The meteoric rise in gold prices to a peak of nearly 900 per ounce on London exchanges earlier this year reflects international economic unease, rather than booming optimism. It represents the stashing of gold coins in mattresses on a massive scale.
For ten years international monetary authorities have been trying to 'demonetise' gold, and replace it with the IMF's Special Drawing Rights (SDR's). A country's credit-worthiness would then be based, not on its gold reserves, but on the health of its economy. But the struggle, led by US banking officials, has failed dismally.
The recurrent shocks of inflation and recession have made people turn to something that seems more solid and reliable. Although gold has no real value - in the sense that it has few practical uses - many investors would rather trust in other investors' faith in gold - however irrational - than in the vagaries of stocks and shares.
Gold's position was strengthened further last March when members of the European Monetary System - led by France and Italy - adopted it as the basis for conversion of the new European Currency Unit.
And the thirst for gold is never quenched. Although perhaps a total of 1200 tons of new gold comes onto the markets each year, the price continues to rise. The countries benefiting most from the price rises are South Africa - who produced 706 tons in 1978 - and Russia - producing 400 tons. Other producers - the US with 36 tons, and Canada with 53 tons - cannot compete with this level of output. South Africa produces 73% of the West's gold.
A high gold price guarantees an economic boom in South Africa. More and more Western firms want to do business with a country that can so obviously pay its bills. And South Africa is treating its precious resource with care. Their policy is to prolong the life of their mining industry. Taxes discourage companies from working their most profitable seams, and subsidies keep less fruitful mines in operation.
If gold holds an average of only 400 an ounce this year, revenue will rise nearly threefold from an estimated $1.4 billion in 1978-1979 to $4 billion. You can pay for a lot with an income like that. And to a government still bent on buying time for apartheid, the gold rush has been a godsend.