The current drop in the price of gold is nothing new in the natural course of investment. The daily buyers and sellers of gold make or break on a regular basis, nothing can be relied on, there is a risk factor involved with dealing in gold.
Australian gold producers rely on the price of gold to hold things together; during the course of a gold mines life it will encounter several global financial crises and gold price fluctuations. Rising production costs also hamper existence but the major crises point is always the price of the product. They have no safety net as per the car industry, you make money or you close up.
Australia was built on the back of gold mining, along side agriculture. The Eureka flag was stitched together by the hands of gold miners in Ballarat standing up for a fair go, and democracy was established as the ensuing outcry throughout the land brought forth change. If ever there was an Australian public sacrifice on Australian soil creating power for the people it was the events of 3rd of December 1854 in Ballarat. It left the Eureka flag stained with the blood of gold miners to whom we owe much.
Therefore gold mining has always been considered a noble business, during financial crisis fluctuating money markets devastate the so called trickle down among families and business but mining towns generally held together. Mining towns have been eradicated to fly in fly out, the persons dwelling in mining towns had a vested interest in social, economical and ecological matters, and this was an expense.
Along side the fight by wharfie’s after the terrible years of the great depression gold mining and the mining of alternate commodities such as coal sometimes referred to as black gold spurned the rise of the union movement. These organisations take care of the welfare of their members; they are at times as even quoted by an American President, the keepers of sanity, albeit sometimes stained by corruption as are governments such as recent goings on in the Bylong Valley in NSW.
When the gold price drops the first people summoned to contribute are the workers, throw a few more sticks on the donkey, the gold price has dropped, whomever works in the industry must have been their fault, they are paid to much, they are lazy. Never anything to do with the International Monetary Fund or banks or governments, the voters are to blame. Run a multi million dollar media campaign to force politics to drop taxes, anything but sacrifice profit for core values and principals, the things that hold societies together.
A sustained drop in the gold price will severely damage the gold mining industry across the world, not only Australia. I recently had a representative of a major gold mining company suggest the Australian dollar should be devalued to around 60 cents just so they could recover. With the gold price dropping and the dollar sitting at around a dollar and five cents sounds serious.
The government have no intention of easing monetary policy, the IMF have to much of a hold on them, they like the money the high Australian dollar is generating for them and if the dollar eased and domestic development and productivity got out of hand inflation would make them look bad and we cant have that, politicians looking bad we could never hear of it.
The gold price is important to Australia for if it fails and gold mining closes down apart from iron ore and coal exactly what will generate GDP. When China’s growth levels and iron and coal fall away what then.
The efforts of government to promote free trade will result in no work in Australia, free trade for whom we should ask. With no vision of a sovereign bank, tariffs and import duties Australia will be drained dry by overseas interests. We hear government representatives assure us that overseas interests must be maintained and escalated to keep the overseas investors interested.
What lack of vision, what weak kneed and self protecting plans to keep themselves in power and on borrowed money from overseas. The South Australian government sold their entire power grid to China for ninety nine years and currently pay seven hundred and fifty million dollars interest on loans. What an earth were they thinking? These would be considered local issues if you listen to federal politicians, concentrate on local issues is the advice.
Local government cannot operate without a level playing field, with federal monetary policy holding everyone to ransom it is obvious where the problems can be turned around. A sovereign bank can support internal business including gold miners in times of hardship, the IMF would freak out but they cannot demand competition be eliminated but they can and do bribe politicians with easy support and further debt.
Should the gold price drop to unsustainable levels a serious financial crisis will arise and we are ransom to the IMF and overseas investment. We are around twenty years behind heavy borrowers such as Spain, Greece and Cyprus. Pyramid selling politicians are leading us down the same path and the drop in gold price will not be a welcome problem.