By Neil Collins, City Editor (Filed 23/05/2002)
Ingot they trust after the course of history restarted on September 11
War fears send gold to two year high Picture the scene. It's mid-January in the freezing mountains of Afghanistan and Osama Bin Laden is holed up in the Tora Bora cave complex. US and British forces are preparing to go in for the kill with their bearded chums in the Northern Alliance. But the Afghans won't budge. They want to be paid. In vain they are tempted with paper money. Dollars? Pounds? Or, in desperation, euros?
According to a well-informed report in The Spectator magazine at the time, not until some nice heavy glinting gold bars had been flown up, would the Northern Alliance so much as raise a Kalashnikov in the fight against global terrorism. After all, any old warlord can print money.
Gold, by contrast, is the true global currency and rests on nobody's promise to pay. By the time the British and Americans had learnt this painful lesson, Bin Laden and his merry men had slipped away.
Now the market is learning that ancient lesson too. For the best part of two decades, gold has been in a bear market after it touched $800 in 1979 during the last oil shock.
And thinking about it, if ever there was an epoch likely to produce a bear market in gold, it had to be just such a time of peace and prosperity we have just lived through. The Cold War finished, leading one academic to say that the End of History had arrived.
Gordon Brown, who sold 425 tonnes of British gold at the bottom of the market, was not the only one fooled by this attractive myth.
Well, history restarted on September 11 and gold has been a conspicuous beneficiary. The dollar, the backbone of the world financial system, is looking green about the gills as the recovery in the US economy has yet to feed through to profits or to Wall Street.
Euros and Yen do not look especially attractive. So investors are turning to gold. And what do they find? There is a shortage as no new mines are being built. The nervous citizens of Japan, India and Pakistan, who do not trust their governments, prefer the precious metal as a store of value. This is a bull run with some way to go. Just ask a Pathan tribesman or a mujahideen.