Snapshot: Gold Mining in the Philippines

The interesting thing about the internet these days is that we can see the inter-play of gold prices and the international economic climate.  We can read about laid-off retail workers in England, nervous buyers in Israel and the Mideast, and frightened consumers around the United States.

But we can also see a bright spot, like the gold market.  The gold market is steadying fears around the globe as well.  The reason?  Historically, gold has been the benchmark of wealth and luxury across centuries, including in stressful economic times like we’re seeing.  And because of the internet, we can peak into the history and current thinking in far away countries, for instance in the Philippines.

During the Great Depression that hurt the United States from the late 1920s to the early 1940s, a gold boom was underway in the Philippines, where Americans established the country’s first mining enterprises, according to a top Philex Mining Corp. official.

This bit of history has given Filipino miners hope that they can ride out a prolonged recession when it hits its hardest there in 2009.

It is only gold that offers a measure of hope for the industry next year, when the looming recession is expected to take its toll on the economy, said Louie Sarmiento, who is president of the Philippine Mine Safety and Environment Association.

“The gold mining activities will continue on account of the good price of gold, and there are projections they will be maintained, if not [escalate] next year,” he said.

According to the Jose Ernesto Villaluna, President of Philex Mining Corp., the sector takes comfort and refuge in the parallels between 2008 and the gold rush of the 1930s, when the US began experiencing the pangs of the 1929 depression.

“If you look at the Great Depression in the [1930s], the common denominator was gold,” Villaluna said. “[President Franklin Delano] Roosevelt upped the price of gold from $19 to $35 an ounce and that was when all the gold mines boomed.

He was referring to the enactment of a US Gold Standard, which defined the value of the currency of many countries against a specific volume of gold quantities.  That was retracted when the American government introduced a gold reserve law making it illegal for people to own gold.

This law pushed gold prices from $20.67 per ounce to $35 per ounce at the time.  Now it’s over $800 per ounce.

At the same time in world history, the gold industry experienced a boom, even in the Philippines growing from 89 mine claims applied for in 1905, to 544 mine stakes in 1906.

Gold has always been a store of wealth in times of uncertainty.  It will be the stable place to be during whatever lies ahead.  Gold continues to fulfill its role as an asset for uncertain times and demand is strong.  It’s an investment you can be certain of, even as we continue to watch the markets in turmoil.

Gold Prices Going Up!

For the first time in some weeks, the prices of gold have started to rise.  It happened on Friday, after a week of miserable financial news and word that deflation was on the way as fuel prices fall, food and retail prices fall, and inflation backs off.  But gold comes to the rescue of investors, edging forward slightly as the dollar weakens.

This is interesting news after months of dismal prospects for miners and mining companies.

I spoke with a foreman who works for a mining company while I was at a family event this weekend.  He gave me the “sad news that 1000 people were laid off by our company on Friday.  We’re just not doing the work because we don’t have the customers right now.”  His company mines everything from sand to salt with minerals and precious metals in between.  So this latest news is good for those companies; their workers and those workers’ families.

Shares of the world’s largest gold mining companies jumped on higher gold prices Friday as investors shifted into precious metals and demand for the product continued to build.

Barrick Gold Corporation, the world’s largest gold producer, along with Newmont Mining Corp., the second largest, and other mining firms posted double-digit gains by late afternoon. The price of gold for future delivery jumped above $800 an ounce – up $52.90 to $801.60 by Friday afternoon on the New York Mercantile Exchange.

The renewed interest comes as investors seek safer investments amid volatility on Wall Street. “There’s been a tremendous amount of pressure on gold in recent weeks because as there’s been a lot of liquidity selling,” Barnard Jacobs Mellet analyst Patrick Chidley said in a telephone interview.

“It’s this battle between sellers trying to find liquidity and raise cash and the long-term fundamentals which are for higher gold prices as a result of a weaker dollar,” he said.

Now here’s the key part for us here at ApplesofGold.com: although we hope for a reasonably lengthy delay in rising jewelry prices, the lower gold prices have boosted demand among jewelry manufacturers and investors, according to Chidley.  This means that prices, which have been sitting idly while the economy appeared to weaken, may be going up.

Holiday prices are expected to remain low, and some say “big sales” and “huge markdown” will be the bywords this holiday season.  But after that, with gold prices going up, expect jewelry prices may start to launch upwards, too. So let the buyer beware: now is the time to shop.