GOLD CRASHES: GOOD FOR TIBET?

“While greed and fear, trust and mistrust have an influence over the price of many assets, like houses and stocks, those ultimately produce some income, which provides a fundamental base from which markets can infer prices. Gold, on the other hand, neither toils nor spins, but just sits there looking pretty. That means gold is far more volatile, with emotion and short-term supply and demand driving sharp swings in prices. Like someone who spends too much time in bars late at night, gold has the unlikeliest things happening to it over and over again.”

So says Reuters columnist James Saft, trying to explain the latest wild gyrations in the price of gold. The Asian Argument at the core of Spoiling Tibet, due out in September, is that China’s lust for gold is so great, this is the driver of spoiling Tibet. Surface gold, easy for the poor and desperate to collect, and new finds in Tibet of subterranean gold so fine it is invisible to the naked eye, drive a gold rush that is transforming Tibet into a despoiled land.

Does the sharp fall in the price of gold mean any pause in China’s gold rush to Tibet? Unlikely. China is the world’s factory, and gold has many industrial uses. But, as Spoiling Tibet argues, industrially necessary uses of gold no longer drive China’s demand. China has, extraordinarily, overtaken India in the demand for gold as jewellery, and as a store of wealth safe from the state’s prying eyes. Gold is readily transportable, the classic way to get wealth out of one country and into a tax haven wrapped in secrecy. This is what drives the insatiable demand in China for gold, from any source, as long as the selling price is profitably higher than the cost of production.

In Tibet, the costs of production are low. The poorest of artisanal miners need only a flask of mercury and cyanide to extract gold from streambeds, a practice supposedly stopped years ago, which still persists. The biggest of China’s state-owned miners need far more capital and technology, but are profitable, especially in Tibet where gold occurs together with silver, copper, molybdenum, lead and zinc, all recoverable and profitable, even if prices have slipped recently.

While hedge funds may be piling out of gold, the long term attractions remain. Now that China is the biggest gold consumer in the world, the price boom in all minerals that China triggered in 2003, remains in place. The headlines say gold has dropped especially sharply, but that is from an amazing $1900 an ounce quite recently.

China does buy gold mines around the world, but Tibetan gold is in the backyard, attracting almost no attention or global scrutiny. Maybe Spoiling Tibet will change that.

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