Gold -- Sharefin, 08:36:36 01/08/03 Wed Italian gold jewellery trade worries over exports Prospects for Italian gold jewellery exports in 2003 are gloomy because of the global economic slowdown, soaring gold prices and a weak dollar, industry officials said on Tuesday. "The outlook is not encouraging as we are facing a slowdown in various markets, a strong increase in the price of gold and the threat of war in Iraq," said Andrea Turcato, executive director of Vicenza Fair, which hosts the world's biggest gem and jewellery trade fair in north Italy next week. ~~~ Italy is the world's biggest manufacturer and exporter of mass-produced and crafted gold jewellery. The country is also the largest single consumer market in Europe and an acknowledged international trend-setter when it comes to jewellery design. Biffi said Italian goldsmiths, renowned for their intricate jewellery designs, were already facing stiff competition from innovative jewellery manufacturers in Turkey, Israel and Asia who benefit from cheaper labour costs. Turcato said the consumer who buys gold jewellery by weight would fork out for higher gold prices, but those who buy designer jewellery from retailers like Bulgari and Cartier, priced per item, would not feel an immediate impact. According to its latest figures posted on website www.vicenzafiera.it, Vicenza Fair estimates that Italian gold jewellery exports fell 7.1 percent year-on-year to 4.07 billion euros in the first 10 months of 2002, weighed down by the sluggish global economy. Biffi said recent weakness of the dollar would harm Italian export prospects to the United States, Italy's main jewellery market, accounting for about a third of its sales.  Gold -- Sharefin, 08:30:57 01/08/03 Wed Do you need to hold more gold? Gold bugs such as Dow Theory Letter's Richard Russell are convinced the moves of the last month are just the beginning. "My choice for the sector to be in during 2003 is gold," he writes in the current issue. "I believe that gold is in the early stages of a major or primary bull market." Gold -- Sharefin, 08:25:14 01/08/03 Wed Gold Companies See Opportunities With Price Rise A higher gold price has given long-suffering gold companies a new lease on life, with the chance for more capital investments and smaller hedgebooks, but the world's biggest producers said on Tuesday it did not mean sudden production increases. Companies like Goldcorp Inc , a mid-tier Canadian producer which has accumulated over 180,000 ounces in gold bars, said the price was not high enough to warrant selling its bullion stocks. "We don't think it's high enough to consider selling the gold because we think we're still a long way from the top," said Chris Bradbrook, Goldcorp's vice president for corporate development. Bruce Hansen, senior vice-president and chief financial officer for Newmont Mining Corp , the world's biggest gold producer, said a higher gold price meant bigger profits and a chance to pay down debt and reduce hedgebooks further. ~~~ "We will still as an industry see less production in 2003 than we saw in 2002 and it'll be a slow turn assuming that these prices hold," he said. "I don't think production will regenerate at a rapid rate here so we think there's more upside than downside." Gold -- Sharefin, 08:21:04 01/08/03 Wed Newmont says gold rise won't lead to more output Newmont Mining (NYSE:NEM - News), the world's largest gold producer, said on Tuesday it did not expect the rise in the gold price to around $350 an ounce this week to lead to major production increases. "We're not going to turn on the spigots in terms of production increases here, but there are incremental components of various of our mines that we will re-evaluate...that were marginal at lower prices," Gold -- Sharefin, 08:19:50 01/08/03 Wed Placer CEO says to reasses uneconomical projects Placer Dome chief executive Jay Taylor said on Tuesday the rise in the gold price meant the company would reassess projects that were previously uneconomical at a lower gold price. He said the higher price gave Placer new confidence to spend money on technically difficult deposits like the Getchell gold property in Nevada, suspended in 1999 because of low prices, and the Pueblo Viejo asset in the Dominican Republic. Taylor told Reuters in an interview that Placer was on target to reduce its hedgebook by 20 percent to under 7 million ounces in 2002, and was aggressively looking to cut the hedgebook of newly acquired AurionGold, the Australian company Placer bought in a hostile takeover. ChartsRus -- Sharefin, 08:14:46 01/08/03 Wed Here's two charts suitable as a backgound image for your PC. Right click on the images and choose "Set As Background" Then next time your neighbour pops in you can show him how good gold is going. Gold -- Sharefin, 20:01:56 01/07/03 Tue When the outlook is golden, start worrying On Friday I telephoned my colleague who edits this page and said that I was thinking of writing this column about gold and currencies. I outlined my argument, that the dollar is still too high, that the US external deficit is not sustainable, that the European and Japanese economies are suffering from low growth, that the euro and the yen are attractive only compared to the dollar. I added that gold was making new highs, and that the preference for gold showed the lack of confidence in the main currencies. On Saturday morning I opened the Business section and found an article by Richard Lambert headlined “US dollar faces year of living dangerously”. He makes many of the points I was planning to make, and makes them very well - the overvalued and declining dollar, the “enormous” US deficit on current account, “the sorry state of the world's second and third biggest economies, Japan and Germany”, the Asian central banks propping up the dollar, the sharp rise in the price of gold. On such occasions one's first thought is to turn to some other subject. However, I admire Richard Lambert's journalism. If he thinks that the problems of the world's currencies are the most urgent subject for his first article of the new year, that makes it more, not less, likely that it is the right subject for me as well. If this is worrying both of us, and it is, then it is probably right for us to be discussing the difficulties and possible dangers. As Richard observes, “the moment of maximum uncertainty is probably close at hand”. For the past 30 years I have been following the price of gold. In some circles I am regarded as a “gold nut”. I have no objection to the term and may, on occasion, have earned it. But it is not an altogether accurate description of my interest in gold. I regard gold as the alternative to the central banks' currencies, and as a counter-indicator of the realities of the world's currency markets. Gold is very different from paper money. It has had very long-term price stability, whereas currencies normally lose 90-100 per cent of their value in each century. Its price does not determine the export costs of the nation of issue. It cannot be created except by an expensive mining process and in small quantities; it cannot, therefore, be over-issued for political reasons, to win an election or pay for a war. It is an asset which is not represented by somebody else's debt or liability. It is the only form of asset that is both liquid, like a currency, and real, like property. For these reasons, it is the canary in the mine; major changes in the world exchange system usually show up early in the gold market. In the past three years the world gold market has certainly been singing. Last week, it closed with gold above $350 an ounce; only a few weeks ago we were wondering whether it could break through $320. Not long before that the question was whether it could go above $300. The last time I wrote about gold, I commented that gold had been a better investment than equities and that I expected it to continue to outperform them. It has, and on a worldwide scale. For the past three years gold has been a much better investment than equities, in Japan, Germany, Britain and France, let alone the United States. Gordon Brown insisted on selling a large part of the Bank of England's gold reserve near the bottom of the market. Chancellors make rotten speculators. ~~~ There has been another major reason for the rise in the gold price. Asian central banks and the Asian public have been buying gold. Japanese consumers have been buying gold chains to increase the family reserves. They do, of course, pause from time to time. The Central Bank of Japan has $461 billion of reserves, on the October figure, up by $66 billion in the first nine months of last year. The reserves of the Bank of China have risen at a similar rate. If China and Japan already have more dollars than they want, and are accumulating still more of them at a rate of more than $100 billion a year, they must be under pressure to diversify their reserves. Given the deep economic problems of Germany, the leading European economy, the euro is not an attractive alternative. Gold is a rational central banker's solution to an excessive accumulation of dollars, particularly as the dollar is falling and is expected to fall further. Again, the rise in gold price can be seen as a devaluation of the dollar. For the investor, such an analysis may help to answer some central investment questions. The dollar is likely to continue to fall, and the yen and the euro are likely to remain firm. The US economy will continue to grow faster than Germany or Japan. The gold price is likely to outperform most other assets. But such an analysis does not give any cheerful answers to the problems of the world economy and world trade. After all, the United States is by far the leading world economy, Japan is second and Germany is third. The US has a serious problem with the deficit and the overvalued dollar; Japan and Germany have equally serious problems of low growth, financial deficits in the banking and insurance sectors, and non-competitive prices caused by their overvalued currencies. The big three all have sick economies. Their economic diseases may be different, but in each case the cure, if there is a cure, will be painful. Both the dollar and gold are telling us that a perilous adjustment in currencies and in real economies lies ahead.  Gold -- Sharefin, 19:58:27 01/07/03 Tue All that glisters... GOLD “bugs” like to believe that the precious metal is one of the best hedges against inflation and one of the best stores of value during times of uncertainty, like war. The rise of the gold price over the past couple of years seems to bear this out. On January 6th, the price hit $356.25 per troy ounce, a level not seen since March 1997. A looming war in Iraq, a spike in the price of oil and weakness in the dollar, the currency in which gold is traded, have all boosted demand. --- Disinformation rules....  Gold -- Sharefin, 06:05:03 01/07/03 Tue Andy Smith proves too bullish on gold Hard core gold bugs like nothing better than to rough up Andy Smith, über gold maven and wordsmith who works for Mitsui Metals in London. Take for example John McDonald who recently wrote on this site: “[Smith] seems of marginal utility if not counter productive. Perhaps he is the gold world's answer to Wall Street analyst problems - an analyst that always tells clients their industry is heading into a dead end. I certainly wince every time a journalist refers to him as a respected analyst, or even refers to him at all. A respected analyst should consider all possibilities.” ~~~ Not good enough for ‘Briale' who opined on this site: “Of course you will forgive Andy this time. If he is wrong again, you better nail him to a cross.” Randall Ryll let it all hang out: “Why is this man considered a Gold Authority? He is wishy-washy, appears to know little about economics, and has lost clients at Mitsui tons of cash.” Diamond Jim got himself in a factual twister: “The guy's has been dead wrong on his last three calls....”, while Dan Broucek is sure he has Smith taped: “He's NOT an authority on gold, he's just another opinionated bum.” ‘Black Blade' was scathing: “Given his attitude toward Gold and those who invest in Gold, why does he waste his time hanging around?” ----- Don't forget to read the commentaries at the bottom. They are as humorous as the article. Gold -- Sharefin, 05:34:30 01/07/03 Tue Jim Sinclair remains confident of $400 gold this year Today was a big day for gold and gold shares, gold shares up by nearly 5%, but the gold price through the $350 an ounce level. This is the first time since 1997 - five years - that the gold price has been at that level. We asked our New York correspondent, Timothy Wood for an appropriate comment he said no, rather speak to America's Mr Gold, Jim Sinclair, who has been calling the bullion price incredibly accurately. Tim doesn't give these kind of positive comments that easily, so you must be sure that he's been monitoring very closely what Jim Sinclair has been up to and how he's been calling. We go across the water now and welcome Jim. The South African gold shares today, Jim, were up by almost 5%, the gold price itself, bullion, cruised through $350 an ounce. Tim says your timing and calling of the gold price has been impeccable. So the obvious question is, where to from here? Gold -- Sharefin, 05:29:31 01/07/03 Tue Planets aligned for $377/oz gold Bullion dealers surfed the wave of optimism carrying the gold market today, with at least two major banks speculating that bullion was primed for a run at the $377/oz level in the medium term. By midday in Johannesburg the metal had set itself a new six-year high of $354.50/oz, eclipsing the $353.75/oz level achieved on December 29 and the $350/oz average of March 1997. Standard Bank London said in its morning precious metals report today (Monday) that the gold looked set to build on the gains made over the last fortnight. “With the market looking well supported around the $342 level both from a technical and fundamental basis, it would appear as though the price will look to make fresh gains in the week ahead. The upside sees various levels of light resistance, although the medium term objective should see the yellow metal target $377.00,” Standard Bank said. Fiat -- Sharefin, 05:09:36 01/07/03 Tue Greenspan & Co Financial Vampirism In the view presented here deflation is a huge wealth-transfer scheme from the producing sector to the financial sector, denuding the former of its capital, and enriching the latter with risk-free capital gains. Indeed, the beneficiaries of the falling interest-rate structure, making risk-free profits thanks to the zero-interest policy of the central bank, are the principals of the financial sector, chief among them those of the big money-center banks. Their obscene profits do not come out of thin air. Their wealth is not newly created wealth. It is existing wealth siphoned off the balance sheet of producing enterprise, forced into bankruptcy by the falling interest-rate structure. This is modern vampirism practiced by the financial sector, aided and abetted by the central bank, and its victim is the producing sector. The bear market in stocks is not the cause but the effect of deflation. The cause is the artificial bull market in bonds financed by the central bank. If you ask the bond speculator about his obscene profits while the rest of the economy crumbles around him, he will shrug: "I play by the rules. And I did not make those rules either." ~~ The proof of complicity of the banks in the bond-speculation-scheme is the $100 trillion derivative monster. No small-time speculators could create such a Moloch. It was created by the big money-center banks, for their own benefit, with complete disregard for the disastrous effect it has on the producers of goods and services. The total face value of outstanding bonds falls far short of the colossal figure of $100 trillion. It is against common sense, and an invitation to disaster, to allow speculative long positions to exceed total supply. Messrs. Greenspan and Bernanke have no comment on all this, except to confirm policies that are conducive to further increasing the debt behemoth and further whetting the appetite of the $100 trillion derivatives Moloch. ~~~~ The producers are sitting ducks in this speculative shoot-out. They have no choice. They must carry the risk of owning productive capital, without which there will be no consumer goods for Mr. Greenspan and Mr. Bernanke, or for you and me. This is an accurate description of the mechanism whereby the capital of the producing sector is surreptitiously siphoned off for the benefit of the financial sector as the rate of interest is driven down to zero. The producing sector is condemned to bankruptcy. It is a victim of plunder sanctioned by the Criminal Code. This is the essence of deflation: speculators aided and abetted by the central bank are allowed to bid bond prices sky-high, in complete disregard for the havoc that falling interest rates will wreak with the capital accounts of the producing sector, not to mention losses inflicted on stockholders. The $100 trillion derivatives market is a monument to the folly of man in delegating unlimited power to the central banker to create as much fiat money as he wishes. Former central banker Paul Volcker knows. He has been there. He is quoted as saying that "the truly unique power of a central bank is to create money and, ultimately, the power to create is the power to destroy." If the central banker has unlimited power to create, then he has unlimited power to destroy. And destroy he does, especially the savings of ordinary people. Gold -- Sharefin, 03:34:51 01/07/03 Tue Freedom Is Lost in Small Steps In periods of crisis, financial collapse and war, an independent and stable currency is the people's protection against the “malice of the times,” as the Swiss Declaration of Independence (1291) so eloquently put it. A collapse of paper-ticket-fiat money systems and the ensuing costs of the anticipated Iraqi war, in addition to President Bush's ongoing “War on Terrorism,” which inevitably will be “paid” for by inflation, may lead to a great economic disintegration and widespread poverty in an alarmingly short time. ~~~ Switzerland is now tied into the IMF-system, which prohibits member countries from linking their currencies to gold, and only to gold. The damages to the Swiss are not yet clearly visible, but like an economic B52 bomber, the IMF has cut a strip of devastation into other countries' national economies. In any case, Switzerland is no longer free to choose its own currency and financial policies to pursue the common good. If gold coverage were to be reintroduced, Switzerland would have to leave the IMF, since it would be in violation of the IMF's gold prohibition, and Switzerland would again have an internationally respected currency, offering protection against inflationary interests and other world economic shock waves. We would again have the world's most trustworthy currency. Nothing could be more positive for Switzerland, for its citizens and for its banking center. ~~~ Exchanging the nest egg for paper-ticket-fiat money? The price of gold per ounce (31.1 grams) has risen from $275 to $320 (+18%) within the last twelve months. During this time, stock markets declined, and some worldwide super-companies collapsed, e.g., Enron, Swissair, Worldcom. Many others, some of them Swiss, are teetering on the edge of collapse. The world situation is serious, and the outlook for next year is glum. For this reason it is very unwise, even for an ordinary businessman, to sell the one commodity perceived everywhere as metalized crisis protection that maintains its value. When things get really bad, e.g., when one of the big banks fails, it will be very difficult to contain the incident. The entire economic world may go into a tailspin and all paper-ticket-fiat currencies may crash simultaneously. All the paper-ticket-fiat currency reserves that the SNB has in dollars, euros and yen will not be of any great help in its role as “lender of last resort” (the central bank as final rescuer of the banking system). Then, it will have to resort to using gold-provided the gold is still there. Gold -- Sharefin, 19:42:20 01/06/03 Mon The investment of choice: Spot gold prices hit 6-year high. Some cry conspiracy ("Its price has been held artificially low for years!"); others say uncertain geopolitics makes it more attractive. GATA Chairman Bill Murphy and GATA consultant James Turk, editor of The Freemarket Gold & Money Report, were interviewed tonight as part of the lead story on the "Marketplace" business news program on the National Public Radio network in the United States. The program was broadcast on dozens of stations throughout the country and there probably was not much U.S. geography beyond the reach of its signal. Gold -- Sharefin, 19:19:38 01/06/03 Mon Canada sells gold, keeps shift into euro reserves Canada took advantage of the sizzling price of gold last month with the sale of one-eighth of its remaining gold reserves, part of a long-standing drive to get a bigger bang for its foreign reserve bucks. A finance ministry official said the decision to sell was not explicitly tied to a specific gold price, but added: "When the price of gold is enjoying some lift, we may conduct more sales at that time." Canada has been selling gold from foreign reserves since 1980, investing the proceeds in bonds and foreign-currency securities that yield a return which "far exceeds the return that the government gets on gold," the official said. Finance ministry figures released on Monday showed that the government sold 83,399 ounces of gold in December, leaving its holdings at about 599,000 ounces. That is down from some 21 million ounces in 1980 before the gold sales started. Gold -- Sharefin, 17:30:33 01/06/03 Mon Gold group urges SEC to investigate JP Morgan The Gold Anti-Trust Action Committee (GATA), a group alleging banks and governments are covering up a conspiracy to keep gold prices down, has asked the U.S. Securities and Exchange Commission to investigate JP Morgan Chase and Co's involvement in the gold market. The announcement by GATA in a press release Monday came one business day after JP Morgan, one of the largest bullion dealers, said Friday it had asked the SEC to check into rumors propagated on GATA's Web site last year that the bank had lost money in 2002 trading gold and gold derivatives during bullion's rally to six-year highs. "We are asking them to investigate their role in the manipulation of the gold market and to investigate what these rumors are all about, about Morgan and the gold market," GATA founder and chairman Bill Murphy told Reuters. "What we have said is, 'it doesn't pass the smell test.'" The group said it appealed to the SEC to investigate J.P. Morgan's denial of any exposure to changes in the price of gold. The request came in a letter to the SEC from GATA consultant James Turk, editor of the Freemarket Gold and Money Report. Gold -- Sharefin, 07:18:16 01/06/03 Mon Debt, Money, Gold and History "The 19th century gold standard was the highest monetary achievement of the civilized world. The gold standard was neither conceived at a monetary conference, nor was it the brainchild of some genius. It was the result of centuries of experience." Ferdinand Lips Gold -- Sharefin, 07:10:12 01/06/03 Mon Going for the Gold Always a good read..... Gold -- Sharefin, 06:56:31 01/06/03 Mon India Gold - Importers shy away as world prices soar Soaring global