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Unformatted text preview: 66 MANAGEMENT ECONOMY I M A G E S O U R C E , C O R B I S Engineering & Technology 9 October - 22 October 2010 www.theiet.org/magazine raising the gold standard One of the sure signs of our economic recession is a market awash with investors pumping their money into things rather than concepts. Precious metals have never been a safer bet. Guy Clapperton reports. WHEN THIS article was commissioned, one of the first things the editor said was to consider the precious metals by all means, but above all to consider why some are worth more than others. “Think about something like gold,” he said, “whose value is intrinsic, as opposed to steel, whose value is in the application.” It’s not fair to pick on a casually tossed word when someone’s actually taking the time to throw paid work at you. But the really interesting thing about gold is that it has no intrinsic value at all – its value is the exact opposite of intrinsic. Yes, of course it’s rare and we all know that (that’s “rare” as in “the High Street is full of jewel- lers selling it”) but its density militates against using it in tools or any other industrial application. You could argue, pretty successfully, that gold investments represent the perfect market; if people went off it, or it fell from fashion, the market would simply fall apart. And yet it’s one of the better investments to be in when the economy is troubled, explains Martin Arnold, senior researcher at ETF Securities. Put simply, when times are tough people would prefer to invest in things rather than in concepts. Gold is a special case as a precious metal because of its background, explains Arnold. “The reasons for its value are 67 www.theiet.org/magazine 9 October - 22 October 2010 Engineering & Technology twofold,” he says. “First, it’s been used as a pseudo-currency for several hundred years. Second, there is the lack of abundance.” The historical point is impor- tant, and it goes beyond the currency idea. Planet Earth plc has a long standing historical love affair with gold, in spite of platinum being rarer and also harder to extract – former analyst Nick Bias explains that, as a polymetal, platinum in the raw is often bonded with as many as 15 other metals, and any mining company needs to factor in the cost of extracting it from the rest before settling on a price – we do like our gold. Ancient civilisations imagined it trapped the sun in some way and concluded that it had healing properties. It has more than a whiff of prestige and power – you never hear of people having platinum-topped teeth, for example, or a pot of bronze at the end of a slightly rubbish rainbow. This shouldn’t affect objective, business-run markets but we all know it does....
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