The Incredible Tale of Gravity Defying Gold

Considering that gold has a very high density, and is one of the heaviest metals per volume in the world, the fact that researchers at ETH Zurich have succeeded in creating gold aerogel so light that it can float is quite an accomplishment!

Aerogels, also called ‘frozen smoke’ are produced synthetically with solids and a high porosity. Since the voids between particles fill with air, they have very low density.

Although at first glance, this particular aerogel appears as a sprayable gold ingot, it is in fact a thousand times lighter. The material, which is a type of rigid foam, is actually lighter than water – its density is close to that of air. Gold aerogel can also be freely shaped, even with bare hands!

Interestingly, this new spray has quite a bit of intrinsic value, as it is composed of 83% pure gold. The remainder consists of air bubbles and a little bit of milk (that is not a typo – yes, milk).

The process used to create the gold foam makes use of heated milk proteins, which form miniature amyloid fibrils. These are then placed in a solution containing positively charged ions of gold. After a period of evaporation, the fibers are arranged into a 3D structure, around which crystallized gold forms a kind of ‘grid.’

In addition to perhaps leading to the creation of super-lightweight jewellery, gold aerogel has numerous potential engineering applications. Its usefulness is primarily due to its catalytic properties and thus its ability to carry a current, but this requires subjecting the gel to high pressure so that the gold particles come into contact with one another.

The Story of a 1700-Year Old ‘Silver Bug,’ and What They Can Tell Us Today

In or shortly after 294AD, someone who was living in what is now rural Switzerland buried nearly two years of wages (over 4 000 ‘silver‘ coins) – a hoard which was discovered in an orchard earlier this year. The find, though extraordinary in itself due to size and state of preservation, is also remarkable for what it literally contained.

As is the case with most Roman coin hoards, the coins were consciously selected by the person who deposited them –  generally for their metallic value, or, as in this case, their perceived level of debasement.

Romans were used to the debasement of their silver coinage – and as a result, inflation in goods and services. The correlation is because the silver Denarius was the coinage of taxation – and thus the preferred coin of commerce. With mounting financial difficulties through the late second through to the late third centuries AD, successive rulers reduced the silver content and increased the circulation numbers of their silver ‘workhorse’ coin so as to be able to cover mounting budgetary deficits. This meant that in a span of a little over two centuries, the silver content of the Denarius had fallen from 95% to 5%.

It is thus not difficult to see why someone was removing 5% content Deanarii and setting them aside – whoever this person was, they correctly foresaw the complete debasement of their wages (a reality which resulted in coins being dipped in silver rather than having any real content whatsoever). One curator at the British museum put it quite succinctly when he explained that “the silver contained in [these coins] guaranteed a certain value retention in a time of economic uncertainty” – this person was hedging, much like the ‘silver bugs’ and ‘gold stackers’ of today.

Had this person been able to return to reclaim their savings, they would certainly have benefited, but unfortunately, for whatever reason, they were unable to do so. It must be noted though that this person would have done better to hold gold, which maintained it’s value relative to goods more or less completely through the course of the Empire’s history.

Startlingly enough, this is proving to also be the case with the US dollar, which has lost 83% of it’s spending power since 1981. Conversely, an ounce of gold has increased in price by 97%, meaning that it is actually outperforming one of the world’s most trusted currencies. Though stocks and bonds might have a higher short term yield, it would seem that the role of the yellow metal as a stabilizer and hedge against inflation isn’t quite over yet.

Two Diamonds, One Man

The Hong Kong based real estate billionaire Joseph Lau has, for the second time this week, set a gemstone related record. First, Lau bought a 16.08 carat vivid pink diamond for $28.5 million from Christies, beating the auction sale record for a pink stone. Ever the insatiable collector, he then snapped up the Blue Moon diamond for a cool $48.5 million at a Sothebys’ auction in Geneva the next day. Coming in at over $4 million per carat, the second sale set the record for any gem sold at auction.

Both of the stones were purchased for his 7-year-old daughter Josephine, with the rocks being renamed the “Sweet Josephine” and the “Blue Moon of Josephine” respectively. This is part of a pattern of buying, as Joseph bought Josephine a 7.03 carat blue diamond in 2009 for $9.5 million (since renamed the “Star of Josephine”), and his daughter Zoe a 9.75 carat blue diamond in 2014 for $32.6 million (the “Zoe Diamond”). The latter was also the recipient of a Cartier brooch featuring a 10.1 carat ruby now known as the “Zoe Red,” which cost $8.4 million.

Lau has had plenty of time on his hands since he was forced to take a backseat in his real estate business. Corruption charges which were lodged in Macau by the government there stated that Mr. Lau had bribed the chief of public works with HKD$20 million – a drop in the hat compared with his auction spending. The charges were upheld in 2014-5 following numerous appeals. He has so far managed to avoid extradition due to a lack of a treaty between Hong Kong and Macau.

Having spent a combined $77 million, this has has certainly been an expensive week for Mr. Lau, and a banner month for at least two major auction houses.

The Ugly Story of Beautiful Swiss Gold

Though the recent gold price fixing scandal out of Switzerland may have come as a shock to many, the reality is that this is just the latest installment in a long saga of shady Swiss gold dealings. More troubling than the event itself is that this, and other nefarious gold-related transactions, are taking place in a country which accounts for nearly 70 per cent of the world’s production and refining of gold bullion.