gold prices and poor demand in India, the world's largest consumer, have forced bullion importers to stay on the sidelines, traders said on Monday. "We all are almost sitting idle and waiting and watching price movements," said Narendra Singh Rathore, a gold trader based in the north-western city of Jaipur, a leading gold importing centre. Gold nudged its highest level for six years on Monday as signs of U.S. and British preparations for an attack on Iraq kept markets volatile. Japanese investors returning from holidays piled into the safe haven of the bullion market. Gold (XAU=) was quoted at $352.30/353.00 an ounce at 0820 GMT, up from $326 a month ago. Rathore said daily gold imports into Jaipur shrinked to only about 300 bars (of 116.64 grams) over the past week, against the normal 4,000 bars. The country imports an average of 14,000 gold bars a day, which is more than 70 percent of its requirements. The gap is met by local recycling of old jewellery and domestic output. Traders said gold imports could rise next week with a pick-up in marriage-season demand, provided world prices did not fluctuate wildly. "No one wants to trade when prices are sharply rising or falling. We are looking for some stability in prices," said a Bombay-based trader. Gold jewellery demand normally rises in India during the Hindu Marriage season, which starts in mid-January and runs through to May. It forms an essential part of weddings as parents give the metal to their daughters for financial security. Jewellers said gold inventories had fallen as they had not replenished stocks due to firm prices. Gold -- Sharefin, 06:47:52 01/06/03 Mon Gold Touches 6-Year High, Oil Nears 2-Year Peak Gold nudged its highest level for six years Monday, oil hovered near a two-year peak and the dollar dipped as signs the United States and Britain were preparing troops for an attack on Iraq kept markets volatile. ~~ Japanese investors returning from holidays marked by news of preparations for a possible war on Iraq piled into the safe haven of the bullion market. That sent gold briefly back to touch $353.75 an ounce, a six-year high set last month, before it eased to around $352.55 at 0600 GMT. Gold -- Sharefin, 06:43:56 01/06/03 Mon Gold and Gold Stocks “...The price of gold goes up, but gold stocks don't, and you don't know why. Or the price of gold stays steady, but gold stocks go down, and you don't know why. The extent to which gold affects gold stocks is not always the same, nor do they always move in "lockstep" with each other. So, how can we explain the relationship between gold stocks and gold?...” Gold -- Sharefin, 06:35:55 01/06/03 Mon A Tarnished Dollar Will Put The Shine On Gold “...The most important dynamic affecting the gold price is, and will be, the fate of the U.S. dollar. The inverse relationship between gold and the dollar began with the dollar's ascent to supreme status as the world's reserve and trading currency, a role once played by gold. It stands to reason that when the dollar's value is challenged, all sorts of people turn to gold...” ~~ Chances are, unless he's in the habit of adding Geritol to his Cheerios, today's investor is perhaps feeling a little clueless in this post-bubble bear market. On the other hand, those who have been through this sort of thing before might have noticed the one bright spot on the investment landscape - gold - which has been in an upward trend since the bubble burst in 2000. Much has been written about gold's move and the many dynamics driving this trend. In no particular order, that menu includes: The widening demand/supply gap, currently at 1,500 tons per annum, is due to an ever-increasing decline in production by the primary producers. At current current gold prices and for too many industry reasons to list here, production is expected to decline up to 30% in the next eight years. The collapse of interest rates effectively eliminated the once attractive spread that compelled both producers and institutional speculators to sell forward. They sold forward as much of the stuff as the central banks would lend, and thereby capped the price. Ironically, in the face of a reversing tide, these same producers are now scrambling to cover the short positions created by years of indifference to gold as anything but a commodity. Due to lack of disclosure, the magnitude of these short positions is unknown, but could be anywhere from 5,000-10,000 tonnes, or two to four years of production. And finally, the last couple of years saw an end to the "peace dividend." Instead, we witnessed an ever-increasing series of geopolitical crises that seem to pop up faster then pimples on a teen's face. However, the most important dynamic affecting the gold price is, and will be, the fate of the U.S. dollar. The dynamics noted above will, for the most part, play but a supporting role to that of gold's inherent inverse relationship to the dollar. To understand this relationship, we need only look back 30 years. (Arguably, we could go back several hundred years, as this is not the first time the world has had to cope with the temptations and consequences of paper money.) In 1971, Nixon unlinked the U.S. dollar and gold, thereby terminating other sovereigns' rights to exchange their U.S. dollars for U.S. gold reserves. Predictably, the dollar took a swan dive, declining up to 70% against some currencies over the next 10 years. Conversely, gold began a decade-long bull market that saw the price top $800 per ounce by 1980. This "Mutt and Jeff" relationship has played out several times since. One good example is the mid-'80s, when the dollar again declined by 50% over a two-year period, and the gold price moved up to $500. The reverse was seen in the mid-'90s, when the dollar commenced its five-year rise, and gold experienced a five-year bear market. And once again, the relationship reversed itself just last year. You get the picture. Parenthetically, with the effects of inflation, the dollar has also lost 80% of its purchasing power during this same period. From a long-term perspective, this makes the gold story even more compelling. In the current go-around, with severe post-bubble forces at play, I believe we may be due for a 1970s-style gold market. The inverse relationship between gold and the dollar began with the dollar's ascent to supreme status as the world's reserve and trading currency, a role once played by gold. It stands to reason that when the dollar's value is challenged, all sorts of people turn to gold. So why is the dollar's value being challenged today? Well, quite simply, its role has been abused. Since the U.S. closed the "gold window," the only "asset" backing the dollar has been faith in the U.S. system, which was entrusted to it by the global community. The value of the dollar is impacted by many factors, including a) how much of it is printed, b) the rate of return it generates, c) the fiscal health of the government balance sheet sponsoring it and d) the general state of the economy it represents. As, one by one, the foundations supporting these pillars erode, this faith may, at best, turn agnostic and, at worst, turn outright atheist. Although history is littered with the destruction of once-supreme paper currencies, the total demise of the dollar may be a long way off, perhaps generations from now. But the statistics show the dollar is heading in that direction. For the purpose of this discussion, the trend alone is sufficient. Gold -- Sharefin, 06:09:09 01/06/03 Mon Strange Bedfellows While most markets stayed thin in holiday trading, however, rumor mill conditions in the gold world thickened. Glossy eyed gold bulls ecstatic about gold's late season bull market signal and about being on the right side of the market heard Greenspan utter the word gold but three times. To them it was a superbowl pass and they ran the ball right past the end zone and onto the next field with the idea that key Fed officials have been signaling the coming of a reversal in more than 100 years of straight-line monetary debasement; that they plan to reinstate the gold cover clause, which served as a bridge to more soundless money under the Bretton Woods system.  Gold -- Sharefin, 05:40:22 01/06/03 Mon Date: Sun Jan 05 2003 14:12 ANOTHER (THOUGHTS!) ID#200346: Copyright © 2002 ANOTHER All rights reserved All: Where are those who say $200 gold? What happened to $300 “MAJOR” resistance? Then they said $330 was wall. Again noone will believe $600 is time to buy. ENOUGH of this foolishness! Soon there will be “announcements” of large buyers of gold but will this be “spin” to say many sellers? Now is time to watch what gold does and not hide head in sand. Your eyes don't lie. This is the beginning of the greatest transfer of wealth in the history of all ages. What is wealth and do you have it? The wealth of many millenniums and of your great fathers before you will protect your family now. As for me and my house gold is wealth! Thank you Gold -- Sharefin, 05:29:23 01/06/03 Mon GOLD: Prepare for the Meltup Gold's impressive breakout in December provided the final confirmation, if any were needed, that it is in a bull market. After such a move the price is entitled to rest and consolidate, perhaps react some, which is what it is now doing. Despite many technical indicators showing an overbought condition, I believe that the vigorous uptrend now in train will not relent and gold will remain overbought and will continue upwards, perhaps with brief pauses, until the overbought condition becomes extreme. Gold's impressive breakout in December provided the final confirmation, if any were needed, that it is in a bull market. After such a move the price is entitled to rest and consolidate, perhaps react some, which is what it is now doing. Despite many technical indicators showing an overbought condition, I believe that the vigorous uptrend now in train will not relent and gold will remain overbought and will continue upwards, perhaps with brief pauses, until the overbought condition becomes extreme. Quite a lot of people missed this move, having been kept out of gold and gold shares by listening to Elliott Wave nonsense about gold dropping to $200 or by being scared off by the large commercial short position. As James Sinclair pointed out a while back, the commercials goofed up handsomely in the 70's, and they may be doing the same now. Just because people are "professionals" and move large amounts of money, doesn't mean that they always get it right. Many readers of my articles know that I track market volume. Volume is the "lifeblood" of the market and, as an indicator, stands "head-and-shoulders" (no pun intended) above any other indicator or system in its ability to predict stock or market moves. The volume patterns on countless gold stock charts were screaming "buy!" well before the breakout. Examination of volume patterns enabled me to predict major breakouts in Bema Gold and Silverado hours before they happened, and in Vista Gold a few days prior to a major breakout and in Caledonia Resources, to position my readers in the stock at $0.15 a few weeks ago - it spiked up to $0.30 last week. Gold's December breakout was, in my opinion, its most bullish development for well over 20 years. This breakout, which was the culmination of several years of preparatory price action, was of tremendous psychological importance. This move signalled completion of the huge "Cup and Handle" or "Double-Bottom" base area that has been forming for several years - the British government famously highlighting the low by selling half the UK gold reserves right at the bottom, to the considerable amusement of the Chinese and others - if they can't even run a railway network, how can you expect them to understand TA? Maybe they sold the gold to pay for the noble British contribution to Gulf War 2. Everyone concerned with the gold market, whether bulls or bears, and whether they like it or not is now put on notice that this is a bull market which has just entered the dynamic advancing stage. All gold bears, all with a net short position, have two choices. They either cover their short positions now, or very soon on minor dips, or they can bury their heads in the sand and cover later at a higher price and greater loss. I believe this realization is slowly percolating in their skulls right now. The two primary emotional states that generate market trends are fear and greed. Of the two, fear is the more primal and urgent as it relates to avoiding loss, to survival. Market panics caused by fear are normally associated with a falling market, however, they can just as easily occur in a rising market. A "Meltup" is an upside panic, generated by fear on the part of holders of short positions, who stand to lose more and more the higher the market goes, and therefore scramble to cover short positions as the market rises. This short covering drives prices higher and further pressures remaining shorts who are then forced to cover, propelling prices higher still in a vicious circle (virtuous if you're a bull) and resulting in a vertical price spike. I have several times in the past expressed the view that should the critical resistance at $320 - $340 be breached, then all those short the market would find themselves in a precarious situation, exposed to potentially huge losses should the price continue to rise. This resistance has now been breached and the remaining shorts, faced with the imminent prospect of runaway losses, are likely to generate a self-feeding Meltup. I believe the shorts are now at the point of "throwing in the towel," if so, any further advance in gold is likely to lead to a steep vertical spike towards the next significant resistance in the $420 price area. Such a move will result in the price spiking through the upper channel boundary I have drawn on the accompanying chart and result in an extremely overbought condition, which will probably be followed by the price dropping back into the channel. In any event it will be a period of extreme volatility and during this period gold shares should go crazy. I view this as a strong possibility, say 60%, no more, as I do not have stats for the amount of short positions and I do not know what their "pain threshold" is. Even if this does not occur, I believe that the least we can expect is a steady advance. A short-term reaction by gold back into the $330's, which would be rendered more likely if the threat of war with Iraq soon turns out to be a massively orchestrated bluff, will not negate my bullish outlook. I do not see it going lower than the mid $330's because of the psychological impact of the recent breakout and the fact that the direction of the dollar is far more important than the Iraq factor. I believe that having cleared the resistance at $340 by a significant margin, it is likely to remain above $340. Fiat -- Sharefin, 05:09:07 01/06/03 Mon Inflation target coming: Yamasaki The government and the ruling Liberal Democratic Party are poised to adopt an inflation-targeting policy to fight deflation and prop up the economy, LDP Secretary General Taku Yamasaki indicated Sunday. Fiat -- Sharefin, 04:07:35 01/06/03 Mon Deflation in a Debt Based Economy I support the idea that Fed Chairman Greenspan is walking a high wire act between the two known evils of inflation and deflation. The possibility of inflation exists but is of secondary concern at the moment given the higher probability that loan defaults will cause trillions of dollars to simply disappear. This would surely cause a lack of liquidity that in turn, could cause a deflationary collapse of the banking system. Such a catastrophe would be to the detriment of Mr. Greenspan's real employer, and place severe strains on his public image, if not his self-esteem. Gold -- Sharefin, 04:00:01 01/06/03 Mon Patience can be worth its weight in gold The top-performing U.S. mutual fund of 2002 is a real-life survivor. In the depths of a 20-year bear market for gold, managers Jean-Marie Eveillard and Charles de Vaulx almost put the First Eagle SoGen Gold Fund out of its misery in 1998. Five years after its founding in 1993, the fund's assets had never broken $100 million, as measured by annual figures from Morningstar Inc. SoGen Gold posted an annualized loss of 9.1 percent from the end of 1993 through mid-'98, according to Bloomberg data. It was the runt of an otherwise prosperous SoGen fund group. Things kept happening in the world, though -- here a debt crisis in Russia, there a blowup at the hedge fund Long-Term Capital Management. The managers decided to stay with their outpost in gold, a haven traditionally sought by investors in times of trouble. "I thought if the financial system was so fragile that a hedge fund had to be bailed out, maybe we should give our gold fund a little longer," Eveillard recalled last month by telephone from Paris. Patience rewarded! In December, First Eagle SoGen Gold sported a 110 percent gain for 2002, to rank No. 1 among more than 15,000 open-ended U.S. funds tracked by Bloomberg. Over the past three years, it has averaged a 33.8 percent annual gain. "Gold is a small market," Eveillard said in a Bloomberg News interview in 2000. "So it wouldn't take much for the price of gold truly to rocket." At last report, the fund's assets had jumped to $125 million, and Eveillard said new money was flowing in at the rate of $1 million a day. Gold -- Sharefin, 03:46:20 01/06/03 Mon Gold surges above $350 The price of gold jumped more than $5 (U.S.) an ounce yesterday to close above $350 for the first time in about six years, a move analysts saw partly as a vote against the U.S. dollar or for the likelihood of war. Like other market players, Bruce Latimer, head stock trader for Dundee Securities Corp. of Toronto, could point to no specific news event to explain the gain. "It sort of caught people by surprise. When you get a $5 move in gold on a daily basis, that's a big move." John Ing, a gold analyst and president of Toronto-based Maison Placements Canada Inc., said the price was clearly affected by the state of the currency in which gold is commonly priced. "The dollar has been weak the last couple of weeks," he said, "and that's partly because of the geopolitical sabre-rattling that's going on. More important, it appears that the Americans' twin deficits [the budget deficit and the current account deficit] raise the prospects of a lower dollar. Foreigners who have usually been financing the deficits decided to keep their money at home." Mr. Ing also pointed to a pickup in demand for bullion from the Middle East and China, among other factors favouring gold. ~~~ Among the metal's fans are Mr. Ing of Maison Placements, who argues that gold's most important recent move was to climb above $330 last month. "Was $350 a breakout? The answer is no," he said. "Really, the $330 was the breakout. We have a near-term target of $375, but that's not the high; I think the high this year will be $510, so we've only just begun this bull market in gold." Dundee's Mr. Latimer said some leading Canadian gold stocks barely responded to yesterday's jump, partly because they have mortgaged their chances of benefiting from higher bullion prices through hedging. Platinum -- Sharefin, 03:42:05 01/06/03 Mon Platinum shines on demand for diesel cars As drivers in Europe turn to diesel engines for more efficient motoring, and governments push for tighter global emission standards, platinum is along for the ride. In 2002, the spot platinum price climbed more than 20%, to about US$600 a troy ounce, a 13-year high. Much of that gain is attributable to a marked increase in demand for the metal in catalytic converters -- important parts of cars' anti-pollution systems. Demand is expected to grow in proportion to supply, holding prices near current levels. "In short, the platinum market is in chronic structural shortage, which Western producers look poorly positioned to relieve until at least 2005," says Steve Sheperd, analyst at J.P. Morgan in Johannesburg. "After perhaps easing slightly from recent levels early next year, prices may well spend most of 2003-2004 above US$600." ~~~ "Although carmakers are technically better placed than in the past to switch, many may take some persuading and may hold off for a while," Mr. Briggs says. Manufacturers have become wary that any immediate substitution could result in a similar price reversal in favor of palladium within only a couple of years, setting in motion a cyclical price swing. Fiat -- Sharefin, 03:39:03 01/06/03 Mon US dollar faces year of living dangerously In a very uncertain financial world, there is one thing about which most people agree: the US dollar is overvalued, and on a downward slope. The drumbeats have been getting louder in the past few weeks. The price of gold has risen sharply as investors have looked for safer places to park their funds; the new year forecasts from the world's currency analysts were almost universally pessimistic about the dollar; the gloom-and-doom merchants have been dusting off their sackcloth. The only real debate seems to be about whether the currency is set for a gentle slide, or for something more dramatic.  