Gold Rush: Party Like It's 1849 Robert Roy Britt
– Thu Mar 26, 10:47 am ET
gold prices topping $900 an ounce and jobs still disappearing,
a new gold rush is on.
It's taking place in California again, where
unemployed people are heading for the hills to prospect for
gold. It's also happening on TV and online, where sometimes
dubious ads promise rich rewards if you'll just hock your
jewelry. And it's even creeping into a new kind of cocktail
party that could only start in the Golden State.
And just like last time, the new gold rush can come with
a mix of disappointment and, well, rush. The adrenaline kind,
as one miner says.
"Some days you sit here and make two cents. Some days
you make a couple of hundred dollars," said John Gurney,
who like his crusty predecessors came from the East to find
gold by digging around in California river beds.
"I had one good day and made about $10,000," Gurney
told the KNBC-TV in Los Angeles.
What they're after
The mineral gold is dense but highly flexible. It is virtually
indestructible and extremely rare. All of the gold ever mined
can fit into a cube with 72-foot sides, says Stuart Simmons,
a researcher from University of Auckland, New Zealand who
has studied how gold forms.
Today, Fort Knox holds 8-foot-tall stacks of gold bars worth
some $130 billion, enough to bail out at least one large American
The original 49ers came California starting in 1848 when
James W. Marshall found gold at Sutter's Mill in Coloma, now
a ghost town. Soon 300,000 people flocked to the state. San
Francisco became a boomtown and California gained statehood
in 1850. Some early prospectors hit the mother lode, but most
- especially those who came in the dwindling days of the phenomenon
through about 1855 - spent as much or more on equipment as
they ever extracted in precious metal.
Gold mining today, for the most part, is a big-business affair
as the pickings are no longer easy. To extract enough gold
flecks from a typical mine to make a single wedding band requires
digging up at least 20 tons of rock.
Meanwhile, geologists figure 80 percent of California's gold
remains to be found, KNBC-TV reported.
The trick today is to dig deep. Where nuggets were once found
in river beds, panners today report having to dig as much
as 30 feet lower than the old timers did to strike it rich.
The real winner, as in the old days: A company that makes
the equipment you'd need. Keene Engineering of Chatsworth,
Calif., makes everything from plastic pans for riverbed sifting
to large commercial gold mining rigs. Business has doubled,
the owners report.
Others are simply digging into the jewelry drawer. Online
pawnbroker Cash For Gold USA (you've seen the TV ads) says
the company has grown "1,000 percent" in the past
year, helped in part by the recession and plummeting TV ad
prices, according to an article in the Christian Science Monitor.
Who is selling their stash? "In the last two months we've
seen an extraordinary amount of jewelry that typically is
owned by the upper middle class," said Michael Gusky,
CEO of GoldFellow, which also buys gold over the Internet.
Pawning jewelry is no longer necessarily a low-class affair
conducted in a dusty shop in the bad part of town. GoldFellow's
Web ad reads: "Want a new plasma HDTV? Sell us your gold
And the price of gold has inspired another phenomenon you
might expect in California: gold parties. According to a report
on the "CBS Evening News" this week, some Long Beach
party-goers come not to get snockered but to get cash for
their gold. Rings, necklaces and other jewelry is bought up
by party organizers who recycle it so others can pay their
What is Fool's Gold?
Pyrite may be shiny and brass-colored, but any miner will
tell you, it is not as good as gold.
The inferior mineral nicknamed fool’s gold only mimics gold
in looks. Pyrite is more common, harder, and more brittle
than gold. When crushed into powder, it looks greenish-black,
whereas real gold powder is yellow.
Pyrite contains sulfur and iron. During World War II it was
mined to produce sulfuric acid, an industrial chemical. Today,
it is used in car batteries, appliances, jewelry, and machinery.
Although fool’s gold can be a disappointing find, it is often
discovered near sources of copper and gold. A miner who stops
digging once they have a piece of pyrite in hand is the real
What's Behind the Record Price of
The price of gold continues to hit record highs, with futures
trading at $1,000 an ounce this morning. Gold crossed the
$900 level in January.
The recent rise comes against a backdrop of widespread concern
over the U.S. economy, which according to the Associated Press
pushed the euro to a new record and the yen to 12-year highs
against the U.S. dollar today, while gold and oil prices also
But the precious metal has been highly valued for thousands
The latest high prices for gold are part of an upward trend
that began in April 2001. Analysts explain the bull market
in gold by pointing to a slowing economy and the metal's increasing
scarcity in the ground.
