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Gold Is Where You Find It
(March 18, 2006) In tabulating our year-end inventory using the year 2005’s final gold trading price of $513, I am reminded that gold began the year 2005 with a spot price of $427. To coin a phrase, a lot of water has gone over the dam since then.
January 4th's gold price of $513 seems so long ago, yet it was only about ten weeks past. With gold prices running up and down the ladder in a range this month of $535 to $568, it should be kept in mind that gold traded above $500 for the first time in over 20 years just this past December. To say the least, this is all new territory for gold.

2005 was gold's 5th consecutive year of higher prices. Yet, it still feels like an accumulation phase, with people just sort of tip-toeing away from the dollar. The graph of gold prices has not yet gone parabolic, and we are still a ways from the tipping point in which we see a real rush for the exits.

Will gold prices fluctuate this year? No doubt they will. But the recent tumble in gold prices, from nearly $570 In February down to the $535 level reached early on Friday 3/10/06, was immediately met with this week’s rally of nearly $20. Of course, the short term outlook for gold, as always, is anyone’s guess. And our clients for the most part have the fairly low blood pressures enjoyed by accumulators with a long-term plan, in contrast to traders who have to sweat daily and hourly movements in the market.

Our record sales for 2005 reflect a definite and growing movement of money into physical precious metals. Many motivations are at play. If nothing else, you can chalk it up to the simple security achieved when earned dollar assets are ‘banked’ in that most traditional of manner – via conversion to the timeless wealth known as gold. When stocks are choppy, interest rates uncertain, the US economy a question mark, real estate seemingly overblown, and the dollar an electronic cipher, who among us doesn’t sleep a little better with some hard assets tucked away?

On another note, I have received more favorable comments about my January 29th story, “A Man Walks in With a Bar,” than about any other of the articles that I have posted on this website in its seven-year history. But, alas, I still don’t know the rest of the story. As we left it, the two possessors of the ersatz ‘gold bullion bar’ have not come forward to finish the tale in all its gory details. All I know is that the older man obtained it from the Philippines some years prior, and somehow involved the younger man in the project to cash it in, to the tune of the younger fellow coughing up $30,000 cash American. Perhaps I’ll never hear more, but if I do, so will you.

Gold, of course, is where you find it. Here in Arizona, a state essentially founded on mineral wealth, we have on occasion assayed and purchased gold as it comes out of the ground. For instance, and initially to my complete surprise, from sand-and-gravel operations.

I didn't ever give much thought to sand-and-gravel yards. Out here, they are basically claims to large parcels of dry river beds, marked by piles of rocks and sand. The essential function of a sand-and-gravel is to take the mineral content of a stream bed, and separate it through various size screeens into large river rock, smaller sizes of rock, different grades of gravel, and so forth on down to various finenesses of sand. Such is then piled up, and sold to the construction and landscaping trades.

But the most interesting product of such operations is not something which you can see piled up in the yard. In certain parts of the West, the densest rock which filters down during this winnowing process is native gold. Of course, this is handled with a bit more secrecy than such an operation's more prosaic products. After we were first hired to assay and refine a batch of this placer gold (presented to us in gallon jars, each weighing a few kilos), I no longer thought of such businesses as boring, dirty, low margin enterprises ever again.

Besides serving our larger assay accounts, I have also met many a weekend prospector, and examined their finds. For most of them, armed with metal detectors or simple dry-wash equipment, the pickings are fairly meager. But, it’s a great hobby that brings people outdoors in the vast beauty of Arizona, and there is no discounting the thrill of the hunt, and the possibility that the next shovel-full could bear a sizeable bit of ‘color.’

Last year, I saw a customer of mine who, as a hobby, had spent years seeking gold in the Lynx Creek area near Prescott, a town which was once the territorial capital of Arizona. Lynx Creek has been for over 150 years one of the most explored sources of gold in Arizona. The early Arizona gold strikes were in that area, and some commercial gold claims are being worked there today in what is now a National Forest. Activity there started in the 1850s, when miners fanned out all over the West after the California strikes petered out. Many found gold-mining success up in those piney woods, with Lynx Creek right in the middle of it.

Because of that history, I would have thought that the chances of scoring a sizeable nugget from that played-out area were pretty slim. But our customer discovered a bit of a geological anomaly up there: in one part of Lynx Creek, the creek-bottom is solid rock, but he and a friend found a section where there was a crack in the rock that went the width of the creek. They rigged a long pole with a spoon-like contraption on the end, and with that, ‘spooned’ up what they could in the way of mud, stones, and debris that had fallen through the crack over the ages. One day, they brought up one of the largest natural gold nuggets that we have even seen from an Arizona digging, a smooth and somewhat porous piece of nearly pure gold weighing about an ounce and a quarter.

Which is to say, there is still gold out there. And sometimes, it’s found in the most obvious places. Earlier this month at our store in Arizona, we received a phone call from a young woman whose great-aunt had some placer gold from the Sierras, home of the original California gold rush of 1849. It seems that her great-uncle owned some 20 acres a few miles from the aptly-named Placerville, and through the middle of the property ran a stream. In 2002, at the age of 80, this fellow had started some gold dredging in that stream, more or less as a hobby.

Now, a gold dredge is simply a machine that floats on water for the purpose of gold mining. Dredges can be huge, the industrial-sized ones used in large streams being as big as the riverboats that Mark Twain used to pilot on the Mississippi. No matter what the size of the dredge, the function is the same: scour the stream-bottom and scoop the mud and rock aboard, where it is sifted and sorted, and the placer (naturally occurring “native” gold, usually in the form of small, smooth nuggets that have been tumbling down the river for eons) is separated out.

This fellow’s dredge had been small, a one-man model less than six feet long. The story was, he had spent a few summers playing around with the thing. Since then he had passed away, and his widow, wanting to realize the value of his take, had engaged her niece to find out how to market the nuggets and little flakes of gold that had been left.

She brought in three little vials of gold, and also two substantial nuggets, the nuggets weighing more than an ounce apiece. I explained to the young woman that placer gold from that part of the world normally assays 85% pure gold or slightly better. We finally settled on a price for the two nuggets for outright purchase, and sent the small pieces off to be assayed.

In about a week, I called her with assay results (87.5% pure, by the way), and mailed her final settlement check. Along the way, I was told that the great-aunt is holding onto the largest nugget, one which is several ounces in weight, an egg-shaped piece smoothed by its millennia-long trip from the mother lode high in the Sierras, down the stream to the acreage near Placerville.

They’re not of a mind to part with it yet, but I certainly hope to at least see it someday.


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