CULTURE CHANGE MEDIA INTERNATIONAL EDITOR
New York, NY - October 5, 2004

It is a given, when there is political turmoil and the price of oil goes up, so does the price of gold rise. Austria is not an oil power, but it decided to become a gold power. When the Austrian mint was purchased by the Central Bank from the Ministry of Finance in 1989, a decision was taken to mint a one-ounce bullion coin in pure gold. Austria decided not to mint a commemorative coin, such as a Mozart gold coin — it rather opted for a “living Institution,” and Austria’s most famous institution is its Philharmonic Orchestra — so was born the Vienna Philharmonic gold coin. From 1989 to 2004, a total of 8.3 million coins were sold, stacked, one on top of the other, that would reach almost 45,000 feet.

Now the price of oil is pushing for new heights and so is gold. (Let us remember here that in 1979-1980 when the price of oil was high, the price of gold shot up to $875/oz., and now, perhaps, we are again starting on an upward spiral).

To mark the 15th anniversary of the “Vienna Philharmonic” success story, on October 5, 2004 the Austrians unveiled at the Neue Gallerie in New York, the biggest gold coin ever minted. This is a monster Wiener Philharmoniker coin that weighs 68.57 pounds, or 1,000 troy ounces of pure gold. The diameter is 14.5 inches and it is 0.79 inches thick. It has a face value of 100,000 Euro, at present exchange rate about $US 121,000.

It looks like it could be used as legal tender for paying for oil — though we must note that the oil business is still done in US dollars rather then in Euro. Nevertheless, the oil exporters, having learned about the low value of the US currency, do indeed hedge their deals by betting on the monetary exchange values. That is why, unless we take steps to introduce alternate fuels to the presently used petroleum fuels, the above coin in a time of $60/barrel could be used very soon to buy about 200 barrels of oil. That is unless the price of gold also moves up and then Austria could get probably 220 barrels per coin.

The “Vienna Philharmonic” is the only bullion coin with a Euro face value. As such it presents itself around the world as the investment coin from Europe. Its chief overseas markets are North America and Japan. In the US it has a respectable 7% of the market alongside the Eagle and the Canadian Maple Leaf. In Japan two out of every three buyers now choose the Euro coin. More seriously, it can be expected indeed that oil exporters may choose to store value in these coins at a time of “termoil.”

Obviously, gold does not pay dividends, but if it stores value, this is more important at times of turmoil.

At the unveiling, the host speaker was Dr. Wolfgang Duchtczek, Vice-Governor of the Central Bank and Chairman of the Austrian Mint, and guest speaker was Columbia University Professor Robert Mundell, winner of the 1999 Nobel Prize in Economic Science who also played a role in the founding of the Euro.

Professor Mundell presented the history of gold and showed the relation between turmoil and the value of gold as represented by the gold/silver price ratio, e.g., when on April 2, 1810, Napoleon married Marie Louise to insure peace, the ratio fell to a low of 5/1

Professor Mundell also mentioned that if there will ever be a real global currency it will be backed not just by paper but in part by gold. Remembering the discussions years ago of having a whole basket of commodities to back the currency, it seems that oil may have a part to play here also. Oil in storage may then be as good as gold.

The UN tried also to play with the subject — gold. At the end of the seventies/beginning of the eighties, the UN Institute for Training and Research (UNITAR), tried to figure a way how to deal with countries that had a non-convertible currency. As, at that time, the world included the two blocks - the Eastern Europe and Communist countries, and the Developing countries, the Research desk at UNITAR decided to focus at first on the Soviet Union and on Brazil. Both countries are exporters of gold. Their sale of gold to the commodity market tended to depress the price of the commodity, so UNITAR thought that if instead of selling the gold, the Soviets and the Brazilians could rather deposit the gold in some acceptable neutral bank, i.e. in Switzerland or Austria, such a neutral bank would then issue papers backed by the deposited gold. Without the actual sale, these papers would trade at a premium, because the commodity did not reach the market, and would remain the property of the respective countries.

These gold-backed bonds would thus bring in to the previous exporters more than the sale of the commodity, and would also provide these countries with papers that were in effect a convertible gold backed currency. The idea sounded neat but was rejected by the Soviets. In retrospect, one could say that the history of the Soviet Union may have been perhaps longer had they given their backing to above idea.

(This article was first posted on CultureChange.org)