Sunday, May 17, 2020

The Best Book on Gold

Following up on yesterday's ""A settler forgot where he buried $100,000 in gold around the Bay Area. It might still be out there" (plus: gold performance under deflation)

This is a repost from 2013, still true, probably evergreen.

Original post:
The most important thing to know about commodities is: They are mean-reverting sumbitches.
Except for guano. As far as I know guano is the only resource that people have actually used up.

All the rest mean-revert, often in nominal terms, always on a real, price basis.
They can mean-revert from a high price either by falling in nominal terms or trading sideways until inflation catches up to the speculative high price.
That's it. It will continue until it stops, until the next guano.

Although this corner of the internets is not a goldbug hangout I do know at least one thing:
...I've come to believe, is yes gold does store value.
It does not, however, produce wealth. The first point is well made in The Golden Constant: The English and American Experience, 1560-1976*, by Roy W. Jastram, late professor of business at the University of California, Berkeley:
"Gold maintains its purchasing power over long periods of time, for example, half-century intervals." 
The second point is as well made by Econompic as anybody, plus it's in color.
*The book has been out-of-print and commanding $4-500 second-hand. In April it will be re-printed by Edward Elgar Publishing, with new material and updated to 2007. It's priced at £71.96.  —from our 2009 post "Hey Gang, Is That a Double Top in Gold?"
Four years later the re-print is quoted on Amazon at $131.88 while Edward Elgar Publishing is asking £80.10.
There would be an arbitrage assuming shipping was free.
There are no readily available copies of the out-of-print edition.
The store of value proposition seems to works at a 50 to 100 year timeframe, nothing shorter.
Jill Leyland did the update on the reprint. From the World Gold Council:
...She is former Economic Adviser to World Gold Council with whom she has been associated since 1997. In addition she has worked, as an adviser or staff member, for the Organisation for Economic Cooperation and Development (OECD), the UK Office of National Statistics, the Economist Intelligence Unit (EIU), the UK Department of Trade and Industry, the Financial Times and the Commodity Research Unit (CRU)...
...Jill is currently a Vice President of the Royal Statistical Society and chairs its National Statistics Working Party. 
—from the WGC's 4 page PDF "The Golden Constant".
And here's her two page write up for the London Bullion Marketers Association:
Jastram’s Golden Constant
How is it relevant today?

If interested see also the similarly named and somewhat related paper at the Social Science Research Network by Erb and Harvey, 2016:
The Golden Constant