Price of Gold Dives June 02, 2013

Transcription

1 In News Focus #38, we look at the price of gold around the world. In 2011, the price of gold climbed to $1,800 an ounce (28 grams). Since that record high, the value of gold has steadily slipped and may well fall to $1,000 an ounce. But bad news for gold is probably good news for the wider economy. As the global economy gradually improves, then investors look for other ways to invest their money. Click here to find out more. Price of Gold Dives June 02, 2013 The world s largest pile of gold lies below the streets of Manhattan, New York. Half a million bars rest in the vault of the Federal Reserve Bank of New York. And the bad news for the bank is that this gold has lost about $75 billion of its value. Gold, the pride of Croesus (*see notes below), is a very bad investment of late. Since climbing to a record high in 2011, its price has been falling steadily. It is a remarkable turnabout for an investment that many regarded as one of the safest. The decline has been swift. Wall Street analysts are saying it is the end of a golden age of gold. The last time the metal went through a bad patch, in the 1980s, its price took 30 years to recover. What went wrong? What went wrong? The answer is really what went right. From August 1999 to August 2011 the price of gold rose by an astonishing 650 percent. Fund managers and ordinary savers flocked to gold when the world economy wobbled in Now, the worst of the Great Recession has passed. Things are looking up for the world economy and, as a result, things are not looking good for gold. Gold has been through booms and busts before. In 1980 it traded at $835 for an ounce (1 ounce = 28.3 grams). At its high in 2011, gold hit a record high of $1,800 an ounce. Anyone who bought gold in 1999 and has held on has done better than the average stock market investor. Even after the recent decline, gold is still up by 450 percent. Gold has been on the rise for so long, and so strongly, that a big setback was overdue, said Alan Ashdale of BullionVault. In US dollars, gold has gone up for 12 years straight. That s a remarkably long stretch. A generation of investors believed that the metal would keep rising forever. In an April 2011 poll, 34 percent of Americans thought that gold was the best long-term investment. That was more than any other investment category, including real estate. This confidence explains why ordinary investors are so stunned by the current downturn in gold. How low can it go? Some conservative analysts think that the gold price will keep dropping before people start buying again. Société Générale, a multinational banking and financial service, has issued a report titled, The End of the Gold Era, which says that the price could keep falling for years. Alan Ashdale pointed out that Between January 1975 and September 1976, the price of gold in dollars fell by almost one-half. A repeat of that fall would see the price of gold drop crash to around $1,000 an ounce. That would be

2 a drop of more than 30 percent from its 2011 peak. But bad news for gold is probably good news for the wider economy. As the economy continues to recover, the demand for gold as a financial hedge or safe investment -- is declining. There will, of course, always be a demand for gold jewelry, said Perella Weinberg Partners, who sold off its investments in gold in the fourth quarter of ounce = 28.3 grams

3 Richer than Croesus Croesus (KREE-suss) was the king of Lydia (part of modern Turkey) from 560 to 547 BC. Croesus was extremely wealthy and in Ancient Greek and Persian cultures the name Croesus was used to mean a wealthy man. In English, expressions such as rich as Croesus or richer than Croesus are used to indicate great wealth to this day. [illustration] gold coin of Croesus, Lydia, around 550 BC. It is believed that Croesus issued the first true gold coins with a standard weight and purity. However, the coins were quite crude, and were made of a naturally occurring pale yellow mixture of gold and silver called electrum. Later, he made purer coins. The gold was purified by heating with common salt to remove the silver. In 546 BC, Croesus was defeated and captured by the Persians, who also began to use gold as the main metal for their coins. [A] READING CHECK Are these sentences correct (C) or incorrect (I)? 1. A bank in Paris has the largest collection of gold bars in the world. 2. Gold increased in value for 20 straight years and many investors believed that it would continue to go up. 3. In one survey, a third of the people said that it was better to invest in gold than in real estate. 4. All analysts agree that the price of gold has now stopped falling. 5. Many investors turned to gold as a safe investment when the global economy slipped in One investment company predicts that people will stop buying gold jewelry. 7. Extremely wealthy people, such as Bill Gates, are as rich as Croesus. 8. Croesus got the idea of making gold coins from the Persians.

