While we are on the topic of scenarios, do you have a long-term outlook for gold? In 1934, they set the price of gold at $35 an ounce and gold production declined every year between 1935
and 1980. Production kept going down because there was no incentive to look for gold. During that whole forty-five-
year period, the consumption of gold kept going up, especially during the 1960s and 1970s, when we had the
electronic revolution. Demand got bigger and bigger, while at the same time, the supply was going down. You would
have had a great bull market in gold in the 1970s, no matter what. Even if inflation was at zero percent, you still
would have had a big bull market in gold during the 1970s, because of supply and demand.
The situation has changed entirely in the 1980s. There is nothing like taking the price of gold from $35 to
$875 to make people go into the gold business. Gold production has gone up every year since 1980. Just based on
known projections for mine openings and expansions, gold production is scheduled to go up every year until at least
1995. At the same time, there have been major technological advances in the recovery processes for gold. In short,
there is much more gold available than there used to be, and that trend will continue at least into the mid-1990s.
I own some gold as an insurance policy, but I don't think gold is going to be the great inflation hedge of the
1990s that it was in the 1970s, because supply and demand is so different. I don't know what the inflation hedge of
the 1990s will be yet, but fortunately, I don't have to decide today.
The supply/demand picture you are painting for gold is obviously negative. But if you put that together with a situation in which, using your own words, "the dollar disappears," wouldn't such an event swamp the internal supply/demand balance of gold? Certainly, gold may keep its purchasing power. It may do better, it may do worse, but it's not going to be the
best market.