Gold -- Sharefin, 03:33:49 01/06/03 Mon JP Morgan, Enron, and Gold I have today mailed the following letter to the Enforcement Division of the Securities and Exchange Commission. It's about time that we learn the truth regarding JP Morgan Chase's activity in the gold market, the full extent of its gold exposure, and whether it used gold loans to fund the so-called "disguised loans" that it arranged for Enron. Perhaps the SEC will help us learn the truth by investigating these matters and reporting the results. ~~~ Thus, your investigation into the rumors about JPM's activity in the gold market is timely, but the focus of your investigation should not be, as JPM management implies, how these so-called "rumors" started. Rather, your investigation should determine whether these rumors have any basis in fact. If they do, then this is to also ask for your determination whether the statements above by Messrs. Harrison and McDavid are false or misleading. To assist you, I would like to bring the following matters to your attention: 1) The Wall Street Journal published an insightful article about JPM and Enron on January 25, 2002 ("Insurers Balk at Paying Bank Up to $1 Billion in Claims On Complex Transactions"). That article provides an overview about the financing provided by JPM to Enron, through Mahonia Ltd., a company Chase Manhattan (one of JPM's predecessor companies) established in the Channel Islands. The article states: "Prepaying for future delivery of a commodity is known as a 'gold trade,' because it is the way gold bullion has been trading for centuries. In recent years, trading companies, whether from Houston or Wall Street, have been making more use of this structure to buy and sell oil, natural gas and other commodities. Some commercial banks, including Chase Manhattan had to set up part of these trades overseas because their banking charters wouldn't allow them to take delivery of commodities." The article describes what is generally known as a commodity swap, and gold is frequently used in one side of the transaction. As an ex-banker (1969 to 1980), I have some knowledge about how these transactions work, as banks are a facilitator for them. When gold is used to finance a commodity swap, bullion is borrowed from a central bank, and sold to raise dollars, which are then used to purchase the commodity on the other side of the transaction (oil and gas in the case of Enron). It is noteworthy that the WSJ article specifically mentions a "gold trade"; given this remark, anyone knowledgeable about commodity swaps might naturally assume that JPM/Mahonia was arranging gold-for-energy swaps for Enron. Thus, this WSJ article may be the original source of the so-called "rumors" referred to by JPM management. But importantly, this WSJ article also suggests that these rumors may have some basis in fact. The article did not specifically state from where Mahonia was obtaining the funding needed to purchase the commodity contracts it acquired from Enron (the so-called "disguised loans" the insurance companies contended were shams). Nor did a WSJ article published August 13, 2002, ("Enron Probe Shines Harsh Light on Financiers") disclose the nature or the original source of the funding needed to complete these commodity swaps, but this later article does provide more information about potential gold activities by JPM in its dealings with Enron: "In the world of commodities, particularly gold trading, the 50-year-old Mr. Mehta [Chase's and then JPM's head gold trader] was well known. His successful marketing of derivatives, and his enthusiasm for the use of these instruments, helped the gold-hedging business take off in the 1990s. Mr. Mehta and his team executed [deals which] allowed Enron to use an offshore vehicle known as Mahonia to raise hundreds of millions of dollars from J.P. Morgan." Taken together, there are enough facts disclosed in these two WSJ articles to suggest that gold loans could be one possible source of funding for Mahonia's commodity swaps with Enron, and if so, these gold loans could lead to the "gold exposure" denied by JPM management. ~~ The point is that certain aspects of JPM's derivative disclosure appear to be inadequate. Thus, this is to ask that you make a determination in your investigation whether JPM's disclosure about its gold derivatives has been sufficient, and indeed whether the statements by its management about JPM's gold exposure are not false or misleading. Periodic Ponzi Update PPU -- Shifty, 20:42:49 01/05/03 Sun Preiodic Ponzi Update PPU Periodic Ponzi Update PPU Nasdaq 1,387.08 + Dow 8,601.69 = 9,988.77 divide by 2 = 4,994.385 Ponzi Up 168.345 from last week. Thanks for the link RossL ! Looks like another interesting week ahead! Go GATA ! Go GOLD ! $hifty  Gold -- Sharefin, 04:28:16 01/04/03 Sat French Fund Managers Take A More Positive Attitude To Gold and Gold Stocks Than Their Peers In London. The turn of the year is traditionally the time when all the UK pundits come out with their recommendations for the following year. Minews has scrutinised them , in so far that that is possible, and none have come out with a recommendation of a gold producer. Now that has to be strange as we move into a year when war in the Middle East looks very likely and with the dollar coming under increasing pressure. Maybe the journalists in the UK are not talking to the right people, though basically all they do is repackage comments from fund managers and analysts. Nobody seems to have explained that it is perfectly possible for equities to go on down for a 4th year in a row, especially when the average price earnings ratio for stocks in the FTSE All Shares Index is nearly 19. Gold -- Sharefin, 03:29:07 01/04/03 Sat The 'Gold Cap' Disembowelment Of America The 'gold cap' is the deliberate, institutionalized use of physical gold and paper debt instruments for the criminal price fixing of the dollar/gold price relationship. The gold cap also encompasses criminal price fixing in the silver, currency and stock markets. Establishment criminology categorizes price fixing as white collar crime. The criminal price fixing of the 'gold cap' was created by, and is maintained by; the Federal Reserve Bank, the United States Treasury, and Wall Street banks and brokers. The 'gold cap' price fixing artificially prevented the dollar's natural free market decline in purchasing power as the total number of fiat dollar units expanded. The criminal price fixing of the gold cap, which capped the dollar price of gold, is also called the 'strong dollar' policy because it made the dollar extremely overvalued in world markets. The criminal price fixing of the gold cap was to free markets what the Spanish conquistadors were to the Inca. As a consequence of the Fed/Treasury/Wall Street criminal price fixing of the gold market, the dollar became stronger in relation to other internationally used fiat currencies left to free market forces. Have no doubt, it is physical gold that defines the dollar and every other fiat currency in the world. The purchasing power value of the U.S. dollar is defined by how much physical gold, or silver, a dollar will purchase. This has been true for more than two centuries of U.S. history and it is still true today. The gold cap contributed to the explosion of both debt; and, the total number of dollar units outstanding. The gold cap flooded the markets with physical gold and gold debt priced in dollars in order to artificially overvalue the purchasing power of the dollar in the short run. The very same actions in the longer run accelerate the eventual destruction of the dollar. The gold cap, since l995, achieved short-term political gains. However, the long term costs of those short-term political gains has been the accelerated financial disembowelment of United States corporations, stock markets, and citizens, in that sequence. Gold -- Sharefin, 03:07:09 01/04/03 Sat Why no talk of $32,567/oz ? Therefore, a rational dollar price prediction for gold can be obtained by dividing available dollars by available gold. The best official figures for these are M3 and the U.S. gold hoard. For those of you who don't know, M3 is the best measure of the dollar money supply that the U.S. Federal Reserve uses. M3 http://www.federalreserve.gov/releases/h6/Current/ $8.5 Trillion or (8,500,000 million) U.S. Gold www.fms.treas.gov/gold/index.html 261 million oz. Admittedly, the official numbers are not very reliable. There are more dollars available than is listed as M3 because there are foreign bank accounts and many counterfeit dollars that are used as money in the world. And the U.S. gold has not been audited since the 1960's, and many suspect it is totally gone, and not available at all. Nevertheless, the official numbers are the best figures available that we have to work with. If the figures are wrong, M3 is surely higher, and U.S. gold is surely lower. If either is the case, it would only mean that the rational dollar price for gold should be much higher than $32,000/oz. At my web site goldismoney.com, I present a simple calculation: M3 / U.S. gold. Since gold is money, each dollar in existence could potentially buy gold. Current figures as of Nov. 2002 are: 8.5 Trillion dollars / 261 million oz. of gold. This ratio tells us the level to which the dollar needs to devalue if it were to be backed 100% by the U.S. "official" gold again. This number gives me an idea of a potential top of the gold market. This number, at the moment, is $32,567/oz--a number that I do not see discussed by anybody. Why not? Gold -- Sharefin, 02:30:39 01/04/03 Sat NY gold retreats as Dow, dlr start '03 with rally But perhaps the main fundamental focus for gold players will be the dollar, which hit three-year lows against the euro on Tuesday but rallied sharply Thursday. For the greenback, 2002 was the worst year since the late 1980s, and with U.S. interest rates at four-decade lows, gold looked better than most dollar-based investments. Gold was the best performing sector on Wall Street, with the XAU index of gold and silver mining shares up around 45 percent last year, compared to a 25 percent gain for bullion. Most investors interested in gold bought mining shares rather than getting involved with the physical bullion, which is cumbersome and expensive to transport, store and insure. The gold market is minuscule and just a tiny diversion of global investor capital can have a huge influence. That said, speculators on the COMEX led the way higher for gold in 2002 and the futures market is now extremely overextended by historical standards. So analysts are wondering where new buyers will come from in 2003. Indeed, traders see a risk that gold producers will start selling forward again, after spending last year unwinding hedge sales and derivatives contracts that prevented many miners from benefiting fully from the rise in bullion prices. "I think the nature of it will be puts instead of forwards and that means there will be less selling than usual," a bullion dealer said, referring to put options. "I think it will be the first quarter that they will be net sellers instead of buyers for a change, which is bearish to some extent." Gold -- Sharefin, 02:22:54 01/04/03 Sat Dirt Poor The Internet offers access to a richness of ideas never before available. It is possible to wonder through and gather a tremendous volume of information and opinions of most any topic. A few years ago I began researching gold. One particularly interesting thread of discussion and speculation was promulgated by a bunch of whack job conspiracy theorists that decry the Fed and the Treasury for selling out the nation's gold. On the surface, most any sane man would dismiss this story completely. I nearly did. But it is my job to rake through the detritus of human ideas to find the one or two overlooked gems that can lead to fabulous riches. I have come the well considered conclusion, as did many hedge funds about a year ago, that this time the whack jobs are mostly right. If they are completely right, there has been treason at the highest levels. However, I never believe a conspiracy theory where a failure of reason offers an alternative explanation. That's almost always. The true story will likely never be known. Even if known, it will defy common explanation and will be discussed for many decades. The villains will remain in shadows and not be defeated by man but by the cycles of inflation and deflation. A natural force more powerful than nations or armies. I have my own theories. Many are most certainly wrong, but drawing from the web and connecting the dots, a story can be told. As Promised, A Scary Campfire Story The story begins with Barrick Gold. And a strategy for growth. Very simply, Barrick would take advantage of a bear market in gold to acquire other properties at distress prices. Nice friendly Banksters were able to offer considerable assistance. Through the alchemy of derivatives, hedging, and forward sales the Banksters were able to offer Barrick quite a deal: no downside risk in the event that gold were to rise. What's this. No risk? No such beast. Someone was taking the risk. With Big Daddy Bush on the Board, the operations and policies of the Exchange Stabilization Fund could be telegraphed to Barrick. Essentially, Barrick and the Banksters could front run the Treasury. After all, bond traders do it all the time. An honored tradition. Over the years Barrick grew to be the world's premier gold miner, with a hedge fund bolted to the side. A hedge fund with an edge. As the years went by, a second administration found a use for this edge. Any one remember Clinton's temper tantrums over not being able to control long rates? Well, Larry Summers to the rescue. His understanding of Gibson's paradox set the stage for a manipulation of biblical proportions: By suppressing the price of gold, you can suppress long term interest rates. Eureka! The bond ghouls were defeated. Clinton and Rubin and the politicos of the day could inflate stocks and bonds forever. Or at least until someone else takes office. Thus began a new period in economic history. A period where the Exchange Stabilization Fund facilitated the long peg on a bewildering array of gold swaps, gold leases, forward sales and unfathomable derivatives schemes. Spreading beyond Barrick, the entire industry has become caught up is a web of structured finance that could only be created during a financial mania, and can only be unwound during a deflation. The Treasury has recharacterized its gold reserves more than once. Only the naive believe that the type of fraud demonstrated by our corporate elites has not infiltrated the federal monetary system. The insanity began when the historic relationship between stock and bond prices was violated in 1996. Sobriety will return when historic reality returns to this primal relationship. One by one, the party go-ers are sobering up. Austrian concepts are being considered. Mr. Market has been discounting hedged mining companies. Sir Alan has been emphatic about netting legislation before Congress. The Federal Reserve discussed buying gold mines after 9/11. The Russians have circulated the gold Ruble, the Chinese have liberalized the gold market, and the Islamic Dinar is about to launch. Lawsuits have been filed, first by altruists, now by commercial interests. Dollar devaluation was the consensus at Jackson Hole this year. Keynesian ideas are being dissed by Fed governors. Monetization of debt has become policy. Gold and its shares are breaking out. And Greenspan, the closet gold bug, appears to be coming out. Gold -- Sharefin, 02:03:09 01/04/03 Sat Fed Focus - Late For The Sky Two months ago, Morgan le Fay and I confessed to meditating nostalgically about gold.1 Not in a covetous way, I stress, but rather in the context of global monetary arrangements established after World War II at Bretton Woods, New Hampshire. Since then, both Fed Governor Bernanke and Fed Chairman Greenspan have thought out loud about gold, too. Morgan and I like the company! Very cool, she wiggles her ears; and I agree. I'll come to what Ben and Alan had to say in a moment, but first, let me review why Morgan and I had wistful memories about gold, as part of the Bretton Woods arrangements. It was really a very simple deal: the dollar was pegged to gold at $35 an ounce, and everybody else was pegged to the dollar. Theoretically, the arrangements were a prophylactic against accelerating global inflation, in that the set-up putatively required America to embrace sustained monetary and fiscal discipline, so as to keep the dollar "as good as gold," limiting dollar creation via the fiat printing press. Such had been the foundation of gold-linked currency regimes for time immemorial: a check against the inflationist (immoral, many would say!) tendencies of governments, from kings to dictators to democracies.  ~~~ And the truth of the matter is that America's redemption from inflationary sins had morphed into a bubble of irrational exuberance. What a long strange trip it had been from America's paroxysm of Jimmy Carter malaise. As the millennium turned, stocks crashed, just like gold and silver had crashed two decades earlier. And interest rates crashed with stocks, at the hands of aggressive Fed easing by Mr. Greenspan, the exact opposite of Mr. Volcker's frontal assault of soaring interest rates. America's war against inflation was over and a new secular war against deflation risks was initiated. Mr. Greenspan never put it exactly that way two years ago, of course. But the proof of the pudding has been in the eating thereof, and short-term interest rates futures have been some mighty fine pudding over the last two years. The only question has been whether and when the aggressive reflationary easing would/will "get traction."3 "What the Sam Hill do you guys want?" I'm sure that Mr. Greenspan has asked more than a few times over the last two years. Finally, as I wrote last month,4 Greenspan found his answer: we, the risk takers of Wall Street, have wanted the Fed to quit pretending that it was not reflating. Reflationary tapioca wasn't enough. We have wanted the Fed, in broad daylight, in front of the mother-in-law, and with no apology, to pour a reflationary fifth of the good stuff into the punchbowl: a put beneath private sector debtors' wings. Then, and only then, would private sector risk managers ask for a cup of the stuff with default risk. In November, the Fed finally poured, with Mr. Greenspan and Mr. Bernanke hailing the reflationary power of the printing press. Ever since, we in the private sector have been drinking up. It's good reflationary hooch: the Bernanke Put! Particularly good stuff, say the gold bugs amongst us. I happen to agree with them, though I've never had a fondness for gold. If the war against inflation was started with the Fed flogging the gold speculators, then the war against deflation risk should logically commence with a Fed embrace of the gold speculators. The simple fact of the matter is that America, and the world, needs a devaluation of paper versus "stuff," the exact opposite of twenty-odd years ago. And gold is the global symbol for "stuff." Over thirty years ago, America was forced to bust up the Bretton Woods arrangements, because America didn't want to deflate sufficiently to keep gold from rising above $35 an ounce. Today, just the opposite problem exists: America needs to inflate the money stock, while devaluing it against gold, so as to keep private sector debt obligations from sinking into a deflationary abyss. And the world needs the same thing: a broad based, wholesale devaluation of all paper currencies versus a basket of globally-traded "stuff." Gold -- Sharefin, 01:10:59 01/04/03 Sat Gold price rises as miners stop hedging A key factor helping push gold prices to five-year highs is that miners have stopped betting the price will fall, according to Deutsche Bank. While fears of a Middle East war have been blamed for gold's run to almost $US350 an ounce, the change of thinking by miners is just as important but not as obvious. Gold is now 30 per cent higher than the prices below $US260 seen early in 2001. "Historically, at these prices, the producers would have been very active in the hedge market," Deutsche said. "The belief that we are in a bull market has led to negative sentiment towards the hedged producers. Very little new hedging is being put in place." The practice of hedging - usually the sale of gold borrowed from central banks, with the intention of paying it back with metal from the ground - increases effective supply, putting downward pressure on the price. Gold -- Sharefin, 01:06:32 01/04/03 Sat Will the dollar crash? US net external liabilities are some 25 per cent of gross domestic product. In five years, they will be at least 50 per cent. This cannot go on.When it stops, the dollar will tumble, to ease the reduction of a current account deficit now about 5 per cent of GDP. It will have to fall a long way, as the rest of the world will not easily absorb a big increase in US exports. The trigger will be reduced willingness of the rest of the world to buy US assets. That inflow has already fallen sharply since 2000. The offsets have, hitherto, been a big reduction in the US private capital outflow and big purchases of dollars by foreign governments. Neither seems likely to endure.The trade-weighted dollar is already down some 9 per cent from its peak in February. The chances of a steeper fall in 2003 - principally against the euro - are at least one in five. A further postponement of the end of an un- sustainable imbalance would make that event not less probable but more so. Gold -- Sharefin, 00:58:57 01/04/03 Sat Gold bugs expect hot times in 2003 Year-end profit-taking drove down gold prices yesterday, but fans of the precious metal say conditions are right to maintain the price momentum it built up in 2002. Geopolitical tensions, falling worldwide production and gold's appeal as a hedge against faltering currencies drove gold's performance this year and point to a positive outlook for gold in 2003, said John Ing, president of Toronto-based investment firm Maison Placements Canada Inc. "There's no question that this is more than a year-end rally," said Mr. Ing, who predicts gold could soar to as high as $510 (U.S.) an ounce in 2003. ~~~ Mr. Ing and other commentators say much of gold's climb in 2002, especially its dramatic jump in December can be attributed to a faltering U.S. dollar and worries over how a war between the United States and Iraq could affect the price of oil and other aspects of the global economy. Low interest rates and monetary policies aimed at boosting economic activity in countries such as the United States, Germany and Japan are also seen as setting the stage for a strong performance. The metal has traditionally been viewed as a haven in times of trouble, and was once considered an integral part of most investors' portfolios. Gold hit its record high of $850 an ounce in 1980. Gold -- Sharefin, 00:54:22 01/04/03 Sat HAS GOLD HIT ITS PEAK? Wayne Murdy, chief executive at Newmont Mining Corp. is so bullish on gold that his wife is catching the enthusiasm: She bought him a gold watch for their 34th wedding anniversary. Gold producers like Newmont are fast unwinding their hedge positions and on hopes that gold will continue to rise. The precious metal has risen 23% this year, including an 8% gain in December alone. "The relative attractiveness of gold in time of great economic uncertainty, with particular concerns over debt-inflation and U.S. dollar weakness, is improving," gold analyst Merlin Marr-Johnson at HSBC in London wrote in a report. Heightened political tensions would only add fuel to the gold flame, analysts say. Gold traded above US$400 an ounce before the U.S.