Glitter of Gold Fades as Price Continues to Slide

Has the glitter gone out of gold?

Not in India, a country renowned for its goldsmiths, where well-to-do brides approach the altar elaborately draped in gold rings, necklaces, earrings, bracelets, tiaras and other wearable wealth. Once married, they keep their jewelry as reserves against bad days.

Not in Japan, where patrons of the former Funabara Hotel on the Izu Peninsula once splashed around in a 22-karat, 313-pound gold bathtub shaped like a bird.

And not in the United States, where high school and college graduates buy tons of gold each year in the form of class rings--one of the country’s largest markets for gold.

But, ever since the price of gold began falling from its historic high of $850 an ounce in 1980, gold fanciers have wondered if the noble metal will ever soar again. Its recent performance, vacillating between $345 and $370 during the last six months of 1991, has not stirred confidence.

“The past two or three years have been very painful for people who have always considered gold and precious metals as an investment,” says Alan Posnick, senior vice president of New York’s MTB Banking Corp., a major dealer in gold coins.

“Gold can be considered security and a lot of other things,” Posnick said. “But, quite simply put, gold is no longer an investment.”

It is, however, still beautiful.

Although there are high-tech uses for gold--in electronics and in reflective coatings for windows and space helmets, for example--jewelry-making consumes the lion’s share of the world’s gold.

The metal is uniquely suited to the purpose. It boasts a heft, feel and innate beauty that excites human passions; a chemical inertness preserves its warm yellow color; malleability makes it easy to shape into ornate objects.

Mines produced 1,734 tons of gold worldwide in 1990. Additional scrap or “old” gold that was melted down and reused, and gold from other sources, brought the global supply to about 2,799 tons--roughly the weight of a small naval frigate.

From the ancient world to the modern, the geographical location of gold reserves has helped determine the wealth and international influence of nations.

When King Tutankhamen was sealed in a golden sarcophagus 3,000 years ago, gold already was firmly established as the fountainhead of national power. Much of ancient Egypt’s influence, and the power wielded by Tut and other rulers, originated in the plentiful flow of gold from Egyptian mines.

Most of the roughly $93 billion worth of gold (at the current market price) owned by the United States government resides under heavy security at Ft. Knox, Ky. An even bigger stash--more than $112 billion--is in the basement of the Federal Reserve Bank in New York, property of foreign countries that still consider the United States a secure place to keep their hoard.

Russia long has been a major gold-producing country. In the 19th Century, Russia produced 60% of the world’s gold. From the 1930s until 1990, the Soviet Union ranked second among the world’s producers. Most gold reserves are in the independence-minded Siberian region of Yakut-Sakha, which has demanded to keep one-third of its production.

But before becoming the Commonwealth of Independent States, the Soviet Union slipped from second to third among the world’s top gold producers in 1990, swapping places with the United States. South Africa remained the leading producer. Australia ranked fourth and Canada, fifth.

Viktor Gerashchencko, former head of Gosbank, the defunct Soviet central bank, announced last October that the value of Soviet gold reserves had dwindled to less than $3 billion at market prices then prevailing. The revelation shocked experts, who thought that Soviet reserves totaled close to $30 billion.

Internationally, the performance of gold as an investment has dropped sharply over the last several years. The reasons have to do partly with changes in monetary policies of the world’s governments.

To stem the flow of United States gold to nations demanding gold for dollars they were accumulating as a result of trade imbalances, the United States stopped backing up dollars with gold in 1971. Other countries also have abandoned the gold standard.

“Gold is no longer considered a form of money like it used to be at one time,” said the Federal Reserve System’s Joseph R. Coyne. “It’s fallen more into the category of a commodity.”