The Price of Gold

The price of gold was once $35/oz.  Last time I looked it was looking like it would exceed $1900/oz.  And now it is falling past $1,500/oz.

The taxing of bank accounts by Cyprus has sent a shudder down the spine of the very wealthy who believe tax shelters provide a safe haven.  However, without Government backing, their accounts are vulnerable to runs on the bank.  It was only EU intervention that saved them from a disorderly default by Cyprus.  Maybe that would have been better for the rest of the EU.

And now we see that the price of Gold is also vulnerable.  Indebted countries may have to see off their gold reserves to cover their debt and this sudden increase in supply depresses prices.  Also affects the very wealthy as only they could afford to invest in gold as a “safe” place for their liquid assets only to find that their own actions to avoid taxation now produce instability in every capital market.

Horror of horrors.  Wealth may have to be invested in business.  Building wealth for others and a fair level of taxation provide the stability that wealth needs.  Continued investment in tax shelters and avoiding mutual responsibility by favouring speculative investment over long term business building threatens wealth as well as welfare.


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