The real price of the gold boom
Its value goes up and up, producers are scrambling to cash in, and people are being hurt in the rush
Saturday 20 August 2011
The headlong rush for gold bullion amid the ongoing global market turmoil carries a social and environmental cost in every corner of the world and seems to be of little immediate economic benefit to the countries producing the precious metal, according to experts.
Gold reached an all-time high of $1,878 an ounce yesterday, the latest rise in a trend that has seen the metal increase in value by 70 per cent since the beginning of last year. Demand is driven by the impact of the euro crisis, the downgrading of US debt, inflationary pressures and the fragile outlook for Western economies.
"Theoretically the gold price is fantastic for an economy like South Africa's," said Peter Major, a mining analyst with financial services group Cadiz. But he said Africa's leading gold-producing country – currently struggling with an unemployment rate estimated at up to 36 per cent - is not reaping the benefits of the boom. "There are about 6,000 abandoned gold mines here. We should be seeing them reopening but it is just not happening," he said.
Economists say a high gold price strengthens the currencies of producer-countries, increases the inflow of dollars and protects indebted consumers by keeping down inflation. But the impact on emerging economies of a boom sparked by circumstances elsewhere has to be carefully managed.
In January, an economic outlook report by Renaissance Capital warned that gold producer Ghana faced the danger of "Dutch disease" – the process whereby a country's revenues from its natural resources kills its own farming and manufacturing industry. Crucially, developing economies feature a lack of democracy and gaping wealth gaps. These have yet to be levelled by taxation, domestic poverty-reduction measures or regulatory environments that produce a trickle-down effect and protect farmers from destitution. The mining industry argues that the sector delivers results over long periods and that it invested heavily in equipment at a time when the gold price was much lower than it is now.
The industry is itself worried about current imbalances and the fertile ground they provide for popular discontent in the hands of populist politicians. An Ernst & Young survey published earlier this month listed "resource nationalism" as the leading risk for the industry.
- 1 Woman 'suffocates newborn baby in plastic bag and puts it in her desk minutes after giving birth'
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 Chinese student carries disabled friend to school every day for three years
Nepal earthquake in pictures: Photos show devastation caused by 7.8 magnitude earthquake
Royal baby: Live updates as superbug closes ward at St Mary's Hospital in London where Duchess of Cambridge is due to give birth
Nepal earthquake: Rescuers forced to dig with their bare hands in search for survivors as images show damage to historic buildings
Ed Miliband and Boris Johnson in angry clash live on BBC's Andrew Marr Show
Bali Nine executions: British grandmother on death row in Indonesia Lindsay Sandiford says she 'just wants to get it over with'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...