4 [B] SUMMARY Complete the summary using the words in the box below. currency doubled history investments investors pure record high stocks value wealth Gold has a long [ ] [1]. Coins containing gold appeared around 800 B.C., and the first [ ] [2] gold coins were made during the rein of King Croesus of Lydia about 300 years later. Unlike paper [ ] [3] or other assets, gold has maintained its [ ] [4] throughout the ages. People see gold as a way to pass on [ ] [5] from one generation to the next. When the value of the local currency falls, as the US dollar did between 1998 and 2008, people start buying gold. This raises gold prices. The price of gold nearly tripled between 1998 and 2008, reaching the important milestone of $1,000 an ounce in early It continued climbing and nearly [ ] [6] between 2008 and 2012 when it hit a [ ] [7] of $1,800 an ounce. People invest in gold when other [ ] [8] are performing badly. Records show us that: - the 1970s were great for gold, but terrible for stocks. - the 1980s and 1990s were wonderful for [ ] [9], but horrible for gold saw stocks drop substantially with [ ] [10] buying gold. [C] LANGUAGE FOCUS: idioms with gold In this news story we read about gold. Here are some English idioms with gold. * [X] is worth its weight in gold = very valuable * (to) be as good as gold = (to) behave very well (usually for children) * It s a golden opportunity = an excellent opportunity that is not likely to be repeated * like gold dust (UK), like gold (US) = difficult to get * (to) strike gold = (to) succeed, to be happy * (to) have a heart of gold = (to) be generous and sincere * a gold mine of information = someone or something with a lot of information Now put one of the idioms into each sentence below. Use the correct tense. 1. Well, I think you should accept the new job in Germany. It s. And it s a great chance to learn about another country. 2. My dictionary was when I traveled in France. 3. Tickets for the BandX concert are. We can t buy them anywhere. 4. You ve with your new girlfriend. She s smart and funny and she thinks you are great.

5 5. My neighbor is about the neighborhood. He grew up around here and knows a lot of the local history. 6. I appreciate that my boss never smiles and that he looks angry all the time, but he actually. He looks after all of his staff in a very kind way.

6 Answers:Price of Gold Dives [A] READING CHECK Are these sentences correct (C) or incorrect (I)? 1. A bank in Paris has the largest collection of gold bars in the world. (I) [A bank in New York has the largest collection.] 2. Gold increased in value for 20 straight years and many investors believed that it would continue to go up. (I) [Gold has increased in value for 12 straight years and.] 3. In one survey, a third of the people said that it was better to invest in gold than in real estate. (C) [34% is almost exactly a third.] 4. All analysts agree that the price of gold has now stopped falling. (I) [Some conservative analysts think the price will keep falling.] 5. Many investors turned to gold as a safe investment when the global economy slipped in (C) 6. One investment company predicts that people will stop buying gold jewelry. (I) [One investment company commented that people will continue to buy gold jewelry.] 7. Extremely wealthy people, such as Bill Gates, are as rich as Croesus. (C) 8. Croesus got the idea of making gold coins from the Persians. (I) [The Persians got the idea from Croesus.] [B] SUMMARY Complete the summary using the words in the box below. Gold has a long [history]. Coins containing gold appeared around 800 B.C., and the first [pure] gold coins were made during the rein of King Croesus of Lydia about 300 years later. Unlike paper [currency] or other assets, gold has maintained its [value] throughout the ages. People see gold as a way to pass on [wealth] from one generation to the next. When the value of the local currency falls, as the US dollar did between 1998 and 2008, people start buying gold. This raises gold prices. The price of gold nearly tripled between 1998 and 2008, reaching the important milestone of $1,000 an ounce in early It continued climbing and nearly [doubled] between 2008 and 2012 when it hit a [record high] of $1,800 an ounce. People invest in gold when other [investments] are performing badly. Records show us that: - the 1970s were great for gold, but terrible for stocks. - the 1980s and 1990s were wonderful for [stocks], but horrible for gold saw stocks drop substantially with [investors] buying gold.

7 [C] LANGUAGE FOCUS: idioms with gold 1. Well, I think you should accept the new job in Germany. It s [a golden opportunity]. And it s a great chance to learn about another country. 2. My dictionary was [worth its weight in gold] when I was traveling in France. 3. Tickets for the BandX concert [are like gold]. We can t buy them anywhere. 4. You ve [struck gold] with your new girlfriend. She s smart and funny and she thinks you are great. 5. My neighbor is [a gold mine of information] about the neighborhood. He grew up around here and knows a lot of the local history. 6. I appreciate that my boss never smiles and that he looks angry all the time, but he actually [has a heart of gold]. He looks after all of his staff in a very kind way.