Mining firms delight in rush to gold

The price of gold reached a record high Wednesday as investors uneasy about the euro put their money and their trust into the metal.

Gold for June delivery jumped as high as $1,249.20 an ounce, nearly $22 above the previous record of $1,227.50 set Dec. 3. It later settled at $1,239.10, up 5.9 percent from Tuesday.

The price surge was welcome news for Nevada's mining industry, which produces roughly 7 percent of the world's gold and nearly 80 percent of the nation's supply of the precious metal.

Mining isn't the Silver State's biggest industry by a long shot. It employed just 11,300 Nevadans in March, according to numbers from the state Department of Employment, Training and Rehabilitation. That's a fraction of the 301,300 workers the leisure and hospitality sector employed in the same period.

But research from John Dobra, director of the Natural Resource Industry Institute at the University of Nevada, Reno, shows that mining exerts an outsized economic impact on the state. Nevada's metals miners posted an average annual salary of $78,600 in 2008, the latest year with available statistics. That's compared to a state average of just over $42,000 a year. Throw in suppliers and other ancillary businesses, and mining was responsible for 51,850 jobs and $2.4 billion in personal income for Nevadans in 2008. That year, mining operators alone paid more than $225 million in taxes, more than half of which found its way into the state's general fund.

Higher gold prices don't mean Nevada's mine operators can raise employee counts and production immediately. Changing a digging site's output and scope requires new plans and permits and can take years.

What the higher prices do allow are increased searches for new gold reserves and production tweaks that extend the lives of their mines, said Doug Driesner, deputy administrator of the state Minerals Division. If operators mined their best-quality ore all at once, the low-grade ore left behind might not pay its own way when gold becomes less expensive, Driesner said. With more dollars per ounce today, operators can extract gold from lower-grade ore and hang on to higher-grade ore, which lengthens a mine's life.

Higher gold prices also mean bigger mine-sales totals, and that translates into more tax revenue for the state and its counties, Dobra said Wednesday.

"It's not the big gorilla the gaming industry is by any means, but still, it's more money for schools, roads and police," he said.

Nevada had 70.4 million ounces of gold reserves in 2008. The state is the world's fourth-
largest gold producer, after China, South Africa and Australia.

The state also has major mines yielding silver and copper -- other commodities seeing rising prices on world markets.

Even though European leaders agreed earlier this week to a nearly $1 trillion bailout program to support debt-burdened countries like Greece, investors are still skittish about whether weak European countries will be able to get their debt under control through cost-cutting. That uncertainty has driven investors away from the euro, which is used by 16 countries, and toward safer investments like gold.

Analysts say high debt levels in countries beyond Europe have led traders to reconsider how much to invest in currencies altogether.

"Clearly gold has become the only reserve currency not backed by debt," said James DiGeorgia, publisher of GoldandEnergyAdvisor.com. DiGeorgia said gold could climb as high as $1,500 an ounce this year.

The Associated Press contributed to this report.