“Gold is inversely correlated to the dollar,” said George
Milling-Stanley, an analyst for the World Gold Council, an
organization funded by gold mining companies. “Gold is a safe
haven in times of political as well as economic turmoil.”
Trouble is, this extremely rare commodity is getting harder
Miners don’t happen upon rich veins of gold today like they
used to. Big mining companies nowadays hope to find mere flecks.
Although gold is mined in more than 60 countries, it is estimated
only 167,600 tons of gold have ever been mined. In comparison,
999 million tons of iron are extracted annually.
Hard-to-reach pots of gold have become harder and harder
to find, and not many new gold mines have come into production
in recent years. With the absence of big new discoveries,
demand for gold continues to grow, as does its price.
Still, with inflation taken into account, the price is nowhere
near as high as it seems.
Most of the gold collected today becomes jewelry. According
to the U.S. Geological Survey, 84 percent of the gold produced
in 2006 was used for jewelry and the arts.
Gold’s chemical symbol Au comes from the Latin word aurum,
which means shining dawn. Combining gold with an alloy element
such as nickel or palladium turns gold white.
Beyond its charm, gold’s unusual properties have put it to
Pure gold is relatively soft, with the same hardness of a
copper penny (try finding a penny made of real copper, however).
It is the most malleable and ductile of metals. Only copper
and silver are better at transferring heat and electricity
than gold. In addition, gold is extremely resistant to corrosion.
Only a solution of cyanide can dissolve the hearty metal.
Gold’s properties have made it an essential industrial metal
in technologies such as computers, communications equipment,
spacecraft, and jet aircraft engines.
The visors of astronauts’ helmets are coated in a thin layer
of gold that reduces glare and keeps them cool.
Artisans of ancient civilizations used the precious metal
to decorate tombs, jewelry, figurines, and beads.
The oldest known objects worked from gold were discovered
at a burial site in Bulgaria and were made by members of the
ancient Thracian civilization in 4400 B.C.
Since then many societies worldwide have used gold for jewelry
and as money. Its monetary value shone so brightly that it
was a factor in driving Europeans to explore the New World.
During the 1800s, the United States and many other countries
relied on a system of money, called the gold standard, which
fixed U.S. currency to the price of gold and silver.
The system was rocked when the SS Central America and its
three tons of treasure sunk off the coast of South Carolina
in 1857. The loss led to the economic depression that lasted
until the Civil War.
In 1900 the Gold Standard Act officially set a golden value
for the dollar, but the act did not live long. In 1933 President
Franklin D. Roosevelt outlawed private ownership of gold,
except for jewelry.
The Bretton Woods system of 1946 (which established rules
for financial relations among the world's major industrial
states) allowed foreign governments to sell gold to the United
States treasury for $35 an ounce. But in 1971, President Richard
Nixon ended the system, and officially ended the gold standard.
Since then world currencies have not been formally linked
In the money
The latest price surge is not the first driven by economics
During World War I, a shortage of manpower closed many gold
mines. Mines were brought back into production during the
Depression. In 1934, the price of gold was raised from $20.67
to $35 an ounce, and production increased to more than 4 million
Although the $1,000-an-ounce mark does have an unfamiliar
and ominous ring to it, the World Gold Council’s analyst Milling-Stanley
points out that the benchmark is deceiving.
The previous all-time high of $850 in 1980 was the result
of “a slew of special circumstances,” Milling-Stanley told
LiveScience, such as inflation, 40 years of pent up investing
and the perception that Jimmy Carter was a weak president.
After 28 years of inflation and a weak dollar, it will take
a big push in the markets to surpass the 80s high in real
terms. Gold would have to hit $2,200 an ounce in today’s dollars
What is a Gold Karat?
Most gold jewelry isn’t made of pure gold. The amount of gold
in a necklace or ring is measured on the karat scale. Pure
gold is 24 karats. Bars of gold kept in Fort Knox and elsewhere
around the world are considered to be 99.95 percent pure,
24-karat gold. As metals are added to gold during jewelry
making, the gold becomes less fine and the number of karats
drops. For example, 12 karat gold contains 50 percent gold
and 50 percent alloys by weight. The word karat comes from
the carob seed. In ancient Asian bazaars, the seeds were used
to balance scales that measured the weight of gold.