News

March 25, 2008

Greystar’s David Rovig Knows The Value Of Nose-Rings And Much Else Besides

By Alastair Ford

“At the end of the day”, says Greystar president David Rovig, “gold is what all currencies are measured at”. That sounds like the start of a very interesting debate, part economic, part philosophic, in which the merits of the world’s relative measures of value are called into doubt. Just what is a currency worth? Perhaps it’s simply what you can buy with it? But trade currencies and then travel across the Atlantic in either direction, and you’ll notice that the price you paid for the money is in no way relative to its purchasing power at your point of arrival. And it’s no accident, either. It’s a deliberate policy of the Fed. So if the Fed is messing with the folding stuff in our wallets, isn’t it worth considering holding a bit of the yellow metal ourselves, just to be on the safe side? And isn’t it the case that dollars are in fact priced in gold, rather than the other way round? It would certainly be a fillip for fans of the long abandoned Bretton-Woods agreement if that were so. So if gold is still the real store of value, just as it’s always been, then what better business to be in than making margin mining it out of the ground?

That’s a quick in-the-pub-version of the classic gold bug argument, and, although trained economists can pick holes in it quite easily, the strength of the gold price at the moment is making more noise than any negativity from proponents of the dismal science. Because there’s a further point to be made about gold - it’s easy to understand. Gold is a metal that comes out of the ground. It’s simple. It’s not a credit derivative, or an equity with a nominal valuation quite different from its real...