Fair Trade Gold - Challenge to Investors

I watched the Channel 4 Dispatches programme "The Real Price of Gold". The programme made some good points, but also failed to really grapple in depth with what is a complex issue. In some respects, the information was a little dated and perhaps edged on the side of sensationalism with some of the statements and inferences that were made. This might simply be due to the "big story, not enough time" problem of TV.

OK, so first off, if asked the question - "would you prefer to buy gold that has come from somewhere where children are the miners and have little or no safety - or buy from properly sourced gold mines where ethical and environmental practices are followed?" I doubt anyone would select the former option.

The key is (as with any hazardous industry) how is demand met, by doing something that is innately dangerous, with as much danger removed? In one sense, the case was made for large scale gold mining operations that are well run and properly managed. However, these are not without their difficulties as the process of mining gold produces byproducts and waste - that needs very careful management. They also use a huge amount of water, a resource that is becoming increasingly scarce. This raises some very valid environmental and health questions for which mining companies need to find solutions. The case of the San Martin mine in the Siria Valley, Honduras with the impact on local water and health is one that should concern anyone and the statements shown (as coming from Goldcorp) were (and I have no axe to grind) without context, which as we all know is everything. The Goldcorp website suggests that the mine was closed in 2007 and the site is being rehabilitated. The comments by University of Newcastle Professor Paul Younger are deeply disturbing. A quick Internet search provokes questions about the way in which the mining company have handled this matter. The rightsaction's film "All That Glitters Isn't Gold" would concern anyone. I have taken this up with Goldcorp and with the Fund Manager.

The Dispatches report suggests recycled gold is the solution. It certainly can be part of the solution - but it would be naive to think that this would solve the problem. If all gold mining ceased then the available resource is more limited, pushing the price up and of course increasing the likelihood of "illegal" mining to occur. The pressure of poverty drives children (and adults) to search for gold, which is not well explored in the Dispatches film. I would imagine that this gold ends up in the black market and could potentially end up anywhere. I am very dubious about the inference that 10-20% of the gold supply is mined from Senegal and child labourers. I think this is at best sensationalist. In such ad-hoc mines there is no regulation, this is do it yourself mining. The "proper" mines are not driven by poverty, but by business, which one might describe as greed. An uncomfortable term, perhaps - meeting a need at a profitable price is more palatable. Good business needs to be sustainable and can of course create wealth and prosperity for many.

The World Gold Council have stepped into centre stage with a clear attempt to identify the source of gold with their ethical standards. Deirdre's report reminds us that as consumers and investors we are partly responsible for the situation and now that the genie is out of the bottle (by way of information) we need to play a part in finding solutions. I do not believe that regulation removes corruption or greed, but at least it provides a framework and set of guidelines that hold individuals and companies to account. Sadly, gold is often mined in parts of the world where Governments rarely represent their people and corruption is rife.

Investors see gold as a safe haven which is particularly required during volatile periods, arguably gold is safer than cash in a post-credit crunch world. So these are issues that investors are forced to grapple with as a result of portfolio diversification requirements.

If we count ourselves as the educated and fortunate elite (on a global basis) we must also shoulder the burden of responsibility, that the poor are not exploited in pursuit of our security or pleasure. I recognise that there are no quick and easy answers. My own view is that active engagement with problems is the journey towards solutions. I do not believe that denying that difficult questions exist or working as though everything will be OK in the end, is a path to justice or indeed a good life. The wise know that the safest world is one in which your neighbour also prospers. Thank you Channel 4 for raising this issue. I don't really think shouting from the top of a double decker in London is terribly effective, but at least the discussion has been given a platform here in the UK, albeit rather late to the debate. Here is the Cred Jewellery website and video found on their home page produced by the fair trade organisation. If you would like to add your voice to the Channel 4 Dirty Gold Pledge you can do so by clicking here.