After the Bell: Why does gold still glister so much?

Daily Maverick

10 hours ago

Obviously, gold as a safe haven means that more and more people have been buying gold over the past couple of years. But underneath that is what central banks are doing.
I know that some people find gold fascinating, but I've never really been one of them. I mean, I get that it's shiny and bright and rare, but the actual stuff has never done anything for me.
While I was growing up, I only had two physical interactions with it. The first was fairly regular. I had a succession of sets of earphones that would proudly advertise that the small 3.5mm plug was 'gold-plated'.
To this day, I have no idea why that was so important.
My other memory goes back to 1986. It was supposed to be a year of celebration. Johannesburg was now 100 years old (according to legend, it was named after a pair of men both called 'Johannes'… one of them had the surname 'Rissik', which lives on as a major street in the CBD).
I was lucky enough to be taken on a school trip to the then brand-new Gold Reef City. And we were taken underground as a group of primary school kids to 'experience life as a miner'.
Impossibly heavy
Then we watched gold being poured, and finally were invited to try to pick up a gold bar. It felt impossibly heavy at the time. Something so many heist movies get completely wrong.
Gold has had a much bigger impact on the lives of millions of people. Without gold being found in such quantities underneath Joburg, there might have been no migrant labour system, which still has such important consequences for people today.
But I've been fascinated lately by how important the gold price still is to South Africa.
Because gold prices have been so high for the past couple of years (and they continue to grow), the value of shares of gold mining companies on the JSE has risen dramatically. And that means that as gold prices shoot up and drop down, these shares have a bigger influence on the main JSE index.
Obviously, gold as a safe haven means that more and more people have been buying gold over the past couple of years. US President Donald Trump has helped us with this; the fact that so much is so unpredictable at the moment is largely because of him.
Central banks
But underneath that is what central banks are doing.
The World Gold Council has said consistently that central banks have been holding more and more gold. This is because of how the world has changed.
When there are so many factors that could unsettle markets, from Gaza to Iran to Ukraine to Trump, it makes sense for these banks to hold more gold. They want to use it to protect the value of their currencies.
More than anything else, this has probably been the biggest factor behind higher gold prices over the past few years.
It would seem that this is going to continue. I mean seriously, do you expect the world to get calmer in the next few months?
This is good for us; it brings more money into our economy.
But there are negative consequences, too.
It's obvious that one of the reasons there has been such an explosion in illegal mining in some areas is because there is now so much more money to be made. If you live in Lesotho and your choice is between herding cattle (if you're lucky) and crossing the border to go underground and mine gold, the price of that gold must matter.
And I think the high price of gold is also having a big impact on our neighbour to the north across the grey, green, greasy Limpopo River.
Utterly corrupt
Al Jazeera has done an important work of journalism in showing how gold is being smuggled out of Zimbabwe. I'm sure this can only happen because the people who run Zimbabwe are themselves so utterly corrupt.
But what this does is keep them in power, simply because they can keep making so much money.
There are some people who now claim that gold's reign as a safe haven is over. They say that bitcoin and perhaps other cryptocurrencies will take over, and they'll be the ultimate safe haven.
I'm not entirely convinced. At least not yet. I mean while I get that Bitcoin might be a story of value, it still requires some infrastructure.
Gold is tangible, and somehow, in this virtual world that still seems to matter.
That said, I'm not sure I'll ever touch it again. You can still watch it being poured at Gold Reef City. But I doubt they'll let me touch a gold bar.