JOHANNESBURG — For centuries gold has been deemed the most precious of metals. Currencies were traditionally backed by bars of gold; weddings, sanctioned by gold rings; the Olympics, crowned by gold medals.
During World War II, mountains of gold were smuggled out of war zones and placed into safe vaults as a reserve of last resort.
But governments, especially now, increasingly question the logic of holding on to something that pays no interest.
As a result, the price of the shiny yellow metal hovers near a three-year low - around $350 an ounce, down about 3 percent for the year and almost 14 percent from its peak in 1996.
That compares poorly with stock market performance worldwide, up as much as 20 percent for 1996.
As a result, a number of countries may move their gold stocks to the auction block, threatening the price even further.
Much of the fall stems from concern that European central banks will sell off their gold reserves in the run-up to European currency union in 1999.
"Gold really lost its monetary role more than 20 years ago," says Stewart Murray, chief executive of Goldfields Mineral Services Ltd., a London-based consultancy.
"Gold is an asset of last resort, it is the ultimate guarantor of a country's financial soundness. That role may continue, but it has been increasingly questioned."
Many analysts see 1997 as a crunch year for gold's future. European countries must reduce debt to meet strict criteria for European monetary union. And European central banks are debating whether to dump large quantities of gold reserves to raise cash.
Much of the world's gold sits in central bank vaults - some 30,000 tons - equal to more than a decade of world mine production.
The central banks of industrial countries hold nearly 30 percent of their reserves in gold. The United States alone claims 8,146 metric tons.
The argument in favor of emptying vaults is that gold's monetary role has been diminished since the fixed link between the dollar and gold was severed in 1971.
A new generation of central bankers has no emotional memory of gold's old role during depressions and wars. What they see is a lack of return and liquidity.
Advocates of selling gold claim the proceeds could be invested in something with a yield, US Treasury bonds for example, which currently pay about 6.8 percent.
That prospect gives gold prices the buoyancy of lead.
The European Union (EU) has ruled that gold sales cannot be used to reduce deficits, but that hasn't stopped some European countries from selling gold as a non-performing asset.
Among them is the Dutch central bank, which announced last month that it had sold some 300 tons of gold in 1996. This followed the sale of 400 tons in 1992.
Belgium, Austria, and Canada have also reduced their official gold piles over the past 10 years.
Gold's diminished role was underscored dramatically by the International Monetary Fund, a bastion of conservative economics, which recently considered selling 5 percent of its stocks, or about 150 tons. Some members, particularly Germany, opposed the sale, and it fell through. But gold analysts say the proposal could be revived.
Some analysts say that gold-dumping by European central banks may not materialize. They cite a lack of evidence that any of the richest European countries plan to sell their gold. They also note that Italy, Belgium, and the Netherlands don't have enough gold to satisfy EU debt requirements.
Gold's eroding importance is troubling for South Africa. The world's largest gold producer, it accounts for one-fourth of the world's annual 2,000-ton output, says Roger Baxter, senior economist with South Africa's Chamber of Mines.
The recent drop in the gold price has serious implications for South Africa's balance of payments and monetary policy, he says.
But the country's mining companies are more optimistic. "We do not believe that the outcome of this debate will be as cataclysmic as some commentators have concluded," says Kelvin Williams, marketing manager of South Africa's AngloGold (AngloAmerican), whose 200-ton output makes it the world's largest producer.
He notes that gold is still prized for many purposes: jewelry, industrial use such as electronics, investments, and coins.
Even the most bullish analysts concede problems, however. The paper trade - securities that represent gold - in gold is bigger than the physical one, and investment funds, particularly in the US, are frequently bearish on the bullion.
"The real focus now is what is going to happen in the run-up to the European Union central bank," says Mr. Murray.