More than a decade ago Algy Cluff, the legendary resources entrepreneur who played a hand in opening up the North Sea to oil and then moved into gold, made a startling and dire prognosis.
Back then, when Algy was promoting the Kalsaka mine in Burkina Faso, as well as the Baomahun and Yaoure projects, bulls liked to puff and pant about US$2,000 gold.
And why wouldn’t they?
A gold price at US$2,000 would be good for everyone - those that owned physical would be that much better off, but so would those with equities, given that margins yawn even wider in producing operations with sunk costs when the gold price rises.
But Algy had a different take.
You don’t want to see US$2,000 gold, he would say, sitting in Langans, his favourite Mayfair brasserie.
Oh no, you certainly don’t.
If you see US$2,000 that means apocalypse.
Now, there are some who have been popoing champagne corks now that gold has managed to close above US$2,000.
After all, there’s no point looking in the rear-view mirror, right?
But even allowing that we are where we are, it’s hard to argue that Algy was wrong.
The world is almost unrecognizable now, compared to when he made his prognosis, and in no way is it better.
And, there have been other champagne moments too.
Back in the early 2000s, the gold mining industry was filled with optimism and bulls and celebrating the new high price. The price move that brought the biggest cheer? – when gold went through the US$400 mark.
Fear didn’t stalk the halls in those days, though, so there was no reason to think that US$400 wasn’t already toppy. Yes, gold was a safe haven, but what did you need to be safe from? The global economy was good, the Cold War was over, and everyone was making money. The good times could roll in mining with US$400 gold, but the idea that it might go to US$2,000 was just pie in the sky.
Back then, the idea that it would go to US$1,000 was almost as outrageous.
But it didn’t take long for the wisdom of Algy’s prognosis to start proving itself.
First, it turned out that the boom times Ben Bernanke inherited from Alan Greenspan came with a fatal flaw. Banks were over-extended thanks to the Clinton policy of providing cheap and easy housing, and in 2007 and 2008 part of the debt that everybody owed everybody else folded in on itself and collapsed.
Taxpayers in the western world, who ended up inheriting that debt, are still paying it off today in the form of accelerated inflation. That’s chapter one of the apocalypse Algy warned against. And in response, gold went soaring up to US$800 and US$900.
Chapter two of Algy’s apocalypse took it over US$1,000. That was the response of the world’s Central Banks - nearly two decades of taps-open money printing. Now that the entire financial system was essentially being backstopped by governments, and the US government in particular, printing money was the only thing that made sense.
Hard assets soared in value, and anyone who didn’t own substantial property – including whole countries like Greece – were further impoverished.
And it was at that very moment that politics in the western world started to turn weird. No longer was political discourse centred around wealth and health. Suddenly it was centred around identity.
That was Chapter Three of the apocalypse we didn’t want. Many people fault the rise of social media for the new viciousness in cultural discourse, but it’s also worth noting that just when the Occupy Movement was besieging Wall Street, giant corporations like Goldman Sachs (NYSE:GS) started talking identity.
And mandating it on their business partners too. And so, the cultural fabric of the English-speaking world decayed in new and surprising ways since Algy made his prognosis. Even the meanings of words, once thought to be fixed and obvious has come under attack. Thus, the definition of 'woman' has become contentious, left-wingers are now the ones in certain circumstances agitating for colour-bars, and economists now feel perfectly free to redefine the meaning of the word 'recession' when it suits certain political affiliations.
What we’ve got here, as veteran character actor Strother Martin tells Paul Newman in the famous 1960s film Cool Hand Luke, “is a failure to communicate.”
And it may be that the issue goes back that far, or even further.
But it’s worse now. To the point where “national divorce” is openly being discussed by US politicians like Marjorie Taylor Green, and many commentators talk of a simmering civil war.
Are they wrong?
It’s actually hard to say. The Spanish Civil War began with increasing amounts of isolated violence and shootings - and they certainly have that already in the US. What they don’t have is a military that is more loyal to itself than the state. But it remains possible that an all-out breakdown in US cultural cohesion will be the final chapter in the apocalypse Algy was hoping to avoid.
After all, in the meantime, we’ve also had Trump as the greatest troll that ever lived. If you’re on the Democrat side of the aisle, you certainly regard that as Chapter Four of the Apocalypse that Algy was warning against, not least because of Trump’s apparent unconcern about environmental matters.
Trump also oversaw a return to protectionism and a rise in tensions with China.
And then came covid, where almost every national and international institution worthy of its salt came under intense scrutiny, and most came out wanting. Trust in the institutions of government and society hit new lows, as a previously unknown disease that was probably engineered in a Chinese laboratory using American money swept across the earth and killed millions.
If that doesn’t qualify as Chapter Five of the apocalypse Algy hoped to avoid, then it’s hard to know what does. And during covid, the gold price – you guessed it – went up, punching through US$1,600, US$1,700 and US$1,800 as the world as we knew it fell apart. Humpty Dumpty could not, entirely, be put back together again.
Covid, of course, stimulated a further massive round of money printing, which was the technical reason the gold price moved so sharply, and that in turn, led to further inflation, and the further impoverishment of the poor.
There was supply chain chaos, and just as we were coming out of that, President Putin invaded Ukraine. How’s this for a closing Chapter, allowing that the US Civil War gets edited out? – nuclear war between the US and Russia. Now, you can argue whether or not US-Russia tensions are worse now than they were during the Cuban Missile Crisis. But the fact that you can have that argument shows that things are pretty bad. Is the US President pushing for peace? – no, he’s pushing for more war. It’s the Chinese who are trying to broker a peace.
At the very least, that seems to herald a new world order. At worst, the early onset of an apocalypse that Algy Cluff was sage enough, in his own way, to warn us against.
Do we want US$2,000 gold?
Or do we want a stable, functioning and rational world?