-led Gulf War against Iraq in 1991. Gold -- Sharefin, 00:49:28 01/04/03 Sat DEFLATION VIGILANTES The imaginary scene is the festive Christmas party of the Federal Reserve Board. "Do you realize," one of the distinguished governors says late in the evening, his words slightly running together, "how much more money we could print if we cut down just one minor national forest? We could paper the whole damn world with C-notes." The others laugh till they cry. Essentially, this was the theme of the talk given by Fed governor Ben S. Bernanke, one of Alan Greenspan's new hires, at the National Economists Club in Washington on November 21. Bernanke, a leading monetary scholar, called attention to a potent anti-deflationary technology. Using a device called a "printing press," he said, the government can "produce as many U.S. dollars as it wishes at essentially no cost." The accuracy of that observation is indisputable. The question is why a sitting Federal Reserve official would choose to make it. The United States is a substantial net debtor to the rest of the world. The enviable American standard of living depends on the willingness of foreign creditors to regard the dollar as more than a piece of paper that can be printed "at essentially no cost." What was Bernanke thinking about? What should we be thinking about? Answers - partial answers, at least - to follow. Gold -- Sharefin, 00:39:03 01/04/03 Sat The Case For Gold, Reprise But supply and demand, the derivatives market and impending political violence are only the beginning of the crises contributing to the renewed interest in gold this year (and next?... and the year after that?). "The most important dynamic affecting the gold price is," writes Giustra, "and will be, the fate of the US dollar." Fiat vs Gold -- Sharefin, 00:31:12 01/04/03 Sat Unmitigated Disaster and Demented Windmills The Fed continues it's panic-driven exercise in blatant destruction of the currency, as it rammed another $11 billion into the banks last week. And somebody is doing something with plain old currency, as six billion of it was drawn out of banks and into circulation. Maybe it has something to do with Santa Claus. But all this money being created will result in a huge price inflation, because that's what always happens. The threat of resultant inflation is the only reason that prevents governments from printing the damn money in the first place. If it weren't for the fact that terrible, awful things happen when governments print up excess money, there would be no proscription against it. As it is, every country has safeguards in place - hey! Stop laughing so I can finish the sentence! - to prevent the government from doing this. Addison Wiggin included the following as the introduction to his recent screed about gold, "Unfortunately, any period in history of government-backed, or 'fiat' currency, has led to disastrous bouts with inflation." And since the current period of time is just another period in history, we know what will happen, since there is never a "New Era" that allows up to be down, black to be white, or monetary excesses to be benign. There is already inflationary talk about how the twenty-year price doldrums of commodities is over, as evidenced by the 24% rise in the CRB alone. ~~~ Continuing with the line of thought and remarking on politicians, Addison Wiggin perfectly encapsulated government ineptitude when he wittily concluded that "government fiscal responsibility" is an oxymoron. Continuing on a streak, Addison notes that, "According to Lipper, the average stock mutual fund is down 21.7% for the year. Of the 41 fund categories Lipper tracks, only three will end 2002 with a gain: all three are gold funds and they're up an average of 62%." Not content to merely enumerate history of some investment classes, he dryly writes that, "In the past decade, the US money supply has doubled from $4 trillion to $8 trillion, with a full 25% of that coming in the last 18 months while the Fed tries to reflate the economy." Well, now you know one of the reasons why gold did so well this last year. And since Greenspan is the worst Fed chairman in the history of the worst idea of the twentieth century, namely the concept of the Federal Reserve as a central bank, you can expect things will not get any better. They will get worse. ~~~ "Amazingly, virtually no one today is willing to admit that Federal Reserve policy has been an unmitigated disaster just like it was in the late 1920s, as the problem was too much credit, which caused inflation in asset prices, which caused massive imbalances and a maladjusted economy." Gold -- Sharefin, 00:13:44 01/04/03 Sat Gold and Deflation On September 8, 1933, almost four years after the October 1929 stock market crash, the new American president, Franklin Roosevelt, raised the domestic price of gold by 44 percent from $20.67 an ounce, where it had stood for more than a century, to $29.82 per ounce. The objectives of this change were to raise commodity prices and weaken the dollar in foreign exchange markets. More broadly, the aim was to help end the deflation that was crushing American businesses and households, especially those with debts, the burden of which was magnified by falling prices. So virulent was the deflationary pressure, however, that prices continued to fall during the balance of 1933 while the dollar strengthened, thus exacerbating the deflation gripping the American and global economies. Therefore, on January 15, 1934, President Roosevelt proposed further reflationary measures to Congress, which promptly passed the Gold Reserve Act on January 30. The result was to fix the price of gold at $35 an ounce on February 1, bringing to 69 percent the total increase in the price of gold over the space of just five months. Gold Hedges Inflation and Deflation For those who were trying to preserve, not to mention enhance, wealth in an environment of persistently falling stock prices, shaky government finances, and governments vying for a weaker currency, to have bought gold in 1931, 1932, or early 1933 proved to be a brilliant move. The price of gold, which climbs steadily in a world of rising inflation (as it did during the 1970s, from $35 to over $800 per ounce), jumped suddenly and spectacularly between September 1933 and February 1934 amidst deepening global deflation. Gold can be a hedge against the risks of both more inflation and more deflation because both phenomena entail the prospect of serious trouble for financial assets. Rising inflation depresses the value of outstanding bonds and riles foreign-exchange markets. Rising inflation also distorts relative prices and increases uncertainty about the market value of stocks; remember the stock market crash of 1973 and 1974 after the quadrupling of oil prices. Gold becomes the asset of refuge in periods of rising inflation. ~~~ Stocks Fall While Gold Rises After more than two years of proactive, stimulative monetary and fiscal policy measures and despite an absence of overt deflation and the return of modest growth in America, something is definitely still disturbing investors, households, and businesses. The stock market, as it did after 1929, has gone down for three years in a row and now the price of gold, as it did in 1932, also a third down year for the stock market, has started to rise. Over the past two years, since January 2001 when the Fed began easing, the price of gold has risen from $260 an ounce to more than $345 an ounce or by nearly 39 percent. The biggest part of that increase--more than 20 percentage points--has come over the past year. The history of the post-bubble scenarios both in the United States in the 1930s and in Japan in the 1990s is rich with suggestions to explain a sharp rise in the price of a sterile metal--gold--during a period of intensifying global disinflation and deflation. The recent weakening of the dollar coupled with a two-year period of rising gold prices suggests that investors are searching for a safe-haven asset at a time when equities have suffered and government finances--especially in Japan and Europe--are beginning to come under increasing strain. Until now, and in two episodes this year when investors fled riskier assets, including stocks, junk bonds, and emerging arket securities, they rushed into U.S. Treasuries and U.S. dollars. But more recently, over the first three weeks of December 2002, in what looks to be the early stages of another flight from risk, investors bought more gold, adding $25 an ounce, or nearly 8 percent, to the price in that short span. Other symptoms of the rising disenchantment of investors with financial assets, especially stocks, appeared during the third consecutive year of falling stock prices. The search for alternatives to equity assets coupled with a change from a focus on wealth enhancement to a focus on wealth preservation has resulted in the adoption of two separate strategies by many investors. The disinflation and deflationary environment in the global economy, together with uncertainty, causes investors to abandon risky assets and to acquire claims on reliable sovereign governments such as the United States. Rising uncertainty also leads to an increased desire to hold cash or other highly liquid assets. ~~~~ But the rise in the price of gold is different. It serves as a sign that many investors perceive that reflation efforts have not been successful and will have to be intensified. This is not too surprising. While widely discussed, reflation efforts in Japan have neither been sufficiently aggressive nor successful. The other major economic area outside of the United States--Europe--seems to be stuck in a worsening disinflationary recession, and its central bank has been reluctant to ease as aggressively as the Fed has eased, while fiscal policy is actually moving in a contractionary direction. ~~~ Beware Higher Gold Prices Optimists, making comparisons between the current post-bubble period and the United States in the 1930s, have been consoled by the notion that widespread deflation has not taken hold in the U.S. today. That is a dangerously misleading source of comfort. What we have learned over the past year is that low nominal GDP growth, the sum of modest real growth and tepid price increases confined to the services sector, is insufficient to produce widespread profit growth consistent with the forecasts--or perhaps the hopes--of most equity analysts. Therefore, the search for alternatives to equity assets together with a desire for wealth preservation, which has initially led to purchases of government securities and a movement into cash, will continue. If investors should conclude, and it would be premature to do so at this point, that the only option left to policymakers is to print money in quantities sufficient to create rising prices and perhaps dollar depreciation, the continued search for wealth preservation will lead to further purchases and a higher price of gold. Gold -- Sharefin, 23:53:40 01/03/03 Fri Gold Starts To Reflect The Possibility Of A New World Order More than half the world's population lives in the region which could be poised for rapid economic growth and offer great investment opportunities in the same way that maturation of America's postwar generation powered the US economy over the past 50 yeasrs. Already China has taken over from the States as the recipient of the greatest part of the world's capital inflow and its steel industry is growing at about the same rate as America's is contracting. This is a strong hand for starters and China has not neglected to demonstrate to the western world that it is now open for business. A strong signal to this effect was the reopening of the Shanghai Gold Exchange after 50 years. And there may be more to this than meets the eye. The peoples of the Far and Middle East have long respected gold for its monetary value even when purchasing it in the form of jewellery. They have watched the inevitable swings from feast to famine of economies based on paper currencies and may have something else in mind. Already a gold Islamic dinar has been proposed and there is talk that China may initiate a gold backed trade currency. Last year Ferdinand Lips, a well respected Swiss banker, produced a fascinating book called Gold Wars which is described in the sub-heading as “The Battle Against Sound Money as Seen From a Swiss Perspective.” In it he runs through the history of gold as the basis of currency from the Roman Empire, which started to go into decline when Nero debased the coinage, to the present day when gold is simply being ignored in favour of paper currencies. To the Western bankers and portfolio managers he poses two question, ‘What confused logic compels them to leave no room for gold in their portfolios? Do they really think that stocks of companies with no earnings or bonds in troubled currencies are sensible long term investments?” His contempt for politicians who have pressurised central bankers into selling gold assets for paper is a recurring theme throughout the book. “ I will not ask anything of the politicians because they will never change. All they have done with their politics is to destroy the purchasing power of money. Free people will always believe in gold , and when the economic and monetary situation offers nothing but despair, they will want to get rid of the printing presses and the politicians.” Westerners are finding it difficult to appreciate just what a mess the present monetary system is in, so gold has so far made only a modest advance from US$270 to US$350/oz over the past year. But China and its friends have been accumulating bullion and this may prove to be only the beginning of the beginning of a new world order. Gold -- Sharefin, 23:39:11 01/03/03 Fri Gold Is Hip Again Overlooked for the last 20 years, gold is back in vogue. Its momentum as an investment option has been surging this month, with prices up 9 percent due to rising geopolitical tensions largely from Iraq and North Korea. Gold futures closed Friday at $349.70 an ounce -- a 51/2-year high. Oil prices' recent ascent, the weak stock market and the softening real estate prices also are encouraging investors look elsewhere. ~~~ "That's the catch with the commodity," said Erik Gebhard, president of the commodity-brokerage firm Altavest Worldwide Trading Inc. in Laguna Hills, Calif. "You have a physically tangible product, but its supply and demand nuances are in flux. You kind of have to assume that and look past that and say nobody on God's green earth will know everything. You need reasons to rationalize." But metals analysts are betting that gold prices have some room to grow. Mr. Gebhard sees $400 an ounce "in the next several months." Bill Oyster, president of Dallas-based DGSE Cos., said bullion trading at his company is up 40 percent so far this month, and up 30 percent year-to-date. "If you're a professional trader, you've got to be crazy to short gold," Mr. Oyster said, adding that gold likely won't fall below $340 for now. The "upward resistance" -- or the price at which investors might start to think it too expensive -- would be at about $375 by the summer months, he said. ~~~~ Metals analysts say gold's rise is long overdue. In the last 20 years, the democratization of the stock market, the advent of numerous fixed-income options and rising real estate prices prompted many investors to toss aside gold as an option best reserved for the paranoid. ~~~ Economic concerns also may be at play in gold's comeback. The weakening of the U.S. dollar due to the sluggish economy and the threats of inflation are weighing heavily on the commodity markets, analysts say. In this view, robust consumption, rising oil prices and low interest rates -- and thus the greater money supply worldwide -- have signaled a possible resurgence of inflation next year, and gold has always risen along with inflationary fears. Gold -- Sharefin, 23:35:01 01/03/03 Fri Gold tipped to lose lustre in 2003 Despite shooting to a five-and-a-half-year high towards the end of 2002, analysts have a pessimistic outlook for gold going into the new year. With economic growth forecast to improve and the possibility of tensions easing in the Middle East, analysts believe investors will turn away from defensive assets such as gold. Instead, they are likely to plough money into investment vehicles offering potentially higher returns, such as equities and currencies. ~~~ Mr Maurer suggests the factors currently supporting the price - weak global equity markets, doubt about the strength and timing of a world economic recovery, a reduction in producer forward selling and tension in the Gulf - will be less influential in 2003. "Our view of 2003 is with economic growth picking up, particularly in the US, and a return to less uncertain times. Investors will switch away from gold into other investment vehicles and we see prices heading back down under $US300 an ounce next year." Gold -- Sharefin, 16:33:19 01/03/03 Fri JP Morgan asks SEC to check into gold trade rumors JP Morgan Chase & Co. (NYSE:JPM - News), a major bullion dealing bank, said Friday it has asked the Securities and Exchange Commission to look into rumors about gold trading losses that dogged the bank throughout 2002. "We brought the nature and subject of the rumors to the SEC and asked them to look at it," a spokesman for the bank said. The rumors about Morgan's gold and gold derivatives operations have been propagated over the Web site of the Gold Anti Trust Action Committee (GATA), a group that alleges bullion banks have colluded with central banks to prevent the price of bullion from rising. The price of gold is at its highest in almost six years. JP Morgan, which ran into trouble over its commodity and derivatives dealings with bankrupt energy giant Enron Corp., said in November that mark Gold -- Sharefin, 16:29:14 01/03/03 Fri MORE ON THE BLANCHARD SUIT…AND THE DEATH-DEFYING (?) BARRICK HEDGE BOOK The Blanchard suit against Barrick and J.P. Morgan-Chase is, of course, a big story. The implications go far beyond what the current price of gold should be, and involve the financial health of banking houses and entire financial market sectors. ~~~ The real "story" here is how gold has been used as a vehicle for speculators to engage in, ultimately, very risky financial behavior. Far from being an issue solely of gold's "forced" or otherwise contrived underperformance as an asset class/investment, it's one of shenanigans (short selling, arbitrage, derivative trading and the rest) having been engaged in that threaten the health of several financial institutions, and even the whole monetary/financial structure itself. ~~ We must go beyond even this, though, to wonder what this mining giant's fate might be. Last Fall, the company made more than one announcement warning of production shortfalls, earnings woes and more. Many are asking what on Earth is going on. With declining production, can the company keep all its long-term obligations to deliver gold at any price? Now the ugly duckling in the sector, will Barrick have the clout necessary to purchase more and better production? Does its reduced earnings for 2002 mean that-already-the company is having to eat some recent losses on its hedge book; losses it's tried to tell investors were virtually impossible? Nobody really knows for sure right now. But there are lots of questions; and Barrick's share performance especially during the second half of 2002 tells us that something may be badly amiss. The Barrick dealings with Morgan do not involve a huge amount of gold, within the context of the overall short position which is said to exist. Blanchard's going after these two, though, represents an achievable means of eventually blowing the lid off the entire universe of gold "manipulation." And-given Barrick's position as a producer in particular-the antitrust case is arguably the easiest to make against them. Gold -- Sharefin, 02:32:25 01/03/03 Fri Behind the Vault The Pope's Banks in America, the Giannini Family, and the American CIA Gold -- Sharefin, 02:22:18 01/03/03 Fri GREENSPAN REPORTEDLY BRIBES AND AIDS BUSH IN GOLD SWINDLES - part one GREENSPAN REPORTEDLY BRIBES AND AIDS BUSH IN GOLD SWINDLES - part two econ for newbies like me -- gertrude blake, 14:23:59 01/01/03 Wed http://ingrimayne.saintjoe.edu/econ/TOC.html Gold up 80% in Brazil yoy -- giovanni dioro, 05:34:37 12/31/02 Tue In an inflation related article On today's front page of Brazil's biggest paper, Folho do Sao Paolo, there was a chart with various benchmarks. It probably comes as no surprise that leading the pack was gold, up 80% on the year when priced in the local currency, reaís. In comparison, the real estate market here in Brazil has been quite stagnant for the past few years. Gold has far outperformed real estate, and it shows what a good investment precious metals can be as a hedge against paper currencies. Periodic Ponzi Update PPU -- $hifty, 00:08:48 12/30/02 Mon Preiodic Ponzi Update PPU Periodic Ponzi Update PPU Nasdaq 1,348.31 + Dow 8,303.78 = 9,652.09 divide by 2 = 4,826.04 Ponzi Down 111.14 from last week. Thanks for the link RossL! Looks like another interesting week ahead. Go GATA Go GOLD $hifty Gold -- Sharefin, 01:28:07 12/29/02 Sun Pure Gold: A Veteran Of The Mines Makes A Concentrated Play On The Glittery Stuff Indeed, Foster believes that gold prices have begun an ascent that could last for at least 10 years. His theory: Mining companies scrimped on exploration during the fierce bear market for gold from 1996 to 2001 -- and thereby set the stage for a long-term shortage of supply. Even if they crank up exploration now, the efforts could take years to pay off. "Mines are hard to find," Foster says. "I can tell you from experience -- I've drilled a lot o's portfolio. ~~~ Foster does take a concentrated approach to gold. In 2001, he traded out of platinum, tantalum and palladium to focus on the relatively small world of publicly traded gold companies. Those outfits have a combined market value of $60 billion, or less than one quarter of General Electric's value. Among his favorites: Glamis Gold of Reno, Nev., an efficient company that has been expanding through acquisitions. Foster figures Glamis will double its production during the next five years. Glamis shares have been trading recently at a 52-week high of 18.20. In general, Foster favors companies that don't hedge their production -- and thus benefit the most when gold prices rise. Foster says a full 80% of the names in his portfolio refrain from hedging. In a further sign of concentration, the fund's top 10 holdings account for nearly 60% of its assets. ~~~ Foster believes that the metal is benefiting from a major shift in investor psychology. "What worked in the 'Nineties won't work anymore," he says. "Rather than chasing stock-market returns, investors are turning to alternative strategies that include hedge funds, real estate and gold." But the main reason for Foster's bullishness is supply. During the next five to 10 years, he says, gold production will actually decline for the first time in 20 years, reflecting the aging of existing mines and the likelihood that few new mines will start up. Not only is it difficult to find new gold; it's also expensive. Successful exploration ends up costing anywhere from $25 to $75 an ounce, Foster says. A survey by Toronto-based Beacon Group found that worldwide gold production by 2010 could be nearly 30% lower than in 2001, assuming a long-term average price of $275 an ounce. The Beacon study, performed last year at the behest of major gold producers, suggests that the crunch may not be fully evident until after 2005. Foster already sees a clear sign that the major gold companies are preparing for price increases: They're allowing the hedges on their gold production to run out. Such contraction in the hedging business should also put upward pressure on spot, or current, prices of gold. That's because supply should decline as companies sell less of their production into the future. Gold -- Sharefin, 01:01:31 12/29/02 Sun Central Bankers in the Dock: the Blanchard Controversy Some comments on the storm over the Blanchard lawsuit Hoo, boy. All this dust being raised by Tim Wood's article on the Blanchard-Barrick-JPM lawsuit! One would think that the dispute of whether gold is being manipulated by a nest of conspirators has been settled a long time ago, with the pro and con camps withdrawing into their own circles so that each of them can tell their converted that they have WON! And then Blanchard comes along to light the fuse again! ~~~~ There can be little doubt, if the bulk of these assumptions are not too far off the mark, that the decision of the central bankers to lease their gold in quantity for less than $4/oz p.a. and to continue to do so for at least 28 months during which the value of the bullion reserves fell by $163/oz from $415 to $252 (while earning, at best, $10/oz on just a portion of the reserves during this time), can only be due to two reasons: Massive, sustained stupidity by central bankers in the face of day to day evidence, to reveal a near criminal negligence of their mandated responsibilities A hidden agenda that was more important to them than the effect of their decisions and actions on the value of the bullion reserves in their care Observe that except in so far as there is reference to a possible "hidden agenda" for the decisions of the central bankers, there is no mention of conspiracy or manipulation in this essay. So please do not impute support for a 'conspiracy' theory to what is written here. The whole essay hinges purely on the wisdom (some might say 'sanity') of these central bankers in respect of their decision to sell and lease gold in quantity (a decision generally accepted as fact). Also on the fact they kept on doing so, even when they were clearly shooting themselves in both feet at the same time, at least in terms of their mandate to The People, the proper owners of the national reserves. This brings us to the final assumption: 9. Assume that you, the reader, is the Judge in a matter where 'The People' sue their central bankers for the latter's negligent management of the country's gold reserves during the period February 1996 to July 1999; when the value of the bullion declined by $163/oz and the gold leases at best earned 10$/oz on a (small?) portion of these reserves. The People now seek either reparation or punishment, or both. In the light of the above assumptions, all you have to decide, really, is whether the central bankers, in a climate of excess natural demand, did in fact lease gold in such quantity as to depress the price. Nothing more and nothing less. That is the crux of the matter. ~~~ Finally, though, this essay boils down to just one question - would you, as a judge, rule the central bankers Guilty or Not Guilty on the charge of acting in a manner that had the effect of reducing the value of the national reserves, contrary to what is expected of them in terms of their mandate to be prudent and diligent. No if's and no but's - a simple question: did the central bankers act in a manner contrary to fulfilling their mandate. A simple question, but a Guilty verdict would lead to a mare's nest of other questions and suppositions that are not touched upon here, including, perhaps, mitigating circumstances in that these central bankers were pursuing other objectives critical to their function. But that would be supplementary to their guilt on the main charge. Fiat vs Gold -- Sharefin, 23:41:52 12/28/02 Sat Weekly Money Flows GOLD OUTLOOK - The gold breakout continues with no signs of stopping. $350 was a bit of a problem at week's end as it is a big psychological barrier at least from a numerical standpoint. There could be years of short selling stop losses built up anywhere in the prices between here and $400 due to the producer selling that happened in the past but I can't be sure. If there are triggers they could be hit any day sending the price of the metal even higher. It is either that or there will be some red ink on the balance sheets of those who borrowed the gold to sell forward so Mr. Market will punish the shorts one way or another. Fiat vs Gold -- Sharefin, 23:27:09 12/28/02 Sat THE CATALYST! The point remains...at present, housing prices are rising far more rapidly than incomes, a phenomenon that is obviously not sustainable in the long run, as affordability will become a problem sometime in the future - at least in areas where prices are rising by close to 20% per annum. So, whereas the flight into real estate may be nearing an end, the outlook for commodities is far more appealing. It is worth noting that despite weak global economic conditions and weak stock markets around the world, the CRB Commodity Futures Index has risen by more than 20% this year. Commodity prices have also been in a bear market for more than 20 years and, in the age of capitalism, have never been as low as just recently. Therefore, once fundamentals improve, prices could run away on the upside. For example, if synchronized growth around the world should materialize - a scenario about which we have serious reservations, but which is nevertheless a possibility for the short to medium term given central bankers' propensity to print money - then obviously the demand for all commodities should improve and drive prices higher. But more importantly, with people like Mr. Bernanke at the Fed, and actually even being a serious candidate for future chairman of the Federal Reserve Board, depreciation of the dollar and a rise in commodity prices is almost guaranteed - particularly if the economy weakens. In fact, Bernanke's declaration to the National Economists' Club in Washington that "The U.S. government has a technology called a printing press," didn't go unnoticed by the believers in sound money (gold), who subsequently pushed gold prices through an important resistance level. [Editor's note: Gold traded to $351 at the opening in Hong Kong this morning...and has gained $36 in the last month, or roughly since Bernanke made his speech. Next stop? Who knows, but $414 is the ten-year high set on February 5, 1996...no doubt, an important level to watch. Addison.] ChartsRus -- Sharefin, 23:22:46 12/28/02 Sat Charts Online Looking as good as ever..... Fiat -- Sharefin, 23:14:31 12/28/02 Sat Giovanni Here's another snippet which agrees with your thoughts & mine. Federal government revenues rose ... from about $2/person in 1791, to about $3/person in 1860, to about $15/person at the peak of the war between the states, to about $8/person in 1910, to about $62/person at the peak of WW1, to about $2100/person in the 1980s, until it currently exceeds $8870/person. -- Congressional Budget Office (all figures in constant dollars) Fiat vs Gold -- Sharefin, 23:08:40 12/28/02 Sat Bouncing Betty Bouncing Betty was an aspect of the Vietnam War explained to me by one of my Sergeants back in 1974. It was an explosive that when you set it off it would shoot up in the air and then explode. There was a lag when the unfortunate victim realized they were dead, although they hadn't actually died yet, since technically, the mine hadn't exploded. About where the global and American economies are as we enter the New Year of 2003. We are in the economic version of the famous Breck Shampoo ad, "Does she or doesn't she?" The economy has been in a rolling depression since the spring of 2000, even though you would never know it from the dominant mainstream reality smothering the United States Empire. Things are going to start happening shortly after January 2nd: economic things, political things and military things. 2003 will impose a brutal new reality upon the current fantasy one prancing around these here United States. Things are different now. 2002 was not a good year in economic terms. The Euro is at a three year high against the fiat dollar. The barbaric relic is showing signs of life. We have had record corporate credit downgrades. We have had record personal bankruptcies. We have had record corporate bankruptcies. Hmm, I wrote that last year too. It seems we set a horrible record and then proceed to do worse the next year. Record credit card default rates. Record home foreclosure rates. Record percentages of people overdue on payments. The reason this goes on year after year is because the system simply ignores it. The economic variation of one hand clapping. We have reached the level of debt related chaos needed to trigger an economic collapse. We just haven't experienced the economic collapse. Everything is in slow motion and we are just watching things unfold while denying any of it's happening.  When it Began -- giovanni dioro, 06:02:45 12/27/02 Fri Sharefin, it looks like this monetary inflation started with the "creation" of the Federal Reserve Bank in america. For the next 15-20 years that followed were rampant credit creation (war spending in WWI and consumer spending in the 1920's). When the gold standard would have normally led to a massive deflationary constriction, Franklin Delano Rosenveld (*ancestor's spelling) took away the american citizen's ability to redeem dollars for gold. That same gold (tons upon tons) was simply given to the banking consortium (federal reserve). From that point on, america's gold was gone. It now belonged to the bankers. Any gold that was then stored at Fort Knox was held in trust for the bankers, it no longer belonged to the US Treasury - the Treasury was merely the guardian. Like that saying, "Don't take any wooden nickels", a similar case could be made for "paper dollars". For the US Constitution defines a dollar as a certain amount of gold or a certain amount of silver. Thus a dollar is not paper, but is silver or gold. Fiat vs Gold -- Sharefin, 23:06:37 12/26/02 Thu Giovanni Deflation has many disguises - taxation also. Here's a classic on the deflation of purchasing power. Notice when it all started. Some things used to be golden...^o-o^...  Gold -- Sharefin, 22:56:34 12/26/02 Thu Customers Queue for Gold Bullion Customers lined up to buy investment-grade gold bullion yesterday, when it went on sale for the first time in Shanghai since 1949 -- making a mockery of retailers that refused to sell gold bars earlier this week, claiming there was no demand for it due to high world prices. Responding to numerous phone calls from eager buyers, Shanghai Lao Feng Xiang Co. Ltd., the city's leading gold jewelry processor and retailer, decided to sell 15 kilograms of bullion on a trial basis. It's safe to say the trial was a success as almost all the gold bars were sold within two hours yesterday afternoon. "We had prepared to launch the bullion in Shanghai some time next month. However, we changed our minds as we received more and more phone calls from residents asking to buy bullion," said Chen Kui, an executive with China Gold Coin Co., the country's sole wholesaler of gold coins and bullion. A total of 14 kilograms of bullion -- in bars of 50 grams and 100 grams -- was sold to buyers who had placed orders during the past half-month. And the remaining kilogram was sold quickly over the counter, according to Shi Xiaofeng, a sales manager with Lao Feng Xiang's Nanjing Road outlet. "One man purchased 10 bars at once. People were really crazy for gold items," he said. Some buyers were a little too eager to test the gold. "Many wanted to take a bite of the bar, so I had to stop them," one saleswoman said. Biting gold is a traditional way of testing its quality, as pure gold is very soft. The success of yesterday's trial run could change many retailers' thoughts about selling gold. "When the world market stood at a six-year high late last week, no one dared to take the business from China Gold Coin. If citizens gave a cold shoulder to the bars, we would have to take the losses all by ourselves," said Lao Feng Xiang's Shi. While the bars are bought as an investment, there is currently no place in Shanghai to cash them in, although officials with China Gold Coin is working with several banks to set up a buyback system within the next few months. Some analysts say yesterday's sale was helped by a correction in world gold prices after they had risen for several weeks due to concerns about the possibility of war in Iraq. Gold was selling for US$347 a troy ounce on world markets yesterday, down from a recent peak of just over US$350 last Thursday. The bullion at Lao Feng Xiang sold for 102 yuan (US$12.34) a gram (US$382.19 a troy ounce) yesterday. The price was fixed by China Gold Coin based on the floating prices on the Shanghai Gold Exchange. While some analysts question the investment value of gold at current prices, others see it as a good hedge against inflation. "Gold is a traditional investment tool for people to combat against inflation. Although you cannot reap quick profits from trading gold as you might on a stock market, investing in bullion is much safer due to its small fluctuations," said Wang Lixin, China manager for the World Gold Council. Sales were so good yesterday that China Gold Coin is worried it doesn't have enough bars to meet the demand. A similar gold rush in Beijing, Nanjing and other cities has led to a shortage, said the company. ----- Yet again instituional reporting says demand is down, yet news from the source says demand as strong as ever. This is common on all the reports stemming from India thru to Asia. Traditional media sources are attempting to obscure the news and play down the demand. Likewise with the WGC. Traditional media sources are as corrupt as Enron & suffer from the same diseases. Most People don't understand "deflation" -- giovanni dioro, 13:02:45 12/26/02 Thu Most people like to talk about deflation without really understanding what it is. In a time when gold was money and you couldn't just print as much of it as you wanted, we used to get deflations. People would borrow too much, credit expanded along with the money supply. Problem was that there came a point when there wasn't enough money circulating to pay back the loans + interest. Money supply collapsed and money itself was in great demand. When money is in great demand, then those people who have it can charge a fortune to lend it out. What they charge to loan out money is referred to as an interest rate - the cost of borrowing money. People talk about deflation now, but we don't have deflation because interest rates are extremely low. The Fed artificially sets low rates and creates as much money as it wants by buying stuff and loaning money to the US Govt which has a checkbook account with the Fed without limits. Sure the people who can borrow from the Fed at low interest rates is limited, but nonetheless there is a trickle down effect, e.g. why should the bank pay you 4% interest on a savings account when it can borrow from the Fed at 2%? Moreover, the money supply is not shrinking, but merely stagnating a bit. The way I see it, the only way gold is going to make another low is if interest rates head up to 10% or higher. As long as interest rates stay low, the dollar should stay weak, and gold should remain strong. Position yourself accordingly. Gold -- Sharefin, 09:38:30 12/26/02 Thu Back to days of gold lang syne CHASE dividends and put your faith in the yellow metal. That's the advice for investors facing another difficult year with global stock markets. Experts say 2003 will be another tough one for the Australian share market. Careful stock selection will be the key to better returns, as Wall Street continues to suffer from the excesses of the 1990s and fragile consumer confidence. ~~ And the experts emphasise so-called "X factors" that could derail global recovery - including a protracted war in Iraq, more terrorist attacks and a crisis of confidence in the US dollar. ~~~ The US economy will struggle as it unwinds the huge debt levels built up by consumers and businesses in the debt-financed boom of the 1990s. This will also act as a brake on company earnings. ~~~ Fat Prophets executive director Jason McIntosh predicts further big falls in US stocks as the US dollar plunges under the weight of the country's current account deficit. ~~~ Fat Prophets also strongly favours gold, predicting it will reach $US400 an ounce next year, partly because of investors dumping the US dollar. It currently fetches about $US345 after spectacular, war-fuelled gains in the past month. Gold -- Sharefin, 09:33:44 12/26/02 Thu Gold improve further on stockists buying NEW DELHI, DEC 26 (PTI) Gold prices improved on the bullion market today on sustained buying by stockists in line with a rising trend in overseas markets and closed further gains. Silver, on the other hand, remained neglected and surrendered moderate ground. Marketmen said gold was quoted higher in fresh bouts of buying by stockists in the face of any fresh arrivals as most of the Asian markets remained closed for Christmas holidays. They said traders expect a further hike in gold prices when markets open after the winter break as tension between Iraq and the US continued to be hightening. Gold -- Sharefin, 23:25:31 12/25/02 Wed Gold's Rally May Extend Into Early Next Year, Traders Predict Gold, on track for its biggest annual gain in 23 years, may rise further in the new year as the threat of a U.S.-led attack against Iraq prompts buying of the metal as a haven, analysts and traders said. Gold futures have soared 24 percent this year, reaching a 5 1/2-year high close to $350 an ounce, as tumbling stocks and a weakening dollar sent investors looking for alternative assets. Prices may rise as much as another $50, even before any attack, some traders said. ``We might go to $380 or $400, but it's going to have a hard time getting over that,'' said Leonard Kaplan, president of Prospector Asset Management, a money-management company in Evanston, Illinois. ``It is the only asset that is not somebody else's liability,'' Kaplan said.  Jim Sinclair Challenge to Robert Prechter -- Cobra, 04:40:27 12/25/02 Wed Mr. Sinclair has issued the following challenge to the Robert Prechter Followers of the Elliott Wave Theory ---------------------------------------------------------- locklimit . . Wed, Dec 25, 7:08AM ET For the Wavers to think about, this was posted last night at a Major gold forum, I have followed the comments of the gentleman who made this statement and I think the post is credible, it's certainly made with some conviction. What say Wavers? -------------- Here is a post from Jim Sinclair challenging the Prechter crowd on the price of gold: Thought you might like to read Sinclair versus Prechter: From Jim: There is a major error circulating amongst our Elliot friends. That is deflation is negative to gold. The primary anti-deflation tool to be used during periods of threatened or real deflation price-wise is GOLD. I am willing to say that if the point of capitulation of opinion for the Elliot ( Prechter ) School of thought is $400 an ounce, I am looking for Prechter true believers to make a legally binding wager. I will wager in lots of $1000 up to 100 Elliot believers ( total wager $100,000 ) that gold will trade at $401 in 2003. To book the wager fax me at 860 364 0673. I will send you a contract for signature. To give our Elliot colleagues a fair chance, I suggest that they read my recent Editorial carried on www.financialsense.com, www.tanrange.com & www.lemetropole.com titled " Gold, the Deflation Solution." The Elliot Wave believers have not reviewed in detail the history of gold 1929-1940. May I suggest that you copy this gentlemanly challenge to the Elliot ( Prechter ) Doctrine and send a copy of it to all of the major Elliot web site and to Mr. Prechter himself. Mr. Prechter may wish to book the entire wager, himself. Regards, Jim Fiat -- Sharefin, 21:26:55 12/23/02 Mon THE US FINANCIAL SYSTEM BLOW-UP THE US FINANCIAL SYSTEM BLOW-UP Over the past 32 weeks, the US M-3 broad money measure has increased in quantity by $US 498 Billion. It is being inflated in quantity at an annualised rate of 10%. M-3 has accelerated further over the past seven weeks, during which $US 236.5 Billion was added. That is an annualised rate of 21%! Since 1998, the US M-3 broad money measure has added the huge sum of $US 2.15 TRILLION to reach its present quantity of $US 8.53 TRILLION. If the Fed keeps going at the rate it has been creating US Dollars over the past seven weeks, over the year ahead it will have created $US 1.756 TRILLION! Behind The Cash Comes The Credit: Since the start of 1998, the US credit system has lent and re-lent the additional US Dollars which the Fed has supplied to such a degree it generated new loans of $US 9.7 TRILLION to reach the current total of $US 30.4 TRILLION. US households owe $US 8.2 TRILLION of this in mortgages alone. On the opposite side of this immense US credit engine stands what was once one of the world's greatest productive machine park of goods-producing capital plant. Here in the US manufacturing sector, after 28 months of grinding contraction, the number of people employed has now sunk to the level of 1961. The Danger Ahead: The facts are clear. Since 1998, after having spent the preceding decade inflating the quantity of US Dollars and piling up an even greater mountain of credit/debt that ended up sending the Dow into a historic blow-off, the Fed politely panicked behind closed doors. Then, after the real damage had already been done with its prior inflation and credit expansion, it tried to hold up the failing US stock market with an even greater wave of inflationary US Dollar creation and even more credit. The danger straight ahead, as can be seen from the enormous US Dollar inflation over the last seven weeks, is that continuing and perhaps even accelerating this inflation runs the huge global risk of causing a sudden and massive downside break in the international value of the US Dollar. On Thursday, December 12, the $US index broke down 0.84 points to 104.53 - that's only 0.11 above its 2002 low of 104.42 set on July 19. Printing new US Dollars (at an annualised rate $US 1.75 TRILLION) to be added to the already existing $US 8.53 TRILLION would inflate the quantity of outstanding US Dollars by 20.5% over the twelve months ahead! That rate of US annualised monetary inflation ought to make any sane foreign Dollar holder faint with fear about the future value of the Dollar. Further, fear must also be growing inside the US. If this rate of stark money inflation can't move the US economy ahead, what can? Here, in all its naked and insane glory stands the economic "theory" that if you add to "demand" (by printing new means of payment Weimar style), the economy will climb. What if it doesn't? Richard Russell -- Sharefin, 21:16:39 12/23/02 Mon The question - where is gold going from here? Obviously, there's no definitive answer to this question, only guesses. But it's a free country and I'm allowed to guess. My un-specific guess is that gold is going higher than anyone at this time thinks possible. Gold rose to 850 back in 1980. Since then the Fed has created many trillions of intrinsically worthless fiat dollars. My guess is that before the current bull market in gold is over, gold will be priced substantially above the 1980 peak price of 850. How much higher I don't know. At the recent New Orleans seminar I stated that as a guess I believed we'd see the price of the Dow and the price of gold cross. At what level? My guess was around 3,000. To sum up, it's my belief that the bear market in stocks is still in its early stages. I believe that the bull market in gold is also in its early stages. This, of course, is not a happy forecast. It's a forecast, based to a large extent, on my experience, knowledge and intuition regarding primary trends and how they work. I might also add that in my experience the longer the primary trend is manipulated, held back, prevented from expressing itself, the greater the move when this "wound-up spring" is finally released. Stocks have been touted to the heavens as the way to riches. "hold for the long-term," we are still told, "and you'll die rich." Conversely, gold has been talked down, denigrated, despised, mocked, for over two decades. "Gold is an antiquated relic," we are told. "It's days are over." I believe we'll see a drastic and total reversal of these two concepts over coming years. Stocks will be seen as the destroyer of wealth, and gold will be seen as the answer to economic freedom. If I'm wrong, I apologize. Fiat -- Sharefin, 21:11:22 12/23/02 Mon INTERVIEW WITH DR. KURT RICHEBACHER Q A lot of this is mortgage refinancing isn't it? A One is tempted to say that the American public is monetizing their homes. Q And this alarms you? A I can only say that in Europe to use one's home as collateral is something that neither homeowners nor bankers would consider, except perhaps in the case of an emergency. Q I've never heard any American economist or Wall Street spokesman speak against it. In fact, they encourage it. A No doubt. Mortgage refinancing and home equity lending have been at the epicenter of the credit explosion. I must admit to have grossly underestimated this component of the American bubble. I can only