostentatious needs, were covered by society.

Boris Yeltsin, who was the first president of Russia after the fall of communism in the 1990’s, declared in October 1987, in a speech to the Central Committee of the Communist Party of the Soviet Union: “Yes comrades, it is not easy to explain to a factory worker why in the seventieth year of political power, he is forced to queue to buy sausages in which there is more starch than meat whilst on our tables there is sturgeon and caviar and all sorts of fine meats obtained without any problems from a place which he is not even allowed near.  In these special shops reserved for the nomenklatura (the ruling bureaucratic elite of the former Soviet Union), “the prices of goods were inversely proportional to the position the “customer” had in the nomenklatura.  The higher your position in the hierarchy, the lower the price was.”.  More precisely, this means that for members of the nomenklatura money was certified, that is to say that the higher up a person was in the nomenklatura the higher the value of their money.
EXTRACT FROM THE BOOK by Norman Palma and Edouard Husson –  Capitalism is sick of its currency

According to this book – It has often been said that it was not possible to predict the economic and financial crisis that is currently sweeping across the world.  Nothing could be further from the truth.  At the root of the crisis is an International Monetary System that has been seriously affected by the dollar standard system.  For several decades, informed minds had warned of the possible devastating effects on the world economy as a result of the American Federal Reserve’s issuing policy.  As Maurice Allais, the French Nobel Prize Winner for Economics, emphatically said with general indifference “what will happen will happen” What has happened today always happens with paper money systems: after the euphoria of increasing credit without any restrictions the crash arrives.  This is why the dollar is heading towards total depreciation.”

Although every effort is being made to postpone it, we cannot avoid the collapse of the dollar and currencies which unwisely held it up.  To limit the effects of this unavoidable catastrophe, if it is at all possible, we must urgently create an International Account Unit which is a basket of major paper currencies to which we must add gold in order to restore vital credibility to paper money.  Then, we should not be content with returning to a gold reference system, which will in any case impose itself on the market, no matter what top political and economic leaders think.  Due to limits on the quantity of gold, it will be necessary to return to its vital circulating complement: silver, which ruled alongside gold, during the historical rise of the wealth of nations.  With this diagnostic put forward, and with the only possible remedy analysed, all that remains is for an immense reform to be implemented by a politician largely responsible for the situation, who has nothing planned and whose actions will in all respects be judged by this present tragedy.

Money, when considered as the fruit of many years’ industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency. Thomas Paine (1737 – 1809)

Currency is still a medium of exchange but is not a store of value as it only derives its value by government degree or “fiat”. It’s value is based on the issuing the authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies.

A days wages in Germany 1923

The problem is that fiat currency runs the risk of central bankers printing too much and causing large inflation or worse. The more that is printed the more the currency is debased just as the Fed is doing now with the dollar. This has been going on for decades with central banks indiscriminately creating money to cover expenditure and ever increasing debt.  There are examples throughout history and in the 20^th Century most of us are aware that in Germany in 1923 it would take a barrow load of Deutschmarks to buy a loaf of bread but an ounce of gold could buy a reasonable house and one dollar was worth 4 trillion marks

This irresponsible printing of money has eaten away at the value of the world’s reserve currency the USD dollar and dollar based assets, to such an extent that they have lost 82% of value since 1971, the year the US cut links with the gold standard. The GBP has fared even worse that the USD losing around 85% of value since 1971.   There are many illustrations of then and now and how owning gold with intrinsic value would have more purchasing pro rata than currency. E.g the latest model Cadillac Eldorado would have taken 180 ounces of gold at $42.02 to pay the showroom price of $7,546. This same 180 ounces is now worth over $200k and would buy two Cadillac convertibles with enough left over to fuel to first service. In the UK an average family car cost £1000 around 60 oz of gold and now the same would cost £17000 around 23 oz of gold. The 60 ounces would have bought the same family car for you a sports car for your wife and a hatchback for your son or daughter. Gold retains its purchasing power year after year.

