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Gold Goes to the Movies
During the disappointing dip in the price of gold over the last few weeks, a movie rerun on HBO got us to thinking about the good old days of 2011. The film was called “Tower Heist” released in the U.S. on November 4, 2011, when gold was $1750. It must have been filmed (or given the final cut) in August, 2011, since the script cited a gold price of over $1800 per ounce. In the key plot discovery we learn that the evil capitalist was hiding his gold “in plain sight” in his penthouse apartment, so our heroes, a bunch of hapless outcasts from the hotel staff, devise a way to steal this golden asset. The financial guy in the cabal calculates the gold’s value at something like $45 million. His math was comically flawed, ignoring the difference between Troy and avoirdupois ounces and pounds – and the difference between tons and metric tons – but the refreshing lesson here is that gold was recently a “sexy” movie topic, as of 2011.
The hidden gold trick in Tower Heist was reminiscent of “Goldfinger” which debuted 50 years ago last month, in September 1964. Auric Goldfinger concocted his audacious plan of making his gold more valuable – not by raiding Fort Knox, Kentucky, but by rendering Fort Knox’s gold worthless. That movie came out at a time when our Treasury began to hemorrhage gold, and the dollar was beginning to weaken.
Gold has always been a popular movie theme. You won’t find that many movies about zinc, or lead, or paper currency, for that matter, but according to Moviecus (a movie search engine), at least 623 movies have been made about gold – the search for gold, the lust for gold or the conspicuous possession of gold.
Gold has signified wealth from time immemorial. The Greek myth of “Jason and the Argonauts” and their search for the Golden Fleece was made into a 1963 film with tremendous special effects for the time.
Some of the best films about gold came out between t 1947 and 1974, from the end of World War II to the inflationary year in which gold was finally legalized for Americans to own. After 1974, there were fewer movies about gold during the great stock bull market of 1982 to 1999, when gold was flat.
In the late 1940s, the Broadway musical “Finian’s Rainbow” centered around an Irish immigrant with a pot of gold, which he wanted to bury near Fort Knox, Kentucky, so that it would grow and blossom into more gold. As he told his daughter, Sharon, in the play: “You see, there’s something about the soil in and around Fort Knox that gives a magical quality to gold. The gold radiates a powerful influence throughout America. It activates assembly lines in Detroit; it makes skyscrapers sprout from the gutters of New York, and it produces a bumper crop of millionaires. And that is the McLonergan Theory of Economics.”
Around the same time, the lust for gold was central to two great films: “The Treasure of Sierra Madre” (1948) starring Humphrey Bogart and his rivals in a race toward a Mexican gold mine, and then came “The Lust for Gold” (1949) with Glenn Ford and Ida Lupino trying to find the Lost Dutchman mine.
The same lust-for-gold theme was the central plot point of “Mackenna’s Gold” (1969), in which Gregory Peck, Omar Sharif, Telly Savalas and others search for a legendary deposit in the Canyon del Oro, which they eventually find and then destroy each other in their attempt to bring the gold out. (This is a common theme of nearly all the movies about gold – the corruption caused by man’s lust for too much gold.)
There have been at least four films bearing the single four-letter word “Gold” as the full title. One of the best was released on September 5, 1974, when gold was climbing from $100 to $200. Legislation was passed by Congress and signed by President Ford allowing Americans to buy gold as of December 31, 1974, but Americans could still not buy gold when this movie was released. Americans could, however, buy shares in South African gold mining stocks, and that was the key plot point of 1974′s “Gold,” in which Roger Moore (who debuted as James Bond the previous year) played a South African gold mining executive.
Gold Passes another “Test” at $1192 Per Ounce
Meanwhile, back in the real world of today’s gold market, we saw another test of $1192 in early October. Gold passed that test with flying colors, quickly rising over $30 per ounce within three days.
Gold has now bounced smartly back from $1192 on three consecutive occasions in the last 16 months:
You wouldn’t know that gold passed this test (closing above $1192) from the reports of leading financial publications. In the weekend edition of The Wall Street Journal (October 4-5, 2014), their author who regularly covers the gold beat (Tatyana Shumsky) said “Gold Futures Prices Sink to Four-Year Low.” The December 2014 contract sank to $1192.90, which was marginally lower than the previous low futures price, but the gold spot price (reflected in the London setting) stayed above $1192. That’s important.
The main reason gold has declined so sharply since July is that the U.S. dollar has risen by nearly 8% in the last three months. This makes gold’s rally off the $1192 support level even more impressive. Gold has rallied in October, despite a strengthening dollar. What that means is that gold is performing its role as a currency hedge even more impressively in terms of the euro than in terms of the U.S. dollar.
Gold began 2014 at around $1200 per ounce, at a time when the euro was valued at $1.40. With the euro down 10% at $1.26, gold in 2014 is up by double-digits in euro terms. From a base price of 857 euros on January 1, gold has risen 14% to 978 euros this week (that’s $1232 gold divided by $1.26 per euro).
Since July, Europeans have been trading their devalued currency for gold. Many German bullion dealers have called August and September their best months in years, due to the euro’s weakness (and gold’s strength) in those months. Even though gold is declining in dollar terms, it has been rising in euro terms.
More Sources of Foreign Gold Demand are Now Emerging
Elsewhere in Europe, Switzerland is not par of the euro-zone, but the Swiss are holding a gold “election” on November 30. The Swiss are allowed to bring initiatives before the nation, given enough signatures. This time, the people have called for a vote on the traditional Swiss national love affair with gold.
In the upcoming election, the Swiss will vote on three revolutionary gold-related initiatives: The first would force the Swiss National Bank (SNB) to hold 20% of its reserves in gold, a partial gold standard. The second initiative would prohibit all future gold sales by the SNB. The third initiative would require all Swiss gold held in foreign banks to be repatriated back into Switzerland. The Swiss government is against these moves, but the people demanded this “Save our Swiss Gold” agenda. A passage of the first initiative would force the SNB to buy thousands of tons of gold, equal to several years of newly-mined gold. The other two initiatives would have the effect of keeping huge amounts of gold out of circulation.
In Asia, we have new gold markets in Shanghai and Singapore. The Shanghai Gold Market began offering gold contracts on September 18, while Singapore began tart trading 25 kilogram bar gold contracts (of .9999 gold) as of Monday, October 13. In addition, the Indian government is beginning to relax its strict regulations on gold imports. The gold import duty will be cut by 5.7% and the duty on silver will be cut by 11%. Demand in India is liable to increase over the coming holiday season. Already, gold imports reached 20.8 tons in September, a 16-month high. Indian demand has been coiled up for a long time. It may be ready for explosive growth when lower tariffs combine with rising holiday demand.