say it has removed any doubts that this is by far the greatest and the worst credit bubble that the world has ever seen. Q But only you and a small handful of critics make mention of it. The public likes it and everybody in the mortgage business is making hay. A They should enjoy it while they can. The U.S. financial system today hangs in a precarious position. It's a house of cards built on nothing but financial leverage, credit excess, speculation and derivatives. Q Are we going to fall down and go boom? A I would say prepare for much worse to come. Q What's the nature of this recession you predict? A It will prove unusually severe and long. Q Why? A The key to fathoming the severity of the future crisis lies in appreciating the vulnerability of an economy and financial system that have for years been exposed to the most reckless financial expansion and speculation in history. Q That's Austrian business cycle theory, right? A Yes, the length and severity of recessions or depressions depend critically on the magnitude of the dislocations and imbalances that have accumulated in the economy during the preceding boom. Q And that's why you consistently predicted that the U.S. economy was in for a hard landing? A Yes. Allow me to summarize. The U.S. economy of the 1990s ranks as the worst bubble economy in history. The boom was built on nothing but leverage upon leverage. A vanishing supply of domestic savings was more than subsidized by boundless credit creation for leveraging asset holdings. Q And the Fed's the culprit? A The all-important thing to see is that the Federal Reserve abandoned any control of money and credit creation. The power of the American credit machine to create credit out of the blue is unique and unprecedented. Q Well, some would say it's saved the economy. A This excessive monetary looseness has only postponed and magnified the coming inevitable crisis. Q Let's talk about the dollar. You have said that it will weaken, and to some extent, it has. Is there more weakness to come? A We regard it as an inescapable event. Growing disillusionment with the U.S. economy is the trigger. Q But doesn't the world like a strong dollar? A It suited the rest of the world because it boosted their exports and it suited the United States as a boost to its financial markets. In actual fact, the huge capital inflows have become the U.S. financial markets' single most important pillar. Take this pillar away, and those markets will instantly collapse with devastating effects for the U.S. economy, turning quickly into a savage credit crunch. Q Could it happen that fast? A The fact is that the exposure of the U.S. financial markets to foreign investors and lenders has grown to such preposterous magnitude during recent years that controlled, gradual dollar devaluation no longer appears feasible. Under today's extreme circumstances, the alternative is only between a strong and a collapsing dollar. Q Is there any cure for that? A In order to avoid the worst, the Fed may be forced to drastically raise interest rates? Q My goodness! A The dangers that loom on the currency front are immense. The grossly overleveraged U.S. financial system is hostage to a strong dollar and permanent, huge capital inflows. The U.S. trade deficit and the accumulated foreign indebtedness have reached a scale that defies any possible action by central banks. The fate of the dollar is beyond any control. Fiat -- Sharefin, 21:04:22 12/23/02 Mon BEST OF MOGAMBO GURU My mind refuses to stop thinking about Ben Bernanke's pledge to work the offices of the Fed to actually take positive, calculated steps to achieve a simmering, permanent inflation in the USA by buying debt, and cranking up the printing presses to pay for it all. There is probably no policy statement that any Fed Governor could utter that could possibly cause my eyeballs to spin around in my head- blip blip blip - like that one does. ~~~ Pausing for a mere moment, I look around me to see if there is anybody else out here screaming at the wind. My icy heart, petrified by the cold, clammy hand now referred to for the third damn time and you are probably as bored as I am with this stupid literary device, if indeed it even IS one, is gladdened to see that Marshall Auerback also has some choice words to say re Mr. Bernanke and the new direction of the Fed. "Deflation may be averted, but if we are to take the proposals sketched out by these Fed officials at face value, the increasingly extreme outcome that lies in store for the US economy may be one of two equally unpalatable scenarios: a degree of socialization unheard of since the days of the old Soviet Union or a Weimar Germany-type hyperinflation." Well, there IS the pretty-convincing historical evidence of economies that tread happily down that path. So such things are NOT out of the question. Continuing, Mr. Auerback makes note of the crux of the whole argument, namely flooding the world with money and cheapening the currency, and writes, "We cannot recall another instance of a monetary official actually celebrating the central bank's ability to destroy the intrinsic value of a currency." It is Mr. Auerback's cogent summary that leaves one shivering with goose-bumps of horror, when he warns, "In so doing, they leave us less concerned with the prospects of deflation and more aghast at the apparently limitless measures America's financial and monetary officials appear prepared to countenance sustaining an increasingly unsustainable system." Note the use of the word "aghast," suggesting more than, say, casually interesting. John Crudele, calling it "outrageous," writes, "Federal Reserve Governor Ben Bernanke may have gotten himself into some hot water by saying the one thing that no one in his position should say: we'll just print more money if the economy doesn't respond to traditional remedies." Gold -- Sharefin, 18:31:03 12/23/02 Mon The $380 Question Since gold broke through the symbolic USD 350/oz mark, the technical configuration of the gold market has opened the way to a new rally towards the major resistance level at USD 380/oz. The technical configuration suggests this level will be tested within 1-2 months, which would be consistent with the timeframe cited for possible military intervention in Iraq. The war risk premium remains the principal price driver, while the recent weakening of the dollar should be considered more a result of this risk premium than a factor in its own right. However, although the breaking of each important technical resistance level (USD 327/oz, USD 331/oz and finally USD 337/oz) has triggered a spate of new buying (either stop-loss trades or stale bull liquidation), the key question is whether this movement attracted new buyers. The latest statistics published by the CFTC on 10th December for the Comex contract show that the net long position stood at 5.13 million ounces (7.32 long versus 2.18 short). Since then, the change in open positions suggests that the net long position should now be close to 6.5 million ounces (with a long position of 8.5 million). This level compares with a recent high of only 4.7 million ounces last May. The more bearish market participants will take this to mean that the market is overbought and therefore overexposed on the downside. The more bullish participants will deduce that this type of position could not simply have been built up by the usual investors on the gold market (funds and financial institutions). Indeed, it is clear that this time - unlike past gold rallies - new participants have been drawn into the fray. The weakness of the dollar and the collapse in returns on financial assets justify this choice. The upside potential is now dependent on gold's capacity to attract small investors (retail funds). It is also possible that the media coverage now surrounding the market will also have a part to play. That said, experience has shown that this is more often than not the signal that the party is over. Gold has clearly had a particularly volatile week, with impressive price rises giving way to subsequent drops on the back of profit-taking. Even though the preliminary statements from the White House on omissions in the Iraqi report on its WMD (Weapons of Mass Destruction) programmes served as a trigger factor, it was the attractive technical configuration that fuelled the rally. Gold tested a six-year high at USD 355/oz on the Access system (and hence with very limited trading volumes), which saw bid/ask spreads widen sharply up to USD 1/oz before coming back down to USD 0.25/oz by the end of the week. Physical demand from India and Asia showed some signs of panic buying before abating in the hope of better days to come. Without the arrival of new participants, the risk for the coming two weeks remains of a price drop due to the unwinding of positions, notably physical, in the run-up to closing of the financial year. Even though the technical configuration remains bullish in the near term, we will probably have to wait for further developments in relations between the United Nations and Iraq before witnessing a second upward surge. Fiat vs Gold -- Sharefin, 18:10:24 12/23/02 Mon The Gold Cover Clause/The Deflation Solution The Gold Cover Clause The Deflation Solution A Subject You Must Understand If You Wish To Succeed In Gold Investments in 2003 By James E. Sinclair, CEO & Chairman With your questions answered: What is the Gold Cover Clause? How was it and how will it be used? When will it be used again? How will affect the US Dollar when implemented? How will it affect the price of gold before and after implemented? How will it effect the gold investor immediately and long-term? In order to comprehend how gold will be utilized to reverse the present economic down spiral we need to build our foundation of reasoning with historical facts as well as several fundamental concepts. Fiat vs Gold -- Sharefin, 18:06:02 12/23/02 Mon THE STATEMENTS OF GREENSPAN AND BERNANKE CONSTITUTE A WATERSHED EVENT THE FATE FOR GOLD AND THE U.S. DOLLAR IS SEALED Picture yourself as a foreign banker, fund manager, central banker, or any of a number of individuals controlling substantial wealth. Remember, the U.S. dollar is the reserve currency of all of the major nations, and our Treasury Paper is held as their major asset, representing upwards of 75% of their reserves. Further, an enormous amount of foreign wealth, the Arabs included, is invested in these U.S. Treasuries and dollar accounts. How would you react if you learned that the most powerful person in the U.S. was prepared to issue an unlimited amount of additional dollars? Wouldn't you reason that these new dollars would cheapen those that you held and others that were already in existence? Wouldn't you feel some level of fear that those dollars owed you, or owned by you, were destined to depreciate in value? Wouldn't you feel betrayed by a nation in which you had invested so much of your hard earned money? Wouldn't you be angered by the fact that the Federal Reserve was unconcerned about maintaining the integrity and value of the currency which they had convinced you, that they would forever protect? ~~~ Contrary to Greenspan's likely belief that he could forever fool the world's citizens, his and Bernanke's statements have sent a powerful message. Within a few short weeks, the meaning of their announcements were quickly understood and acted upon! Foreign governments and individuals have begun the long process of reducing or eliminating their dollar or Treasury holdings. Despite statements of "our strong dollar policy" from our politicians, foreigners now recognize that the dollar is destined to decline in value. They have been irrefutably told by our central bankers that further declines in our economy or a derivative melt-down will be met with the wholesale creation of dollars. After all, our nation is poised to create new dollars at "virtually no cost" to us! Many foreigners will hope, and some will pray, that the U.S. economy will recover and the derivative problem will go away, or at least be held off into the future. It is not certain that the Fed will perform as Greenspan and Bernanke have stated. Perhaps the economy will muddle through for quite some time without a serious recessionary threat or a derivative disaster. However, those who are the most astute will move into action before it is too late for them. They have already read the writing on the wall. They realize that they are at great risk and will sell their dollars and acquire gold, silver, various commodities, and other items of tangible worth. They will jettison their U.S. dollar holdings as if they were the plague! Later, an increasing number of people will follow in their footsteps. This will increase the magnitude of gold's rise and the dollar's decline as these events unfold. Greenspan and Bernanke have finally awakened the world to the fact that they are about to sustain serious dollar losses. And, the first of the world's citizens have loudly heard their messages and have begun to protect themselves by acquiring gold. I believe that the die has been cast for a substantial rise in the price of gold, silver and virtually all tangibles! Further, we are witnessing the early days of what will likely become the most severe dollar decline in the history of the United States. It is potentially destined to pale that which occurred during the decade of the 1970's. ~~~ This is a watershed event! Is Greenspan preparing us for an eventual reentry of gold into our monetary system? He is un-hedged in his comparison between 1800 and 1929 and the 60 years that followed. Under the gold standard prices were stable for 129 years, but rose eight-fold in the 6 decades after the discipline of gold was removed and the gold standard was abandoned. His later statement regarding the effects of the institution of monetary restraint after 1979 is also telling. His comments pertaining to the result that occurred, after the money growth slowed and the initial recession ended and the economy staged a vigorous recovery lead me to believe that he is tacitly recommending this action! Gold -- Sharefin, 05:46:11 12/23/02 Mon Gold Keeps Looking Shinier There are plenty of reasons to think the rally will continue. Gold bugs, rejoice: Prices broke $330 per ounce on Dec. 13, further fueling the yearlong bull run in gold-mining stocks. Those smart enough to invest in gold and precious metals funds at the start of 2002 have earned an average 56% return--the best performance of any mutual fund category in the period. "People just don't believe it," says Morgan Stanley's gold analyst, Michael Durose. But that's because they may not understand the dynamics. On average, every 1% increase in the price of gold leads to a 3% increase in the value of mining stocks, he says. "You get that kind of leverage because costs are fixed, and reserves are more valuable," says Durose. Ultimately, the industry's profits are enhanced." There are technical reasons why gold prices spiked, say enthusiasts. Hedge-fund managers, who make bets on geopolitical and economic changes, are buying en masse, propping up prices. Also, as gold-mining stocks soar, short-sellers who had bet on price declines are scrambling to cover their positions. Skeptics say the rally won't last. Spikes are nothing new: Gold last reached $338 in October, 1999, when 15 central banks signed a pact to limit their lending and sales of metals for five years. Prices also shot up after the terrorist attacks of September 11, as investors fled to safe, tangible assets. But the industry has gone through a metamorphosis that bodes well for the long term. Twenty-year lows in gold prices forced mining companies to streamline operations. Some are now earning their first profits in years. Rampant consolidation and lack of money for exploration have cut supply, boosting prices. That's not all: The threat of war and other uncertainties have added to demand from speculators. The weakening of the U.S. dollar will also help to keep prices aloft. As it stands, most analysts expect gold to reach $350 in the first half of the year. "I don't think it's too late to buy gold stocks," says equity metals analyst Leo Larkin of Standard & Poor's. Once a rally starts, watch out, says Frank Holmes, CEO of San Antonio's U.S. Global Investors Inc. He runs two gold-related funds, which are among the best performers of all U.S. diversified stock funds. The U.S. Global Investors World Precious Minerals Fund, which buys North American mining companies, is up 64% so far this year. In stimulative cycles, after the economy turns bad, with low interest rates, deficit spending, and a weakening currency, "the gold stocks take off," he says. "We're more than a year into it, but we think 2003 is going to be another bull market in gold stocks. Gold shines when everything else falls apart." Gold -- Sharefin, 05:41:52 12/23/02 Mon Chairman Greenspan confirms that gold has a place in support of a decaying dollar On the 19th December, 2002, the quiet spoken, well-weathered, but always-dignified, 'Sir' Alan Greenspan, in the opening remarks to to the Economic Club of New York, made a speech that will not only rock the entire monetary world, but spur the world of gold back into monetary, centre stage! In re-affirming that gold has always had an important, no, vital, place in the World's Monetary System, 'Sir' Alan said:"Although the gold standard could hardly be portrayed as having produced a period of price tranquillity, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, has allowed a persistent over issuance of money. As recently as a decade ago, central bankers, having witnessed more than a half-century of chronic inflation, appeared to confirm that a fiat currency was inherently subject to excess." This has always been the case, but in effect, 'Sir' Alan has confirmed what has been said in Gold-Authentic Money since its inception. [visit website to access past articles and subscribe]. In itself, it may simply be an academic statement, but it is far from it. For nearly a quarter of a century, gold has been undermined, supplies have been accelerated and a derivatives market developed which accentuated the fall in the price of gold from its peak of $887.50 back at the beginning of the '80's, whilst the U.S. "Dollar Imperialism," successfully went forth. After Official Sales of gold were terminated at the beginning of the '70's, the assault on gold was begun in the open market, by the U.S. with 500 tonnes of gold sold. When they saw how quickly this was digested and in a reaffirmation of its desire to continue to hold gold, these sales were terminated. Despite their desire to continue to hold gold, they still wanted to squash the price of gold, but from now on, with others gold. The sales from the I.M.F. followed, with similar results and their sales were terminated, never to appear again, despite public statements that they could do so. Now they too, have reaffirmed their respect for gold, and in their public statements. Thereafter, sales of gold from other Central Banks followed. The Central Banks thereafter sold gold and created an environment where expectations of unregulated gold sales were fostered. Over the years, the gold price was held down, and reached its lowest point of $252, ahead of a switch in policy by 15 of the leading Central Banks in Europe, in an Agreement called the "Washington Agreement," in September of 1999. This, was not simply giving transparency to Official Gold Sales, but , as Gold-Authentic Money articles have been highlighting, was clarifying to the market that limitations, and possibly in the future [post Sept 2004?] terminations of gold sales were to take place. The first part of 'Sir' Alan's statement clearly recognises and supports the statement first made in the "Washington Agreement" that "Gold will remain an important element of Global Monetary Reserves." In fact his statement goes much further and recognises that without gold in the system, we have seen a "persistent over-issuance of money." and that "a fiat currency was inherently subject to excess." He could not have said a stronger word on the matter. Perhaps this is why the new Treasury Secretary could indicate that the 'Strong Dollar' Policy would continue, for the only way the U.S. $ can regain credibility in future days is with the support of gold, at the right price, which has to be considerably higher. Without actually saying that he expects a considerably higher price for gold, 'Sir' Alan has indicated that this will happen. How so? that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. How else can gold regain the same price level as it had in 1800 and 1929, without compensating for such over-issuance first? The fears, stated in Gold-Authentic Money of inflationary compensation for deflation, getting out of 'Sir' Alan's control, have clearly been recognised by him, when he continued by saying, "Moreover, a major objective of the recent heightened level of scrutiny is to ensure that any latent deflationary pressures are appropriately addressed well before they become a problem. . Although the US economy has largely escaped any deflation since World War II, there are some well-founded reasons to presume that deflation is more of a threat to economic growth than is inflation." The frightening realisation that tremendous over capacity exists in the U.S. economy, alongside other indications confirms his fears. The statement he next made is a frightening one. 'Sir' Alan went on to say, "the expansion of the monetary base can proceed even if overnight rates are driven to their zero lower bound." He well knows that such a statement is one of desperation, in the realisation that any such action forcefully drives the return on the $ into heavily negative territory, and away from credibility as an instrument of value. His comments on gold have to be seen in this context. Gold must be brought back in support of the $! Failure to do so, when all realise there is no real alternative credible Reserve currency to the U.S. $, would mean to destroy the credibility of currencies world wide, as 86% of world trade is done in $ and 76% of the world's Reserve are in $. Why is this on the Agenda now? Because a fear that endangers the U.S. economy more than inflation has emerged, the real and severe threat of Deflation. In preparation for this 'Sir' Alan's next part of his speech takes on a deep significance and acts as a warning of how severe this threat is. He said, "Clearly, it would be desirable to avoid deflation. But if deflation were to develop, options for aggressive monetary policy responses are available." Gold -- Sharefin, 05:23:26 12/23/02 Mon Gold rush hits Beijing department store A Beijing department store sold its entire stock of 70 kg of gold bars the first day they were put on the market, store managers said. The Guiyou Department Store said the bars of five, 10, 50, 100, 200, 500 grammes were sold at 92 yuan a gramme, in line with the then international price of US$342 an ounce, on Wednesday. "The gold rush we've seen this week is because consumers believe that gold (investment) will be opened (to the public)...but it is not official yet," said Ronald Wong, representative of the World Gold Council in China.  