Submitted by Bryan Kida as part of our contributors program.
The Olympic Summer Games in London this year will have over three hundred medal events in over 32 sports. This means that over three hundred gold medals will be awarded to top athletes from around the world. Before the gold medal, silver medals were given to the winners of the Athens 1896 Olympic Games and trophies and cups were given to Olympic winners of the 1900 Olympics in Paris. If you want to go way back in time, winning athletes were crowned with olive leaf wreaths in the Olympia Greece Games. The custom of awarding gold medals to the winners, and silver and bronze medals respectively to the second and third place athletes, started at the St. Louis 1904 Olympics. The gold medal has long been coveted by Olympians and Olympic hopefuls. But has anyone stopped to think about whether or not the gold medal is actually made out of gold metal?
The Olympic gold medal, according to Anne Marie Helmenstine from about.com, is made of 92.5% silver! That’s right, the Olympic gold medals to be given in London’s summer games will be sterling silver plated, with six grams of twenty-four carat gold. In fact, the last real gold medal was awarded at the Stockholm Olympic Games 1912. So yes, the Olympic gold medal is plated with gold metal, but is mostly made of silver. It has been one hundred years since anyone has received a real gold medal from the Olympic Games. Why?
It could be due, in part, to the rising cost of gold. Indiabullion.com shows that gold back in 1912 sold for $20.67 per ounce. China.org.cn states that gold at the end of the year 2000 was $272 per ounce. Of course, one must consider the effect inflation and cost of living has on the price of gold and relative buying power between now and a hundred years ago. But currently, in the year 2012, gold sells for around $1,500 to $1,600 per ounce. So from the year 2000 to 2012, the price of gold has increased nearly six fold. With such an increase in gold prices, the gold mining industry has become more lucrative and aggressive than ever.
Another factor leading to the presentation of a mostly silver gold medal at the London Olympics is the dramatic increase in the world population. On the earth, there is only so much of each resource. With more people on the earth, there is more demand and less supply for those resources. Since 1912, the world has seen its population grow from 1.65 billion people to over 7 billion people, as of March of 2012. That is almost 6 billion more people demanding the earth’s resources like food, water, oil, and in this case gold.
With all the growth in the gold industry, companies like Newmont Mining Corporation (NYSE: NEM) and Barrick Gold Corporation have invested heavily to have presence in the international market place. This is can be seen by Newmont’s operations being spread over four continents and Barrick over five continents worldwide.
A drawback of being an international corporation is being vulnerable to the welfare of the international economies. For example, India and China account for 49% of the world’s total gold demand and 55% of the global jewelry demand. So if either of those countries’ economies have trouble, Newmont and Barrick Gold have to ride the waves of economic uncertainty in those respective countries.
Although the international market effects the gold prices, it plays in the favor of the smaller, more nimble, domestic mining corporations like Pershing Gold Corporation (OTC:PGLC). This newly formed gold exploration and development company is specific to Nevada’s Pershing County. Even though Pershing Gold is a smaller company than Newmont and Barrick and operates all in one specific area, Pershing has positioned itself to be able to ship their gold from the mines to their ore facilities by truck instead of having to ship from continents away by air or sea.
This smaller mining company has attracted attention within the mining industry. Coeur d’Alene Mines Corporation (NYSE:CDE), a competitor in the mining industry to Pershing gold, invested in almost 11 million shares of Pershing Gold at $0.32 per share. It is peculiar for a company to invest in their competitor in any industry. It would be like Coca Cola buying shares of Pepsi Co. or Ford investing in General Motors. The interesting thing about Coeur d’Alene’s purchase of Pershing Gold’s stocks is that they paid fair market value prices for their shares. They did not get, or attempt to get, a discount for investing as much as they did with their competitor. This means that individual and independent investors, like the average Joe, can invest in Pershing Gold Stock at about the same price as a bigger corporation like Coeur d’Alene.
Other notable investors include Dr. Phillip Frost and Pershing Gold’s own executive chairman and CEO Steve Alfers. Dr. Frost is the man who built the $7 billion company Ivax, invested in and was chairman of the board of directors for Key Pharmaceuticals, and is currently the CEO and Chairman of OPKO Health, Inc. Alfers, who formally lead a $6 billion company and has a track record of building companies from the ground up, invested $1 million in Pershing Gold upon stepping into his current role for the company.
Pershing gold is still a young company. It has support from investors, as seen above, and realizes that the ultimate payoff will come from strategically taking advantage of the record high gold prices.
With silver prices less than $30 per ounce and gold over $1500 per ounce, handing out gold plated silver medals at the Olympics instead of real gold medals makes a lot of sense. If gold prices keep increasing, and if silver follows suit, will gold and silver plated bronze medals be the next trend? At the end of the day it does not really matter what the Olympians receive for winning in their event. The athletes from around the world have still come near and far to compete in past and present Olympic Games even as the prizes for winning have changed.