Not long ago the gold standard imposed monetary discipline on countries as they had to hold enough gold to cover the money in circulation but this all changed with the Jamaica agreement in 1971 when the decision was taken by President Nixon on the 15th August 1971 to suspend the direct convertibility of dollars into gold, the keystone of the financial system created in July 1944 (the Bretton Woods Agreement).  On the 1st October 1971 the general assembly of the IMF asked the board of trustees to study and propose a comprehensive reform.  This would be adopted by member States during a meeting held in Kingston (Jamaica) on the 7th and 8th January 1976, and included a set of provisions which put an end to the reign of gold.  The US money supply in 1971 was $776 billion and quickly became an upward curve which rose dramatically over the last decade where the US money supply doubled from below $7 trillion to $14.3 trillion indicating that spending is out of control.

What is the effect as the US and other governments including the UK go on this spending spree. It means that the risk of sovereign debt default becomes very high indeed. We have already seen Iceland’s debt rise to 7 times GDP and then go into financial melt down and economic depression. This is a warning and recently Greece has been the sick man of the Euro world  with its debt forecast to reach 130% of GDP, its credit rating cut, the country in turmoil and it has placed pressure on the Euro itself.  The UK has not reached that level yet, but we are heading that way with debt estimated to be 65% of GDP this year and a forecast for 78% by 2015.  Japan the world’s second largest economy has debt of twice its GDP but continues to spend. In the Euro zone Spain, Italy, Portugal former Eastern European countries all face serious financial issues.

Most worrying is that the US, whose dollar is still the world’s reserve currency, has debts of 100% of GDP and budget deficits over the next few years will send that figure soaring. Their solution instead of cutting expenditures is create more fiat currency which will inevitably lead to devaluation of the dollar.  There are already moves afoot to seek alternatives lead by Russia and China and gold has featured in their strategies. China’s long term goal is to dominate financially and replace the US and they are currently playing a political game as they have up to 2 trillion in dollar assets that they do not want to destroy but off load at the best value.

It comes as no surprise that both China and Russia are increasing their gold reserves along with India who recently bough 200 tonnes from the IMF to back its financial commitments. China is now the worlds largest producer of gold and has recently surpassed India as the worlds greatest consumer and actively encourage their citizens to put part of their savings into gold.  China has a predicament in that it wants its central bank to diversify into gold without increasing the gold price and to shed dollar assets without devaluing the dollar so they are building reserves from internal sources and buying small quantities during price dips.  The UK made a very bad move when Gordon Brown sold off 395 tonnes of gold a decade ago when gold was at less than 25% of todays value. In light of the of the world economic situation this was doubly bad as gold reserves are more important than ever.

In summary:

• Currency is not money and its value can be changed by monetary policy makers
• Currency can be created and printed at will with no substance to support it
• Currency depreciation in value is accelerating with subsequent loss of purchasing power
• National debt is increasing to disastrous levels with threat of sovereign debt default
• Confidence in the  USD is waning and its use as a reserve currency is under threat
• Countries and investors are shedding their dollar assets
• Central Banks are diversifying into gold and out of dollar assets
• Smart investors are diversifying their portfolios with a proportion of gold
• The value of gold has been consistent in retaining its purchasing power
• Gold is insurance for your wealth
• Gold is the only real money

The price of gold rose to its all time high in December 2009 to $1212 an ounce and since then it dropped to a low of $1048 but now is in a period of consolidation of just above $1100 which follows a pattern that has been consistent over the last decade. It is likely that we will face another financial crisis due  irresponsible printing of currency, the risk of sovereign debt and political pressure. Of the millions of investors throughout the world only a tiny proportion see gold other than as a commodity. Central banks have seen the need to diversify into gold. The discerning investor understands that apart from ROI gold is a protection for wealth and the person who holds gold will see out a crisis and that has been proved time and again throughout history.  Once a greater proportion of investors become educated in the need to diversify, as they inevitably will, the price of gold will rocket.  Now is the time to protect your wealth in the safest investment – GOLD and I would recommend that you invest in the form of gold coins and in the UK gold sovereigns.

For details of the worlds most popular investment coins http://goldcoin.org/investment-coins/

Maurice Hall

Kupol Russian Arctic Mine

There is no other way for heavy machinery to reach Kupol, the $700 million Arctic mine behind a resurgence in Russian gold production after five straight years of decline.”It’s one of the harshest climates I’ve worked in, and I’ve worked in the Atacama desert in Chile and at 15,000 feet in Indonesia,” said Patrick Dougherty, general manager at Kupol. “But I don’t get to pick where the gold is.”

