[Viewpoint] Gold rush brings promise of disaster

Gold is perhaps the strangest of all the metals. It has fewer uses than steel or copper, but its power to captivate people seems to know no bounds. Many people have ruined themselves after falling under its spell.

Gold also loves a good old crisis. The more severe the crisis, the happier it is. So it is having a field day right now, with the price skyrocketing day after day. So far this year, the price of gold has shot up 25 percent and the outlook remains rosy.

Only three years ago, 1 troy ounce (about 31 grams) of gold could be bought for $1,000, whereas now the same amount costs in excess of $1,600 and is expected to soon reach $2,000. This may be good for investors, but it also ranks as a double-edged sword. History teaches us that at no time was a heavily fluctuating gold price beneficial for the global population, and in the past severe swings have led to wars breaking out, while slight tremors have caused economies to be shaken up or left in tatters.

“People believe that gold is a refuge until it is taken seriously; then it becomes a curse,” legendary Wall Street investor Peter L. Bernstein wrote in his book, “The Power of Gold: The History of an Obsession.”

Recently, gold prospecting has come back in fashion in countries such as Australia. Meanwhile, in South Africa, the world’s largest gold producer, some 400,000 laborers mine about 300 tons of gold a year. In the past, annual production stood significantly higher at about 500 tons, but heavy mining has eaten into this already scarce resource and made it harder to find. Laborers now have to travel more than two hours along a 3,000-meter-long underground tunnel to reach deposits of gold, in grueling pit temperatures of around 54 degrees Celsius (129.2 degrees Fahrenheit).

Nonetheless, Australia, Malaysia, Romania and China have all seen a rise in the amount of gold mined there. In Korea, mines that were shut down three decades ago are now being explored again. Internet sites are filled with amateur gold miners’ clubs.

In addition to traditional prospectors, the new gold rush in financial markets is also booming around the world. Gold banking and the gold-backed exchange traded funds (ETF), as well as other gold investment products, are proving increasingly popular. The SPDR Gold Trust, the world largest gold-backed ETF, owned over 1,300 tons as of last year. That is more than the 1,054 tons owned by China, which ranks as the world fifth-largest gold reserve.

In other words, investors in gold have multiplied, and there are no clear indications that this trend will reverse anytime soon because it is being so heavily encouraged. Robert A. Wiedemer, author of “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown,” predicted that gold will rise to $5,000 in a few years’ time and urged investors to sell dollars and U.S. treasury bonds and buy gold.

The more people are bewitched by gold, the more serious threat it poses, however. According to the New York Times, gold mining is more devastating to the environment than the mining of other metals. To obtain 1 ounce of gold, 50 tons of rock and soil must be destroyed, the newspaper said. This means the industry is destroying 4 billion tons of rock and soil to mine 2,500 tons of gold a year, according to the calculation.

In a report called “Dirty Metals,” Earthwork, a mining watch group, said the yield of gold from ore is extremely low. While ore yields 0.51 percent of copper, only 0.00001 percent of gold can be extracted from the same amount, or 50,000 times less. Obviously, this results in a tremendous amount of ore being destroyed.

Producing gold also involves much metal contamination. Cyanide, which also melts cadmium, lead and mercury, is used. And after the gold is removed, the rest of the ore is disposed of, which creates large, contaminated deposits around most mines.

About a decade ago, toxins leaked from one mine into the Danube River in Europe, killing over 1,000 tons of fish and ultimately spreading to the Black Sea some 2,560 kilometers (1,591 miles) from the source.

Although these words will have little effect in lowering the price of gold, people should consider the words spoken by General Choi Yeong of Goryeo six centuries ago in order to stave off future disasters: “Treat gold as stone.” Former president Park Chung Hee used it to advise Lee Nak-son when he became the first head of the National Tax Service in 1966.

*The writer is the business editor of the JoongAng Sunday.

By Yi Jung-jae