Joubert replies to Sinclair essay

DENVER, Oct. 4 (Reuters) -- Is gold a currency, a
monetary standard, a mere commodity, or all three?

That was the question as international mining companies
and investors attending the annual Denver gold show
plugged gold's historic money role as a key to
eventually restoring the embattled industry's
prospects.

But the sad irony is that the once-venerated yellow
metal is behaving too much like a currency -- one that
has been mercilessly devalued in recent years. That
means that after a year of wrenching ups and downs,
bullion's fortunes are tied to the whims of the foreign
exchange markets.

quot;Gold is trading as a currency,quot; Bruce Hansen, chief
financial officer at Denver-based gold giant Newmont
Mining Corp., told Reuters as the conference got under
way Sunday. quot;Fifty to 60 percent of the weakness in
gold since 1996 is attributable to the rise in the
dollar.quot;

The gold business is a relic of the old economy
contending with a high-tech world of low inflation and,
until recently, booming stock and bond markets. Paper
money, specifically the unsquashable greenback, has
supplanted bullion as the backbone of the financial
system and fanned stubborn negative sentiment toward
the metal.

The 325 conferees at the Mining and Investment Forum
are pinning their hopes on an end of the dollar bull
run. When the greenback is inevitably knocked from its
perch, they say wishfully, it is to the rock-hard asset
that investors and governments will again look for
security.

quot;To me the dollar is over-owned right now. It's almost
80 percent of central bank reserves, which strikes me
as something of a high-water mark,quot; said gold fund
manager John Hathaway of Tocqueville Asset Management.

For history-conscious gold bugs, the only certainty is
that good times will come to an end, and that years of
euphoria about the U.S. high-tech economy, low interest
rates, and the end of the cold war is certainly
overdone.

quot;Such progress as we have in finance is not cumulative,
as in science, but cyclical,quot; said journalist and
market commentator James Grant, an avowed gold bull and
publisher of Grant's Interest Rate Observer.

quot;I am a believer in the long-dormant value of gold,
unlocked by monetary monetary developments,quot; he said in
a keynote luncheon address on Monday.

Central bank sales of their low-yielding gold to buy
assets denominated in dollars, euros and yen
contributed to the gloom, which pushed spot bullion
prices to two-decade lows last year. Not only has the
strong greenback created an aura of despondency around
dollar-denominated bullion, but it has had even more
measurable consequences for overseas demand.

Spot bullion prices fell to 12-month lows in recent
weeks as the dollar stormed to record highs against the
euro.

Also hitting new lows were the currencies of top-gold-
producer South Africa and third-ranked Australia, where
some producers have a reputation for actively managing
their hedge books from both the bullion and currency
sides.

The weak Australian dollar, which recently hit its
lowest levels since flotation in 1983, has lifted the
Australian gold price above A$500 an ounce, a level
that in the past was seen as attractive for Australia's
mining companies to lock in spot sales prices for
hedges of unmined gold reserves. The euro has recovered
somewhat from record lows two weeks ago, steadied by
concerted intervention by the major central banks. But
by that time, its fall had made the local price of gold
for European jewelry fabricators and investors too
expensive.

The depreciating rupee has also hurt demand in top
consumer India, where a lack of rain has already
reduced rural incomes and seasonal gold hoarding.

quot;In terms of investments, there is a role ( for gold )
to play,quot; said Jessica Cross, director of Virtual
Metals research. quot;You then have to weigh the
currency/commodity argument -- Is it a currency? Is it
a commodity? It behaves like both.quot;