The Value of Gold

I have been writing this blog during "interesting times" -- as per the old Chinese curse, "May you live in interesting times."

When I started "mining Aśvaghoṣa's gold" in October 2008, an ounce of gold cost around $US 750; or, conversely, a thousand US dollars cost 1.33 ounces of gold. Today the market price of an ounce of gold is $1650 US dollars, so the cost of a thousand dollars, using gold as the standard, has fallen to 0.6 ounces of gold.

In UK money, again, the price of an ounce of gold has more than doubled, from less than £500 in October 2008 to over £1000 now. Or to put it the other way, using the gold standard, the cost of £1K sterling has fallen from more than two ounces to less than one ounce of gold.

What has been happening?

Has the demand for dollars and pounds being going down? Has money become less desirable? Have people started to value American and British money less?

Or has the demand for gold been going up? Has gold been becoming more desirable? Have people been valuing gold more?

It depends which way one looks at it.

We are accustomed to see things in money terms. So for example valued in pounds sterling, the house where I live hasn't fallen too much since the peak in the housing market in around 2007 -- from which perception, I take comfort. But by the gold standard, our house has lost more than half its value -- from which perception, I feel anxious.

Gold has been rapidly rising in price not only in US dollars and UK pounds but also in euros and Japanese yen, in Canadian and Australian dollars, and Indian rupees and Chinese yuan. So it seems that the global demand for gold has been rising faster than gold-hoarders and gold-mining operations around the world have been willing or able to increase the supply.

When one starts to try to understand the components of global demand for gold, things get complicated, especially when the role of speculative investment is taken into account. But the broad picture is that during these interesting times global demand, or desire, for gold has been rising prodigiously, so that for anybody who, circa 2005, saw a banking crisis coming, gold has been a very good investment.

Maybe the price of gold will continue rising steadily. Maybe it will become a speculative bubble, if it is not one already, and burst. I seriously do not know. But I think the big rise in the price of gold over the past three or four years might be a reliable signal of history in the making.

What were the causes of the Renaissance which began in Italy from around 1400? Or of the European enlightenment from around 1650? Or of the Pax Britannica from 1815? I don't know. Historians and philosophers have competing ideas about the causes, and about the historical significance, of those golden ages of learning and international development. What is less open to debate is that for about 80 years from 1400-1480, for about 70 years from 1660-1730, and for the first 80 years of the Pax Britannica, people's desire/demand for stuff and the supply of that same stuff, were roughly in balance.

That demand and supply were roughly in balance in these periods, is not open to too much debate, because records show that prices of things didn't swing too wildly. When demand and supply of stuff remain roughly in equilibrium, this is definitively reflected in the relative stability of the price of stuff.

But when demand starts to outstrip supply, prices go up. And price instability tends to beget further price instability.

David Hackett Fischer, in his book, The Great Wave, Price Revolutions and the Rhythm of History, describes how each of the three aforementioned golden ages, the Renaissance, the Enlightenment, and the Pax Britannica, was preceded by a great wave of rising prices. The great inflationary wave which preceded the Renaissance crested and broke during the catastrophe of the Black Death, which peaked in 1348-50. Before the Enlightenment there was a great inflationary wave which culminated in the Thirty Years War (1618-48). And the Pax Britannica was proceeded by a period of rising prices during the 18th century which culminated in revolutions in France and America and the Napoleonic wars.

Fischer, writing presciently in 1996, describes how in the crisis before a period of price equilibrium, there are volatile swings in the prices of things, so that there are big winners and big losers, giving rise to heightened social inequality.

I read The Great Wave a couple of years ago, and I have recently been re-reading it.

Hacker quotes a statement attributed to Mark Twain: "History doesn't repeat itself -- but it rhymes."

We seem to be in the midst of a financial crisis right now, as has been reflected (so far) in the rising price of gold, and it may be that what Hacker describes as the "20th Century Price-Revolution," the most recent great wave, is about to crest and break.



So what? What has all of this talk of gold prices and golden ages got to do with Aśvaghoṣa?


The Saundarananda of Aśvaghoṣa has been called (by Linda Covill for one) "a story of religious conversion." Again, the Dalai Lama, when asked by Jeremy Paxman how to address him, replied "human brother," and yet this venerable human being is customarily referred to as "His Holiness."

For fuck's sake! How far have we really come since the dark ages?

Aśvaghoṣa, as I read him, was so far ahead of his time that even now, almost two thousands years on, we still haven't caught up with him.

If we are on our way, through interesting times, to a new period of equilibrium, akin to what Hacker identifies as "the Renaissance Equilibrium," "the Enlightenment Equilibrium," and "the Victorian Equilibrium," might that be when the value of Aśvaghoṣa's gold starts to be truly and widely recognized?

I absolutely do not know, any more than I am able to predict the direction of the gold market.

What I do know, having spent the last three years studying it in detail, is that the Saundarananda is not a story of religious conversion. If it is anything, it is a story of individual transformation. It is the story of a process of transformation that Aśvaghoṣa compares to the mining and refining of gold.


So in my next blog post, still on the subject of gold, I will shut up and let Aśvaghoṣa speak for himself.