George Pitcher: Why the WGC is a fool to expect a fresh gold rush

So the World Gold Council (WGC) has decided to double its membership fees for gold producers in order to launch a &£14.3m advertising campaign for overpriced trinkets through Bartle Bogle Hegarty (BBH). The agency should have known better but, presumably, it has been seduced by all that glisters.

The WGC reminds me of a medieval despot, doubling the taxes on his struggling surfs so that he can go and fight a crusade in some remote land.

Gold is fast becoming a semi-precious metal, as it plunges towards its lowest value levels for 20 years. It closed last week at $259 (&£185) an ounce, after losing $3 in late trading on Friday. It was at $312 (&£223) a year ago and is expected to crash as low as $210 (&£150) this year.

All of which is of little concern to BBH and to ballerina Darcey Bussell, who has been draped in baubles for the campaign. They are all in the money as a result of this “marketing blitz”, as it was styled at the weekend. But it may be of rather greater concern to gold producers, who have to be sold the idea that the industry can market itself out of trouble, as the price of their raw material spirals downwards.

It’s difficult, though, to summon up much sympathy for these producers, either. Some of us might even feel the guilty burden of Schadenfreude, and be less likely to respond “ahh” to these afflicted industries than “ha ha”.

The precious metals and jewellery markets must have been among the most manipulated in the history of business. Gold and diamond producers have historically released only enough volume from countries such as South Africa into markets in London and Amsterdam to protect their absurd premiums. Only the foolishness of those with more money than sense has matched the greed of suppliers.

There are still those elderly members of the gold market who must hanker for the days of the gold standard, when the value of currencies was defined by comparison with gold, meaning that a country’s wealth was established largely by its gold reserves. That system was swept aside by the harsh economic realities of the First World War, but managed a revival until the Depression of the Thirties, when again the central absurdity of the gold standard was revealed.

Still, it took until the late Nineties before the Bank of England found the bottle to dispose of its gold reserves, which had acquired some kind of mystical connection with the security of the nation. Happily, those who aren’t old ladies in Threadneedle Street made the emotional break with gold years ago.

The ludicrous glitterati of Hollywood and those who sought to emulate them were effectively undermined by mass-market retailers of the Seventies and Eighties, such as Gerald Ratner and catalogue merchants such as Argos, which unwittingly removed the very mystique on which the jewellery markets depended for their premiums. Gold was no longer exclusive. And the economically privileged and socially aspirant (not to mention socially insecure) want to buy exclusivity.

This is at the heart of the problem that the WGC and its hireling ad agency and ballerina face. I await their treatments with interest, but you can bet your crowned teeth that gold will be presented to us as sumptuous and glamorous and in some way mysterious. Anyway, we can rest assured that we won’t be asked to buy gold because it’s good for our spots or because it’s a good investment when the rest of the economy is going down the Swanee.

That’s because neither of those propositions are true. But nor, post-Ratner and post-Argos and post-social mobility can it be true that gold is glamorous and exclusive. It’s not even – whisper it who dares – very beautiful. If it were, it would be the subject of rather more artistic demand. But the consumer market, unencumbered by a desire to act like a pools winner of the Sixties or a medallion man of the Seventies, is demonstrating that it prefers the aesthetic cleanliness of silver and platinum.

I recently pointed out that Marks & Spencer’s historical market has gone in the process of economic evolution and that there was no point, through a deal with Asda’s George Davies, in pretending otherwise. So it is, on a far grander scale, with gold. The market for gold isn’t sleeping, it just isn’t there anymore. Quite literally, if I may make this point without sounding glib, in the case of India – gold’s largest market – in the wake of the devastating effect of the earthquake there. The earthquake in Gujarat has so adversely affected the economy that the market for gold will have dried up for a considerable time to come.

And that’s a further illustration of what I mean. India has been a fantastically fast growing economy of late, but remains behind the West in socio-economic development. It’s little wonder then that India should be at levels of gold consumption that we haven’t embraced for decades.

Finance leaders of the G7 economies meet this weekend in Palermo, Sicily, possibly one of the most backward and underdeveloped regions of the European Union. When I was there in the Eighties, I met local “industrialists” dripping with gold. With the brakes firmly on the US economy, I trust the G7 will concentrate on the economic growth in the future that the likes of technology, bio-science and telecoms can offer. If gold has applications in these industries, good. If it’s about trinkets and baubles, good riddance.

George Pitcher is a partner of issue management consultancy Luther Pendragon