Gold -- Sharefin, 05:21:02 12/23/02 Mon A letter to the editor of the National Post re 'gold hedge fever' Gold -- Sharefin, 02:12:22 12/23/02 Mon Snipped from another forum. --------------------------- Subject: What Is Making Gold Move Up? And How Far? The facts have been collected over a period from various sources, which unfortunately I am not disciplined enough to keep a record. Much of it came from the Bank of England. If you repost it on your gold forum, please explain that I only performed the role of a gatherer of information toward some useful format, and am not the original researcher. If someone wants to claim credit for part of this post, it perfectly alright with me. Henry C.K. Liu ----- Original Message ----- Subject: What Is Making Gold Move Up? And How Far? The historical high for gold is around $850 per ounce on January 21, 1980. We are a long way from that since 1974, when President Ford restored Americans' right to hold gold bullion. Those who bought gold or went long on gold in 1980 have all gone down the drain. I personally knew a few of them. Gold Forward Rate Agreement (GOFRA) is a hedging instrument used by producers who, having drawn down gold loans , can lock in forward gold interest rate exposure. The GOFRA hedges against the combined effect of moves in both US dollar and gold interest rates with settlement in dollars. The GOLFRA (Gold Lease Forward Rate Agreement) restricts itself to gold interest rates with settlement in gold. The increased activity of the central banks in lending gold to the market means that they, too, have exposure to gold rate volatility and the GODFRA (Gold Deposit Forward Rate Agreement) is tailored to their particular activities. Since July 1989, twelve market-makers have contributed to the GOFO page on Reuters their rates for lending gold (against US dollars) and at 10 am a mean is calculated automatically giving the market, in effect, a gold LIBOR (London Interbank Offered Rate). In 1997 a second page GOFO was added providing logical data, which allows the user to apply the rates to other applications, such as spreadsheets and charts. Reuters LBMA07 gives a full list of contributor codes. Reuter Monitor Dealing Service (RDS) is a communications system established by Reuters and available to users on subscription. RDS is used increasingly by professional traders in gold, especially by banks who also trade foreign exchange through this medium. Central banks choose to lend gold when they could have sold it for dollars because they would have gotten more dollars for their gold, and earned the dollar interest rate -- gold lease rate differential. Central Banks chose to lease out their gold in preference to selling it for the following reasons: 1. CBs believe that they should continue to back their currency with a significant quantity of gold. They think they know that gold is the ultimate store of value, in case dollar hegemony collapses. 2. The duty of the CBs is to regulate the financial markets - and not to make profit in sale-purchase of gold and/or other precious metals. 3.CBs leased out their Gold not because they wanted to earn the lease money, but to provide liquidity to the markets. The purpose of lending was to prevent a squeeze due to short-term increase in demand and/or cornering of the market by big speculators. The continuity with which CBs lent gold to the market at low lease rates capped the price of gold, which is the policy goal of all CBs, to keep the value of their respective currencies. When gold price rises in dollars terms, all currencies depreciates against commodity prices regardless of their exchange rate to dollars. Lower prices resulted in higher physical demand and lower mining output. Demand-supply gap continued to widen and the CBs continued to fill this gap with easy lending. The bullion banks, gold producers and others borrowed gold from the CBs and sold it in the cash market for dollars. Though the CBs continue to hold the title to their gold, the physical gold will not come back to them because of continuing leasing. In addition to the already booked interest rate -- lease rate differential, the borrowers of gold are sitting over huge mark to market profits as the price of gold was at 20 year lows. There is only one problem, a very big problem -- if the Central banks want their Gold back, then where will this gold come from? For these Gold loans to be settled, either the future mining should exceed future demand and/or the CBs must sell their gold holdings. If the CBs were to sell their gold now, then what explanation do they have for leasing out their gold - when they could have sold it and realized a much higher price? For mining production to exceed demand, the price of gold must go up significantly. If the price of gold does go up significantly, then some big bullion banks may go bankrupt. One big failure would result in chain of defaults. It appears that some CBs now realize this and, therefore, are planning to sell their gold reserves just to bail out some market players who are short. It is possible that the Bank of England made the controversial decision to sell their gold reserves in order to protect some bullion banks. It is also possible that for the same reason some other CBs may be ready to sell their gold reserves, whenever the price of gold starts shooting upwards. It is the policy duty of CBs to correct any imbalances in the economy. Their actions in the gold market during the last several years have created an explosive imbalance. Demand - supply gap was widening as the price was falling. It is possible that at some point in the not too distant future, or now, all the metal available for lease and/or sale will be gobbled up by consumers. At that point will begin the mother of all squeezes - and then not even the G-7 would be able to bail out any bank and/or trader short. The Fed has recently reminded us that it can print currency and/or manipulate interest rates, but to bail out somebody short in gold they will need gold, which the Fed cannot print. The biggest proof that the CBs have got it all wrong is that they are being forced to sell Gold at 20 year lows and that too, at a time when the physical demand is far in excess of the current mining. Chinese demand for gold between now and February 2003 is staggering. A lot of analysts feel that gold has lost its value as a reserve asset. They know that the sentiment among the gold investors has been bearish. They believe that sooner or later the masses are going to stop buying gold and gold jewellery. They are increasing looking wrong headed. In one fell swoop fifteen European central banks have effectively transformed the fortunes of gold and, potentially, the way the gold market functions. On September 26, the European Central Bank (ECB) and the central banks of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland and England announced the following: "In the interest of clarifying their intentions with respect to their gold holdings, the above institutions make the following statement: 1. Gold will remain an important element of global monetary reserves. 2. The above institutions will not enter the market as seller, with the exception of already decided sales. 3. The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual sales will not exceed approximately 400 t and total sales over this period will not exceed 2,000 tonnes. 4. The signatories to this agreement have agreed not to expand their gold leasing and their use of gold futures and options over this period. This agreement will be reviewed after five years." After issuing the statement the president of the ECB, Wim Duisenberg, indicated that apart from the 15 signatories to the agreement, the US Federal Reserve had indicated that it will not change its oft- stated stance on gold sales. The impact of this statement was immediate. As traders returned to their desks the Monday after, the gold price exploded, breaching resistance level after resistance level. After closing on Friday at US$268.50/oz, the price raced upwards to touch an intra-day high of US$327.30/oz in New York on Tuesday, its highest level for almost two years. Profit taking forced the price back somewhat, but it has since regained its upward momentum aided by a statement from the Bank of Japan that it too had no plans to sell gold from its monetary reserves. Although the removal of uncertainty over outright sales has undoubtedly provided the launch-pad for gold's rally, it has been sustained by the impact of point four of the joint statement. By agreeing not to expand their activities in gold leasing, and gold futures and options over the next five years, the signatories to the agreement have removed the obstacle that has capped many of gold's previous rallies- producer forward selling. By reducing central bank lending, miners and speculators can no longer rely on forward prices being in contango, and in the short term at least this will have a dramatic impact on the way these three parts of the gold market operate. The effect of this reduced liquidity can already be seen in gold lease rates. According to Mining Journal's Precious Metals Monthly Monitor, the one month lease rate averaged 0.68% in January. Since then, the rate has steadily risen and in September averaged 3.92%. Since the central bank's announcement, lease rates have reached almost 10% which, with the London Inter-Bank Lending Rate at a little over 5%, means that gold is more expensive to borrow than cash and is effectively in backwardation. The implications of this new environment are serious. Producers that have protected themselves with hedges based on rolling lease-rate contracts are now in a dangerous situation. If they cannot borrow gold to roll contracts forward, they will have to deliver gold that they have produced at the contract price or purchase gold on the spot market at the prevailing price to meet their obligations. Investment funds are also in a different environment. In the past, they have taken advantage of the negative sentiment in the gold market through gold-carry trades - borrowing gold at what until recently had been low lease rates, selling it on the spot market, investing the proceeds then buying back gold on the spot marking or rolling the contract forward. The inability to roll forward such positions has fuelled much of the recent price rise. How long this situation lasts will depend on central banks that are not involved in the agreement. According to Andy Smith, metals analyst with Mitsui in London, such banks already account for up to 75% of all lending. In the medium to long term, they are likely to take advantage of the new environment and increase their lending which, says Mr Smith, will eventually reduce borrowing costs of gold. But he warns that this will take a while and lease rates will be less predictable. At its peak, the Fed held over 12,700 tonnes (around 409 million oz), more than one-third of global official stocks, on behalf of 73 nations or international organizations, such as the IMF. The Fed's famous 'gold window' closed in 1971 when the United States no longer sold gold for dollars at a fixed price, so the stockpile ceased to grow. The bank's reputation as an impartial safe haven was also shaken in1979 when the US government froze 50 tonnes (1.6 million oz) of Iran's gold at the Fed during the Tehran embassy hostage crisis. The fate of Saudi gold is not solid. During the 1990s, almost 2,600 tonnes (83 million oz) of gold was moved out of the Fed as many other central banks mobilized their reserves for leasing, swaps or sale. In 2000 and 2001 there was a further outflow of 355 tonnes (11.4 million oz) and 259 tonnes (8.3 million oz) respectively, reducing stocks of "earmarked gold" at the Fed to 6,703 tonnes (215.5 million oz) at the end of December 2001. Much of the decline in stocks over the past dozen years has represented gold being moved to London for leasing; indeed, gold flows out of the Fed have in the past often followed hard on rises in the gold leasing rate, as central banks shifted more gold to benefit from higher rates. (Conversely, when leasing rates have been very low - the situation during much of the second half of 2001 - it has not paid foreign central banks to move stocks out of New York.) The improvement in security following the collapse of the Soviet Union has also encouraged some European countries to repatriate their gold holdings. The ongoing decline in Fed stocks means it may eventually lose the cachet of having the world's largest stock in its vaults, because US reserves in Fort Knox alone are around 4,600 tonnes. The Bank of England has always maintained an active, if modest, trading role in gold, both for the management of UK reserves and to match its sales of Sovereigns, of which it remains the official distributor. Between July 1999 and March 2002 the Bank of England acted as an agent for the UK Treasury, which initially planned to dispose of 415 tonnes (13.34 million oz) or 58% of the country's gold reserves (the sales target was subsequently revised downwards). The Bank of England held seventeen auctions, initially for 25 tonne (0.80 million oz) lots, the sales quantity per auction later being lowered to the 20 tonne (0.64 million oz) level. The final auction took place on 5th March 2002 and brought the total amount of metal sold on behalf of the UK Treasury to a little over 400 tonnes (12.86 million oz). Following the conclusion of the sales programme the UK was left with a stock of 315 tonnes (10.13 million oz), slightly more than originally forecast. The sale of UK gold reserves generated a fair amount of controversy. The National Audit Office (NAO) was instructed to prepare a report into the method and execution of the gold sales. This report came to the broad conclusion in January 2001 that, in the designing and implementing of the sales programme, the objective of selling 'in a transparent and fair manner while achieving value for money' had been successful. However, the NAO report suggested that the Treasury review the possibility of adapting the auction design or even using the London gold fixing as an alternative or additional means of selling gold. This conclusion may well explain the subsequent decision (referred to above) to reduce the amount of gold offered at each auction. The Bank of England has played an additional role in the gold market as a recognised International Monetary Fund (IMF) depository. It holds gold on behalf of many nations and often acts on their behalf in gold transactions. Because of its unique experience with gold among central banks, it has done much to develop the leasing and swap market, which is centred primarily on London. The Bank of England also lends out to the market a small percentage of the UK's own gold reserves. Many central banks have come to rely on the Bank of England in introducing them to these gold market activities, which has resulted in even more foreign gold reserves moved to the bank's vaults. And from the first steps of the lending market, they have often entrusted the bank to execute other operations, whether in derivatives or outright sales. Thus the Bank of England has been at the core of widening central bank involvement in gold. The leasing of gold became an integral and increasingly important part of the more sophisticated gold market of the 1990s, especially in the provision of liquidity to facilitate forward and derivative transactions. Central banks are the predominant source of leased gold. According to GFMS, by the end of 2001 over 80 of them were providing through their deposits and swaps more than 4,650 tonnes (150 million oz) to the market, earning a return on an otherwise sterile asset. By comparison, under 500 tonnes (16 million oz) of leased gold is available from non-official sources. Central banks, in short, provide the market's liquidity. Moreover, the mobilizing of their gold for leasing has brought many central banks back into the market for the first time in three decades, and given them an insight into what else it can offer in terms of writing options on their reserves or outright sales. Central banks have got a taste for earning a return on gold through their leasing, making them eager to see how else they can profit. Central bank gold has provided liquidity for many gold market operations, whether gold loans or forward and option books by mining companies, masking gold sales by central banks until the moment of delivery, underwriting speculators' short positions, underpinning bullion dealers' consignment stocks, or simply providing jewellery manufacturers with working metal. However, producer hedging has provided up to two-thirds of the liquidity requirements much of the time, except when a large central bank sale was underway calling for borrowed metal to conceal sales in published gold stocks until it was all over. Initially, leasing often came from central banks in developing countries, eager for some return on gold but, increasingly, major European central banks, including the Austrian, Belgian, Netherlands, German and UK central banks, came to participate. Even the Swiss National Bank joined in. GFMS estimate that between 1995 and 1999 over 60% of new leasing came from European central banks. Thus the Washington Agreement of September 1999 in which 15 European central banks announced, among other things, that they would not increase their leasing, had an immense impact on the gold lease rate, which momentarily went to 10% Clear evidence of how the gold market has come to live on leased central bank gold. Although less than 15% of all world official gold holdings are currently leased, the Washington Agreement, combined with the reluctance of other large holders such as the United States to enter the leasing market has put a question mark against the assumption that liquidity from the central banks will always be readily available to the market. On the other hand, many central banks have shown a reluctance to close out swaps and reduce their existing deposits. This has been the case in spite of a slump in the level of gold leasing rates, itself mainly caused by a reduction in outstanding producer hedge positions in 2001, which has continued in the first half of 2002. An open position resulting from a sale is known as a short position. It is created because the trader or speculator believes the price will fall and he/she can cover later at a lower price and make a profit. For example, he/she may sell gold at $300 an ounce, hoping the price will fall to $280 at which level he/she can buy to cover the position. The establishing of short positions can depress the price because it implies steady selling. But going short can also cause problems both for the individual and the market if, instead, the price rises. If substantial short positions have been built up (and there are examples of speculators being short between 1 and 10 million oz) a sudden increase in price may force them to cover. Such a run for cover, known as a "short squeeze" or "short covering" only accelerates the rise. In options the grantor or writer of a call is also potentially short because he/she may be called upon to deliver gold and therefore will normally delta hedge the position. The London Bullion Market Association (LBMA) was established in 1987 to represent the interests of the participants in the wholesale bullion market. The LBMA comprises: 10 market making members who quote prices for buying and selling gold (and silver) throughout each working day from 8.00 am until 5.00 pm (See also: LBMA Market Makers) 44 ordinary members, covering a wide range of banks, trading companies, assayers and refiners, mints and security companies 24 international associates; a category of membership that was introduced during 2000. The LBMA works with: The Financial Services Authority (FSA), which supervises the major market participants, who operate under the London Code of Conduct HM Customs & Excise on tax policy, such as Value Added Tax The LBMA maintains: The London Good Delivery List for gold and silver through its Physical Committee The LBMA organises: An annual Precious Metals conference. The inaugural event took place in Dubai in February 2000, a second LBMA conference was held in Istanbul in May 2001, with a third one following in June 2002 in San Francisco. A fourth Precious Metals conference is planned to take place in Shanghai in 2003. London bullion market clearing turnover: Annual daily averages Ounces transferred (millions) Number of transfers 1997 36.8 1,285 1998 31.2 1,188 1999 31.0 1,007 2000 23.2 793 2001 21.5 802 Monthly daily averages Ounces transferred (millions) Number of transfers 2002 January 16.3 662 February 20.1 822 March 17.4 714 April 19.2 739 May 19.3 744 June 21.0 842 July 17.3 744 August 17.1 718 September 16.4 728 October 17.5 659 It is very unlikely we will see $500 gold in the foreseeable future, let alone another all time high. Henry C.K. Liu ~~~~~~~~~~~~~~ Jas wrote: The move up in the price of gold, for the past year or so, has been primarily driven by fundamentals. In order of decreasing importance they are: 1. Very low short-term rates When the risk-free returns on short-term instruments were 5-6%, the cost of carrying gold was relatively high. With rates now close to 1% there is little reason to risk paper money. 