Only South Africa holds more gold than Russia, but Moscow’s fragmented industry has struggled to access vast reserves in its inhospitable Far East. The region was first mined in the 1930s by prisoners of the Gulags set up by Soviet leader Josef Stalin.Russia is the world’s biggest energy supplier, but falling prices and reduced demand have cut income from natural resources to about 8 percent of its gross domestic product in the first quarter of 2009, from nearly 11 percent a year ago.

Gold, on the other hand, has been helped by recession. Its safe-haven appeal has shielded it from a demand slump that shredded other commodity prices, lifting it to over $1200 an ounce in December 2009

Chukotka, a region revived in the last eight years by the $2.5 billion investment of Chelsea soccer club owner Roman Abramovich, produced a fifth of Russia’s gold in the first half of this year. Gold is the region’s passport to growth after Abramovich quit as governor last July.Russia ranked fifth among the world’s gold miners last year, between Australia and Peru, with an 8 percent share of output. Production rose 13 percent in 2008, the first increase in six years, and jumped another 25 percent in the first half of 2009. “This was solely due to the commissioning of Kupol,” said Olga Okuneva, mining analyst at Deutsche Bank in Moscow. “If other large projects in the Far East start producing gold, this will be a major growth driver for the Russian gold industry.”

Kupol — meaning dome in Russian — is named after a rounded outcrop of rock that juts skyward from the tundra in central Chukotka, over 200 km (125 miles) from the nearest settlement. The mine took five years to build. It is the largest tax payer in Chukotka, a land twice the size of Germany where reindeer outnumber people four to one. “With a deposit as large as Kupol, mining’s contribution to the regional economy is expected almost to double to 37 percent this year,” said Roman Kopin, the 35-year-old who took over as governor when Abramovich resigned.

Kinross Gold Corp, the Canadian miner which owns 75 percent of Kupol, is unusual among foreign investors for holding a majority share in a major Russian mineral deposit. The government of Chukotka owns the other 25 percent. Untangling the red tape that stifles some foreign investors in other parts of Russia was one of the main achievements of Abramovich’s more than seven years as governor, Kopin said. “The investment climate here, perhaps, is a little bit different, because we understand that it’s very difficult to work in Chukotka,” he added.Kinross has been the top performing gold stock on the New York Stock Exchange for the last three years, when the company’s value rose more than 160 percent. Kupol will supply about a third of its total output this year and 15 of 24 equity analysts polled by Reuters retain a bullish rating on the stock

ARCTIC CORRIDOR

About 1,400 jobs are related directly to Kupol, and Chukotka’s population totals around 50,000. Miners and catering staff spend four weeks on site and four weeks off, earning an average monthly wage of 50,000 roubles, 25 percent above the regional average. “We have equipment that works here,” said Alexander Puzovets, 48, a drill rig operator who works 10-hour shifts at the pit face. “I’ve been in mines where we’ve used hammers.”The mine’s in-house electricity plant could generate enough to power the regional capital, Anadyr.In winter, miners walk the purpose-built Arctic Corridor — an enclosed, 900-meter tunnel from camp to mine — to avoid temperatures that drop more than 50 degrees Celsius below zero (minus 58 degrees Fahrenheit).

About 60 percent of Kupol’s gold is mined underground. Zurab Samteladze, a 55-year-old Georgian more than 7,000 km from home, hauls 45-tonne rock loads to the surface in a Caterpillar truck.In deeper parts of the mine, skilled operators maneuver drill rigs by remote control. This avoids the need for miners to work long hours beneath areas vulnerable to rock falls.

“With all the video games they play, the younger generation has a better chance of operating these units,” said Dougherty, a native of Arizona. Alcohol is banned. Miners pass their time playing pool, in the gym or watching television. Popcorn is a popular snack, while eight tons of reindeer meat was served up last year. “I play guitar — they have a music room. I like basketball — they have a sports hall,” said Andrei Aksanov, 34, a mechanic in the truck shop.Like 80 percent of the miners at Kupol, Aksanov comes from Magadan, the port city 1,500 km (940 miles) to the southwest.