In light of that last figure, it is easy to surmise that the Swiss are very dependent on their gold industry, which brings in nearly $18 billion in profit annually. As a result, authorities actively try to encourage growth in this sector, often turning a blind eye to suspicious activity. This applies in particular ore imports from countries affected by oppression, armed conflict or violation of environmental protection violation.

For many years now, NGOs monitoring the trade have been pointing the finger at two particularly large Swiss assayers — namely Metalor and Argor-Heraeus for committing particularly flagrant violations. This though, is just the latest generation of Swiss manufacturers to assume the position that ‘if it doesn’t happen in Switzerland, it doesn’t matter.’

To fully understand this mentality, it is necessary to go back to the 1920s. Situated in the heart of then economically stricken Europe, Switzerland managed to avoid the ravages of numerous recessions by attracting substantial, yet oftentimes dirty deposits to its secretive banks. The discretion of the banks, the fact that Switzerland was traditionally a neutral country (and thus not as susceptible to the geopolitical instability of its other European counterparts), and its being situated near the center of the continent all made it an attractive place to store wealth.

The large deposits led to a booming gold trade as depositors went between investment and liquidity, and this led to enormous multiplier effects in the Swiss economy. When everyone else seemed to be down and out, Switzerland was booming —  and all because they had turned a blind eye to anything that might cause a moral dilemma.

Commonly known (to the point where it has become a point of ridicule) is Swiss cooperation with Nazi Germany – the country even came to be known as the “Bank of the Third Reich.” Gold bought from Germans came usually from looted property and the victims of the concentration camps.

It has recently reported that even “gold teeth [were] sent to the headquarters of the Reichsbank in Berlin, where they melted down to ingots.” What is perhaps more shocking is that “the Swiss knew full well that part of the gold sent to them must have come from prisoners.”

In the ’80s, the Swiss once again faced international scrutiny when it came to light that rather than being imported from South Africa as Swiss refiners had claimed, they had actually been importing gold ore in violation of an international embargo on the DR Congo.

Other than this, it has been reported that Metalor had for years been buying gold from Peru, where the company had been making mining contracts with organized crime syndicates. Employees of the resulting makeshift mines faced exploitative wages and hours, and the methods of extraction (particularly the use of mercury) were extremely detrimental to both the workers and the environment. Rather than local benefits, the areas around the mines saw rampant prostitution and drug addiction, which also benefited the syndicates who had brought in the industry.

For their part, Argor-Heraeus has apparently for years been violating import restrictions from the Congo. The firm is reported to have financed one of the warring parties, and exploited cheap labor ($1 per day in dangerous conditions). The extracted gold was then transported to Uganda, thus in effect ‘laundering it,’ and thus allowing it to legally get to Switzerland. In November last year, the Swiss giant was accused of financing acts of war, smuggling and money laundering, and faces a multitude of international court cases.

So as one may see, Swiss price fixing is just the tip of the dirty iceberg – more a symptom of a gold industry that has been corrupted by its historical impetus. When one takes into account all of the human suffering that the Swiss gold industry supports, it seems only logical that they would try to maximize benefit on their end – making this latest scandal sadly unsurprising.

Clear Skies Ahead; Global Precious Metals Barrometer Looking Up

In the west, market players have been persistently hesitant to thoroughly re-commit to the commodities market, heeding pervasive fears the the worst is yet to come. In East Asia on the other hand, bargain hunters are once again piling on the precious-metals bandwagon.

Few of us can deny that it was a startling to see gold below $1 100/oz (a five-and-a-half year low), and even more confounding to see the platinum / gold exchange ratio hold its 25-year low level. This being said, there are growing signs that this state of affairs is a transitory market phase, and that things might be on the up and up for precious metals, with early ripples coming out of China and India.

According to Hong Kong Census and Statistics Department, net gold imports from Hong Kong rose to 59.3 tonnes in August – the third increase in a row. When one factors in the imports that were brought from Switzerland, the total volume of gold which passed through the Hong Kong economy was close to 80 tonnes for the month. When one then considers the rapidly growing gold trade centers of Shanghai and Beijing, the total trade in China is looking quite strong.

Despite measures by the Indian government to curb gold imports, official trade data shows bullion imports more than doubled to $4.95 billion or 140 tonnes in August compared to 89 tonnes in July. This number is also up from just over $2 billion (50 tonnes) in the same month last year. At one time the world’s largest importer of gold, India fell behind China in 2013, but these new figues seem to indicate that Indian demand is gaining ground against their Chinese neighbours.

For it’s part, platinum isn’t looking too shabby, as a statement was recently released by investment bank Barclays arguing that the declining platinum price could drive physical demand of platinum in jewellery, saying that “the price ratio between platinum and gold can affect jewelry demand, shifting some from gold into platinum.” It was also noted that this is “especially [true] in markets such as China, where there is a preference for platinum jewelry.”

Though it might not yet be a bull market, the bears seem to be backing off from the old ‘safe haven’ investments, and those that kept faith might yet see markets back on their side.