As gold bubble deflates, tired excuses will soon follow

By J. Patrick Coolican

Saturday, March 24, 2012 | 2 a.m.

Well, no one could have predicted this. The The Financial Times reports that “investors are losing their enthusiasm for gold as signs of improvement in the U.S. economy tempt them away from the traditional haven.”

And if it’s made the financial press, you know the bubble has really started to deflate in earnest.

Since 2001, the price of gold has increased more than sevenfold, from just $253 in 2001 to a peak of nearly $2,000 last year, according to the FT. Now it’s down to $1,665 or so.

For the life of me, I can’t figure out why, but people put their money in gold when they’re anxious and economic volatility abounds. And the past decade, beginning with the terrorist attacks on the United States, has been a period of extreme economic volatility, with destabilizing wars, the financial bubble and the Great Recession.

Especially since ACORN fixed the election and the scary Muslim usurped the White House, gold has become a favorite investment of the likes of Glenn Beck, which has driven still more white-knuckled La-Z-Boy occupants to invest. To be fair, newfound wealth among the middle classes of the developing world has also probably increased the demand for gold as decorative jewelry.

Rural Nevada, which is one of the prime gold mining areas of the world, has enjoyed significant prosperity during this boom, halting what had been a long slide into economic stagnation.

The chief beneficiaries of the gold boom, however, are two companies: Barrick Gold Corp. and Newmont Mining Corp.

So, one might think Nevada’s tax coffers would be overfilled with revenue from the gold boom. Nope.

The tax on gold is set in the Nevada Constitution at 5 percent of net proceeds. They’re allowed to deduct a bunch of expenses before the tax is calculated.

They also pay property, payroll, sales and use taxes like the rest of us, but all in all, they have an extraordinarily sweet deal.

But now, with the American economy recovering, investors sense the end of the gold bubble because money is going to start flowing into, shall we say, more productive arenas, like new companies and factories and so on.

Of course, anything is possible. We could have another war in the Middle East or the American economy could stutter again, and gold would probably recover.

But on the present course, I know exactly what we’ll hear if voters are faced with an initiative to increase the mining tax, or what I’ll hear from lobbyists and credulous legislators in Carson City next year if the price of gold continues to float down.

Oh, woe is the gold industry and the proud communities that mine it! Now is no time to raise the mining tax!