A worker cast an ingot at the Koylma refinery Magada

This is where mining began in Russia’s Far East. Stalin, needing bodies to unearth new-found gold reserves, sent hundreds of thousands of prisoners to slave in the region’s labor camps over two decades from the early 1930s.From such grisly beginnings, Magadan has developed into the hub of gold processing in the Russian Far East. Kupol flies its dore  (bullion bars)  to be processed into almost pure metal to be refined at the Kolyma Refinery to the north of the city. Vladislav Feoktistov, the refinery’s 71-year-old director, raised a glass of vodka to visiting officials from Kinross Gold. Supplies from Kupol will guarantee the plant’s biggest turnover in its 11-year history, he said.”This a business that’s only as good as its suppliers,” he said. From here, 15 kg (33 pound) gold bars worth more than $450,000 each at current prices are delivered to Russian banks.

Kinross report – The production at Kupol mine was started during the second half of 2008. During the second half of 2009, Kupol mine reported production of 234,265 gold equivalent ounces. Out of this, Kinross has produced 75% or 175,699 gold equivalent ounces. The production includes 151,327 ounces of gold and 1,633,673 ounces of silver. Kinross says that, with a cost of sales of about $205 per ounce on a co-product basis using a gold price of $400/oz and a silver price of $6/oz, Kupol will become one of the lowest-cost gold and silver mines in the world.

Processing – The Kupol mill is a conventional gold/silver cyanidation plant that incorporates a CCD thickener washing circuit and Merrill-Crowe zinc precipitation because of the high silver ore grade. Cyanide destruction is accomplished with calcium hypochlorite. The Kupol mill is designed to process about 3,000t of ore per day (1,100,000t per year). Run-of-mine ore is crushed in a jaw crusher and conveyed to a crushed ore storage bin. The crushed ore is ground in a SAG grinding mill followed by a ball mill. Gravity separation of free gold and silver will be carried out with a Knelson concentrator in the grinding circuit.

MORE GOLD TO MINE

There should be more to come. Polyus Gold, owned by billionaires Mikhail Prokhorov and Suleiman Kerimov, plans to launch Natalka, the world’s third-largest gold deposit, in 2013. Annual production of between 25 and 30 tonnes will put Natalka on the same scale as Kupol. Beyond 2017, Polyus plans to raise output to more than 40 tonnes a year. “It’s a deposit with reserves of more than 1,000 tonnes that will create jobs, infrastructure and become a major center for Magadan region,” said German Pikhoya, Polyus Gold’s deputy chief executive for strategy and corporate development. If Chukotka is to retain its leading position, it must do more. Current reserves at Kupol will last only until 2016. To extend the mine’s life beyond this date, more reserves must be found, mapped and registered with Russian authorities. Kinross and others are already exploring. “Chukotka is definitely a key gold-producing region, particularly in the long term,” said Vitaly Nesis, chief executive of St Petersburg-based miner Polymetal. His company plans to launch the Mayskoye gold deposit in Chukotka by 2011.

Maurice Hall from Sources Reuters, Kinross and mining-technology.com

Tsar Nicholas II

A Gold Rush is set to hit Russia after claims that a huge treasure trove dating form the time of the last Tsar Nicholas II, with possible British claimants, remains buried in remote woodland near the City of KAZAN. Historian Valery Kurnosov says evidence of the hoard, estimated to be worth about half a billion pounds at today’s prices, lies in the files of both the KGB and MI6.

He has also unearthed documents showing that Stalin and Khrushchev both sought to get their hands on the loot but failed.

By rights, the haul, estimated to weigh 17 tons or more, belongs to descendants of its owners, nominally a tsarist financial institution with emigré and British investors. Many may have no inkling they could claim.

Mr Kurnosov has urged the Russian government to organise a search, putting his faith in old maps and modern technology.

The story of the Kazan gold has long intrigued the intelligence services of Russia and the West, despite claims that it was long ago raided.

“I am convinced the gold is still buried in its original location and can be extracted,” said researcher Ravil Ibragimov, 55, who heard stories as a Soviet child of its burial near his village of Astrakhanka. ”

“There is not a scrap of evidence that it was taken out of the ground by the Bolsheviks or anyone else.”

“There is always interest in shipwrecks but this is bigger than anything at the bottom of the ocean.” Gold was secreted in Kazan as Russia descended into revolution during the First World War. British agents were involved in the removal of tsarist treasures from the then capital Petrograd (now St Petersburg) to Kazan, east of Moscow for safe-keeping from Bolshevik forces.

In the months before July 1918, when abdicated autocrat Nicholas II and his family were shot on Lenin’s orders, it is estimated that 73 per cent of the world’s largest gold reserves were held in this Tatar city.

Extract from an article in the Sunday Express