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Literary Forensics Of Two Anti-gold Articles

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Here's two pieces, one from top-ranking - influential even - UK

financial publication, The Economist, and another from top-ranking -

influential even - UK financial publication, the Financial Times.

They were published approx 18 months apart.

Compare and contrast the two pieces. Then, considering the topics, the

syntax, sentence structure, word use, logical arguments, emotional

arguments, tone, and likely goal of the author(s), decide whether they

were both written by the same hand!

:-) :-) :-) :-) :-) :-)

Copied for fair use reasons, each source fully attributed.

The Economist - Dec 1st 2005

Even at $500, it's still a barbarous relic

NOTHING swells the breast so much as the thought that you have been

proved right at last. After riding high at the start of the 1980s, gold

bugs had a miserable couple of decades. The price declined

relentlessly, mocking their credo that the security of the financial

system ultimately depends upon the yellow metal. Lately, though, the

faithful have enjoyed their reward. In the past five years the price of

gold has doubled. This week in Asian trading it briefly surpassed $500

a troy ounce--a level last breached in 1987. You can almost feel the

bugs' excitement as the message sinks in: gold is back.

This being gold, the resurgence has brought forth all manner of

alarming prophecies. The price is an omen of rampant inflation; bonds

are doomed; the dollar is about to fall prey to the United States'

reckless deficits; the euro will shortly be revealed as a worthless

creation of bureaucrats.

The world is an unpredictable place. But, with the possible exception

of a fall in the dollar, not much of the above catalogue of doom looks

likely; and none of it has much to do with gold's good run. The dull

truth is much less bullish for gold. Investors have put money into a

wide range of metals, and precious metals' prices, including gold's,

have risen with the base. Meanwhile, gold remains fundamentally

unattractive. It yields nothing and central banks are sitting on

vaultfuls of the stuff that they want eventually to sell. Gold bugs

hope that $500 is the threshold at which mainstream investors will

start once again to take an interest in the metal. CAVEAT EMPTOR.

The fascination of gold lies in its being not only a commodity but also

a store of value and means of exchange. The glamour and the mystique

lie in the latter, monetary part. This is what draws gold bugs, but

their story doesn't quite add up. The unbalanced world economy still

faces risks. But the most recent rises in the gold price have come

against a strong dollar, which is normally a sign of weaker gold and

continues to confound warnings of a collapse in the greenback. Oil

prices are plainly far higher than they were, but they have come off

their peaks. Moreover, there have been few signs so far that oil prices

are feeding through to a 1970s-style stagflation. Nothing in either

bond or stockmarkets suggests that investors see much danger of such a

thing happening.


Gold's renewed shine is best explained by thinking of the metal not as

money but as a commodity dug out of the ground. In the past few years

the price has climbed because mining companies stopped locking in

prices by selling gold in advance--in effect, withdrawing a huge source

of supply. Even then, gold has captured only 40% of the gains of other

metals in THE ECONOMIST's metals index, which has almost doubled since

the start of 2003 thanks partly to fundamental demand from emerging

markets and partly to investors in search of better returns than those

from other assets. Gold would have done better had Chinese demand risen

as fast as some expected; in fact, figures from GFMS, a consultancy,

suggest it has been flat, even falling, over the past 20 years. Chinese

investors now have other places to put their money.

Gold is still cheap compared with its peak of $850 in 1980. Today,

adjusting for changes in American consumer prices, it is worth only a

quarter as much. Gold bugs might see that as a chance to buy; others as

a reminder of gold's enduring capacity to disappoint.

The Financial Times - April 16 2004

The barbarous relic, as Keynes called it, is crumbling to dust. When

even the venerable NM Rothschild has quit the gold market and the Bank

of France, among the most stubborn of the official goldbugs, is thinking

again about its bullion holdings, the end of gold as an investment has

come a little closer.

It will not be before time. The fetishisation of shiny yellow metal,

decades after it ceased to be used as the anchor of the international

monetary system, is a lingering anomaly in modern financial markets.

Perhaps Rothschild's last service to the bullion market could be to keep

a live gold trader on display behind glass as a reminder of a bygone

age, like the former coal miners who now make a living giving tours of

defunct pits.

The one advantage of gold as a reserve asset is that, unlike assets

based on fiat money, governments cannot make it worthless by inflating

it away. But in an era of low inflation, and given that independent

inflation-targeting central banks are the norm across the industrialised

world, that risk has very sharply diminished.

Indeed, for both private and official investors, gold is now a rather

risky asset with a nil or low return. The intrinsic value of gold,

determined by its use in various industrial processes, is well below its

market price. Gold does not grow. So its value to any one investor as an

asset is dependent on other investors also holding it as an investment

asset. The gold price hangs precariously by its own bootstraps.

For private investors to hold gold on this basis is their own foolish

affair. For central banks and governments to hold it as a reserve asset

is a betrayal of the public on whose behalf they are acting. Despite

recent sell-offs, governments and central banks still hold about a fifth

of the world's bullion. Their large holdings relative to the size of the

market by themselves make gold particularly ineffective as a reserve

asset: the very act of official selling of bullion on any large scale to

raise cash will itself drive down the price.

This danger was amply demonstrated by the UK's unhappy experience of

trying to sell some of its gold holdings. Announced in 1999 in a

sensibly open and transparent fashion, the sales sparked such a fall in

the global bullion price that a group of central banks signed a concord

limiting such sales. That has recently been superseded by a new

agreement providing for limited official sales.

Given the pointlessness of holding gold, the speed of its official

sell-off scarcely matters, unless leaching the gold into the market bit

by bit somehow maximises the return to the public purse by limiting the

impact on the price. That would imply some irrationality on the part of

the market. But then holding gold is irrational in the first place.

Perhaps the central banks are right to go slowly.

Whatever the speed, the direction is clear. Gold is on its way out as an

investment and a reserve asset. Three cheers for that.

Edited by longjohn

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The fact your surprised that somebody who's a gold bear would write more than one article is surprising in it self. It's no conspiracy theory it's just someone who doesn't like gold.

I would agree the same person probably wrote both piece but maybe the person writing the second piece just looked around for inspiration and found an old article.

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The fact your surprised that somebody who's a gold bear would write more than one article is surprising in it self. It's no conspiracy theory it's just someone who doesn't like gold.

I would agree the same person probably wrote both piece but maybe the person writing the second piece just looked around for inspiration and found an old article.

:D Try to get into the spirit of the thing andrew!

Edited by longjohn

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