2. Falling Dollar The price of gold has been lot more stable in terms of Swiss franc and the Euro. As dollar has been falling, it automatically has given boost to gold. 3. Risk Inherent in Paper Currencies This would become far more important as the world economies slide into depression. Currently, a small risk premium has come into play in people wanting to put their savings in gold. These fundamental forces alone should take the gold price to $500 an ounce over the next two years. However, once speculators get the whiff there is no telling how far the price of gold could go. To gauge how far speculation could take the price of an ounce of gold, we resort to numerology, or relative prices of assets under speculative fervour. And what better guide than NASTYQ!, aka NASDAQ, market. We surmise that an ounce of gold is worth at least as much as a share of NASTYQ! Since NASTYQ! peaked at 5,148, we project that $5,148 for an ounce of gold is not only not farfetched but a realistic target. Conversely, the low price of gold in recent years, around $260, is a good target for NASTYQ! Gold is real money. Paper money is based on faith only. Who do you have faith in? How many governments have fallen and how many paper currencies have disappeared for good?? You need to have a very long time horizon to answer these questions properly. Jas Periodic Ponzi Update PPU -- $hifty, 00:59:33 12/23/02 Mon Preiodic Ponzi Update PPU Periodic Ponzi Update PPU Nasdaq 1,363.05 + 8,511.32 = 9,874.37 divide by 2 = 4,937.185 Ponzi Up 39.125 from last week. Thanks for the link RossL. Merry Christmas and Happy Holidays to all ! Go GATA ! Go Gold ! $hifty Fiat -- Sharefin, 22:36:17 12/22/02 Sun BANKING BUNKUM Holiday reading from Henry C K Liu. An excellent series of articles on the case against Central Banking Scroll down to get the entire series. Gold -- Sharefin, 21:43:30 12/22/02 Sun From all of me at Gold Charts R Us to all of you!!! Merry Cheers Nick  Gold -- Sharefin, 20:56:52 12/22/02 Sun Surging Commodities Hint Little Deflation Global financial markets are buzzing about the risk of deflation, a devilish downward spiral in prices that central bankers are paid to steer their economies around. But with the price of gold rising to five-year highs this week, and commodities surging, underlying demand looks healthy and the dreaded "d" word looks overhyped, at least as far as the United States is concerned, economists said. Federal Reserve policy makers once viewed gold -- long the foundation of the global monetary system and still stacked high in many central bank vaults -- as a gauge of inflation forces. But inflation has long been quiescent and officials rarely mention the shiny metal any more. Gold -- Sharefin, 20:03:31 12/22/02 Sun Brown's bullion sell-off 'has cost Britain pounds 540m' GORDON Brown cost the country pounds 540m in lost profits by selling gold reserves at depressed prices over three years. No-one can call the market perfectly, but the Chancellor's decision to start dumping reserves in 1999 looks especially badly timed. The Bank of England sold 400m of its 714m tonnes, ending in March this year. The sales fetched an average $275 an ounce, calculates the World Gold Council. Buyers in the September 1999 auction did especially well. They bought 804,000 ounces at $256. Gold has rallied since, touching $353. It closed down $3.40 at $341.60 last night, despite growing talk of war, litigation and conspiracies. A US lawsuit accuses Canadian mining giant Barrick and investment bank JP Morgan of a 15-year plot to lower the price through massive forward sales. The action, from coins merchant Blanchard, claims a huge amount has vanished from the vaults. Allegedly it has been lent to bullion banks, led by Morgan, who have dumped it on the market, further depressing the price. Research group GFMS says 5,000 tonnes have been lent. Gold bugs say it is much more. Barrick will respond formally in the New Year. Morgan declines to comment. Barrick openly sells future production at fixed prices, on contracts allowing it to defer delivery for 15 years. These protect it against price falls. But it angrily denies any wrongdoing. It says no bullion bank has more than 15pc of its business. It adds: 'We have only 5pc of world production in a highly liquid market. How can we manipulate the price?' It has sold 16.9m ounces forward, one-fifth of global output. Gold has fallen nearly onefifth in 15 years, but so has silver. Central banks worldwide own 33,000 tonnes of gold, despite a decade of selling. Gold -- Sharefin, 20:01:10 12/22/02 Sun Gold 'on fire' as price leaps to six-year high There was more frenzied trading in the gold market yesterday as analysts predicted the precious metal could hit $400 an ounce, a price not seen for a decade. The figure jumped more than $13 to $353 in early trading in the Far East where Japanese banks and Asian private investors were heavy buyers. It then settled back and closed at $345.50 in London, up $4.50 on the day. Gold has been driven to the highest level for six years as nervous investors prefer it to many paper currencies. Risks in financial markets are increasing with a potential war in Iraq. The dollar is falling as economists believe President Bush plans to abandon the strong dollar policy and embark on a tax-cutting programme to boost the US economy. "Gold is on fire. There is enormous appetite out there," said Andy Waag, an analyst at UBS Warburg, the investment bank. JP Morgan, one of the big bullion banks, said in a note to clients: "Gold has reached a pivotal point." It said that the price could exceed $400 an ounce. Rumours persist that one bullion player has been caught out with a huge short position, having incorrectly betted that the price would fall. But the gold market is notoriously rumour-prone and on Comex, the New York commodoties exchange, there are a net 5.5m ounces of long positions, the highest since 1996. Gold -- Sharefin, 19:58:52 12/22/02 Sun Gold is again proving its value in a risky world Imagine if the three wise men arrived in Bethlehem bearing frankincense, myrrh, and a promisory note signed by King Herod. Joseph would send them packing. But that is exactly what would have happened if City analysts had anything to do with it. How else can we explain their 1990s fashion for dismissing gold as a "barbarous metal", which, just like any other commodity, would supposedly fall endlessly in value as production got cheaper? Much better to rely on sophisticated paper currencies, we were told. Well, those predictions have now been proved resoundingly wrong. Last week the price of gold went over $350 an ounce, the highest level for six years. The return of gold as a store of value provides a classic lesson in markets. It shows they are cyclical and informed as much by human nature as by the spreadsheets of economists. After falling to a low of about $250 an ounce in 2001 - the level at which Gordon Brown foolishly decided to sell half Britain's gold reserves - the price recovered rapidly in the anxious days after September 11. So far, Mr Brown's decision has cost the country about £500m. This recovery came as no surprise to those who prefer history as their guide. Take the warrior tribesmen of Afghanistan's Northern Alliance. They insisted that gold, and not lead, fill their pencil in the war against the Taliban. When Osama bin Laden was holed up in the caves of Tora Bora the Northern Alliance suddenly downed arms and refused to go in for the kill. They demanded more payment from the US Army. In vain the Americans offered dollars and other paper currencies. Rupees? Afghanis? Euros? No thanks, they snorted. Any old warlord can print money. Not until some nice gold had been flown up from Pakistan would the Northern Alliance advance. By that time, it was too late and bin Laden had slipped away. Such behaviour illustrates a point made by Alan Greenspan, chairman of the US Federal Reserve. Asked by a congressional committee three years ago if America should copy Mr Brown and auction off the contents of Fort Knox, he said no. "We should hold our gold," he said. "Gold still represents the ultimate form of payment. Germany in 1944 could buy materials during the war only with gold. Fiat money [currency] in extremis is accepted by nobody. Gold is always accepted." ~~~ Speculators and governments are now relearning the ancient gold lesson. In a world full of risks - which by definition are unknown and unquantifiable - you are better off putting your trust in a shiny heavy ingot which cannot be faked, any more than the pain if you drop it on your toe. Gold's value is not based on someone's promise to pay, whether it be from the US Treasury or the European Central Bank, the Bank of England, or even King Herod. ~~~ Japanese consumers, already worried about the banking system, are joining Indians as big buyers of gold. And in this country, Gordon Brown has pensioned off Prudence and embarked on a borrowing binge unseen for a decade. Investors evidently believe that these measures will stoke demand and hence inflation. They are buying gold just in case. Let's not get too carried away. Gold bugs love rumours and conspiracy theories. The rise in the price has more behind it than mere sentiment. It is a natural result of the business cycle. During the long bear market, gold producers stopped opening new mines. Production is now falling, so there is a worldwide shortage. It takes two to three years to start a mine, so that shortage is likely to continue for a while yet. One day gold will lose its shine again. But in the meantime, wise men will tuck some away. Gold -- Sharefin, 19:52:04 12/22/02 Sun When a safe haven's on its mettle As stock markets fell through the floor in 2002 and war clouds gathered, there was one place to be - gold. The price of gold jumped from below pounds 175 an ounce to more than pounds 212 during the year as investors flocked into the traditional safe haven. Investors in Merrill Lynch's Gold & General fund did even better, enjoying a gain of 78.6% over the year which far outstripped any other unit trust in 2002. ~~~ Evy Hambro, manager of World Mining, remains bullish: "We are still very optimistic that the factors that have driven the gold price higher, regardless of Iraq, will be supportive through 2003. We are still overweight in gold and are maintaining our exposure to the pure commodity producers of copper and nickel, although we are less optimistic about aluminium." ~~ Ian Henderson, manager of the JPMF fund, is also bullish. He says: "You've got to remember, gold has only just come off its 25- year low. In real terms, the price of gold is phenomenally low." Big central banks, such as the Bank of England and the US Federal Reserve, have stopped selling off their gold reserves, and there has been a wave of consolidation among the mining majors, cutting costs and exploration budgets. Gold -- Sharefin, 19:47:51 12/22/02 Sun Behold the Gold Bull! The Ancient Metal of Kings has finally burst free from its longstanding $325 shackles! Gold has just declared to the world it is in a secular bull market. The naysayers claimed it would never happen. The Keynesian socialists claimed there was no place for gold in their brave new age of fiat paper. The Wall Street perma-bulls claimed that gold was dead. The lion's share of mainstream investors didn't even know that gold existed in the real world, believing it to be some mythical fairy-tale concoction. They were all dead wrong. The magnificent and exciting events unfolding in the new gold bull market in the past days have rendered the naysayers' endless prattle completely impotent. The radical anti-free-market crowds who continue to oppose and fear gold are now exposed naked to the world as the fools they have been. With all the subtlety of a mighty sledgehammer blow to the skull, the Ancient Metal of Kings crushed its legions of critics into dust as it burst out of its long-festering $325 shackles and screamed towards the heavens. What a wondrous sight to behold for longsuffering gold investors! Hallelujah!  Gold -- Sharefin, 19:42:24 12/22/02 Sun $1000 Gold, No Inflation? In Friday's edition I published a letter from a subscriber concerning the question of which is more likely, inflation or deflation. I've responded below with some extremely bullish comments on gold, and my conclusions may surprise even long-time subscribers of MarketWise Black Box. My comments were prompted by a follow-up query from the same subscriber, who wrote as follows: “The important issue which must be addressed is this: Given that we are in a period of deflation, how can gold go up? Obviously I agree with your conclusion that it is in a strong uptrend, but why? We know that in periods of deflation, legal-tender fiat money will go up in value against goods and services--it should be going up against gold, not down. The balance of my e-mail is directed to possible explanations of why that is happening although I am more interested in provoking you to advance your view than I am in defending my own.” My reply: Gold is especially strong right now for one reason -- the speech several weeks ago by rookie Fed Governor Ben Bernanke. With a bluntness that stunned the economic world, and with the obvious backing of his boss, he said in so many words that the Fed would do whatever it takes to ward off deflation. Now, it's one thing for an official spokesman to say the government will no longer support a strong dollar, as various spokesmen of the central bank have done from time to time when it advanced America's interest to have softer dollars. But it is quite another thing to declare that the central bank is ready to throw the dollar overboard if that's what it takes to get the economy moving. Why Dollar Hovers Even so, and try as it may, the dollar cannot immediately fall relative to other currencies because 1) the euro is tied to the performance of German and French economies that over the short- and long-run lie beyond salvage either politically or demographically; and 2) the Japanese government has just begun monetizing stocks (!), buying depressed shares directly from the portfolios of banks. This suggests that the beggar-thy-neighbor game of competitive devaluations has become so deadly earnest and aggressive that one currency can no longer fall very much relative to the others. For the moment, however, all currencies remain subservient to a dollar that is linked to one of the last theoretically viable economies on earth. Regardless of how much longer the major currencies move in a seemingly stable relationship to each other, all currencies, including the dollar, will come to be measured more and more against gold. And that is why I continue to assert, as stridently and as often as possible, that as the third millennium begins, gold is the no-brainer investment of our lifetime. But how does this square with my deflation prediction, whereby the dollar presumably would be "king" and grow in purchasing power, even relative to gold? It doesn't, actually -- at least, not in a way that conventional thinking can comprehend, much less interpret. In fact, we are headed into an economic typhoon for which there is no historical precedent: a world drowning in debt, but also awash in fundamentally valueless money. Can deflation occur as global funny-money mounts into the hundreds of trillions of dollars? My answer is yes, but not across all classes of assets. I will be examining them one by one in the coming weeks in MarketWise Black Box, since I've concluded that no one, even die-hard deflationists such as myself or Bob Prechter, has yet parsed the specific and seemingly contradictory details of a deflationary bust occurring in a global monetary environment characterized by worthless fiat. Inflate What? During my trip to California over the weekend I had a chance to talk with a friend who has always managed to stimulate my thinking about the economy. My thoughts jelled in the drive back to the airport, and I think you will find them both highly original and compelling. For now, though, let me say that I'm convinced gold could go to $1,000 an ounce without producing a commensurate repricing of goods and services straightaway -- or even much of a change in the relative valuations of currencies. (Bonds and certain other assets are another matter, but we'll save that discussion for later.) After all, it is not perceptions that drive inflation, but physical dollars chasing goods and services. If gold went to $1,000, would dollars necessarily "chase" college tuitions up to $70,000 per year, or ground beef to $20/pound, or doctor visits to $300? I seriously doubt it -- for how could prices possibly soar without a corresponding increase in incomes -- or at least, in asset valuations that can be further leveraged? If you think more housing inflation is the answer, then, along with our Fed chairman and his board of governors, you flunk both economics and common sense. Meanwhile, we won't even mention the scenario of a wage-driven inflation, since even those who believe fervently in the economic-recovery tooth fairy are not dumb enough to believe their pay is about to double. Stagflation Pipe-Dream And what about stagflation? In our dreams, perhaps. For even with the Fed striving desperately to pump up asset prices, 1970s-style inflation remains a remote prospect. The economic system is simply too stressed by gargantuan debt for a muddled and gradual resolution. Moreover, unlike the economy of the 1970s, today's is characterized by a deflationary global market in goods, primarily from China, and the mounting unaffordability domestically of health care, college tuition, and, as deficits swell, services provided by state and local government. We survived the 1970s inflation mainly because our homes, if not always our paychecks, kept pace with inflation, and because the weight of our debts was being inflated away by a depreciating dollar. But it is a far different matter to survive deflation, when wages and most asset values are falling in both real and nominal terms. It is anomalously strong housing prices that we should be most concerned about, since they have been sustained entirely by Fed smoke-and-mirrors. To the extent the Fed chairman, a PhD in economics, continues to propagate the idea that rising housing prices represent an increase in wealth, an insidious and dangerous ignorance has come to cloud the average American's thinking about the economy. Catharsis will not likely come so easy as a mere 40% fall in the Dow Average. Gold -- Sharefin, 19:17:24 12/22/02 Sun Hot, but still not respectable Gold may be having a great run of late but it still has a serious image problem. Gold -- Sharefin, 19:12:29 12/22/02 Sun Small Investors Overrunning Japan's Gold Mkt An official with a major Japanese trading house said that a host of economic and political uncertainties has sent individual Japanese investors flocking back to the gold market. And this budding grassroots movement could help lift the price of gold - already trading near 6-year highs - to higher levels in the new year. ADVERTISEMENT Osamu Ikeda, general manager of the precious metals division at Tanaka Kikinzoku Kogyo Co., Japan's largest refiner and marketer of precious metals, said that the Japanese market is becoming somewhat overrun by individual investors. "This trend started earlier in the year, but became much more pronounced in December when many of the big players left the market, while the number of small investors continued climbing," said Ikeda. Why are so many Japanese turning into gold bugs? Ikeda said that a growing sense of unease among the Japanese, on many fronts, has put the spot light back on gold and its traditional role as a "safe haven" asset. "There is the possibility of a war with Iraq, falling stock prices, higher oil prices, North Korea is restarting its nuclear weapons program. Take your pick," said Ikeda. Ikeda went on to explain that the phenomenal growth in gold coin sales this year in Japan is the clearest indication that individual investors are pouring money into the gold market. "Gold coins are more popular with individual investors as they can be bought in very small amounts. The big investors, on the other hand, tend to go for the pricer gold bars," said Ikeda. According to estimates compiled by Tanaka Kikinzoku, sales of gold coins in Japan in 2002 came to 218,482 ounces through November, which was more than double the 109,381 ounces sold for all of 2001. Ikeda said that he is not at all surprised to see so many Japanese becoming smitten with gold fever. "The Japanese tend to be more conservative with their money. They don't like to use credit cards, they save a large percentage of their money and they have traditionally preferred hard assets over paper." Ikeda added that gold is still the preferred hard asset among the Japanese.  Fiat vs Gold -- Sharefin, 19:09:03 12/22/02 Sun Gold & the Dollar after the Smoke Cleared Looks great to me. To determine the standing of any item you need to look at it long, medium and short. In terms of technical analysis that is monthly, weekly and daily in that order. What those charts read is some minor softness in the daily with the weekly and monthly quite strong. Fiat -- Sharefin, 19:07:05 12/22/02 Sun Billion-dollar Wall Street pact set Top Wall Street firms agreed Friday to pay regulators a total of $1.4 billion, with Salomon Smith Barney hit with the stiffest fine, settling a long-running dispute over investment practices and promising to better serve individual investors. In announcing the settlement, New York Attorney General Eliot Spitzer, who spearheaded the investigation, told listeners that "restoring investor confidence is paramount." Citigroup's Salomon Smith Barney unit will pay the heaviest fine: $325 million. Credit Suisse will pay $150 million. Goldman Sachs, J.P. Morgan Chase, Bear Stearns, Morgan Stanley, Lehman Brothers, Deutsche Bank and UBS Paine Webber will each pay $50 million, according to a joint statement by regulators. Gold -- Sharefin, 18:56:42 12/22/02 Sun Heads Up The gold price has appreciated over night. Much of the present activity is fundamentally based on the announcement of the filing of a law suit by the largest coin dealing company in the United States against a major gold producer derivative (over the counter variety) hedger and JP Moran, Chase (JPM). This suit claims that there was collusion in manipulation of the gold price for profit, not in the best interest of the public or their specific public. ~~~~~ SANITY CHECK LIST: 1/ All professional traders in gold know, without any doubt, that the Comex market is Manipulation Central and has been for years. To deny that is not to demonstrate wisdom but rather to admit that you do not understand the difference between a fiduciary executing an order and a floor showman/women being dramatic in order to affect a price level. The perspective between manipulation and stabilization is in the eyes of the beholder. 2/ The US Jurisprudence system has flaws. 3/ Those flaws are called influence even if just credentials of the accused. 4/ US Jurisprudence is a game of who has the most money and the best talent. Anyone recall OJ? 5/ Blanchard & Company has to my knowledge approximately $20,000,000 budget for this from a previous sealed settlement of a suit. 6/ One defendant alone in this case has a treasury of over $750,000,000.00 and would spend it all if required to defend. 7/ The defendants will use the absolute best attorneys available for this type of action that practice in the US. A dream team is now being assembled. 8/ Patrick Garver of ABX, who will direct that Dream Team counsel for ABX is one of the toughest, roughest, smartest attoneys in North America. 9/ Both of the defendants are litigious themselves. Gold -- Sharefin, 18:49:52 12/22/02 Sun Gold remained volatile in European trade Spot gold remained volatile in European trade Thursday, with the market having lost some of the gains which had pushed prices overnight to close to six-year highs before easing back under profit-taking pressure to around $345 a troy ounce and then edging up again.Ongoing weakness in the U.S. dollar against the major currencies, heightened expectations of a U.S.-led war against Iraq and the threat of terrorist reprisal attacks are expected to continue to underpin the market, dealers said, with strong oil prices and an uncertain economic outlook adding to the resumption of gold's safe haven status. Options-related short covering was also behind the earlier move higher, as traders tried to protect $350/oz call positions. A high bid of $354.50/oz had been seen earlier. Yet the strength in the gold market is hard to pin down on any one factor, market observers said. "Much is made of the Iraq situation, but this is not new news - tensions have been building over Iraq for months. Let's not forget the India/Pakistan nuclear stand-off earlier this year when gold prices were relatively stable around $315/oz," one market player said." The $20/oz rise in gold in the past fortnight cannot be solely attributed to safe haven buying on war fears," he added. Gold -- Sharefin, 18:47:52 12/22/02 Sun Bullion Surges in Late Day Rally Can you say “Short-Squeeze?” By the end of last week, the “commercials” (futures traders) had piled on their short positions big time. Normally the “commercials” are right, and the “specs” (individual speculators) are wrong. Could this be one of the few exceptions to the rules? Could it be that nobody in there right mind wants to divest of gold right now - with such an important resistance level taken out last week, with the US Dollar Index decisively breaking last week, with it being so early in the bullish season for gold, and with so much geopolitical risk, and now a potential oil squeeze at hand to boot? Selling gold that's actually owned would be one thing right now. But to actually be short the metal - a person would have to be out of their minds. Now I am hearing rumours circulating (unsubstantiated) about some kind of a short squeeze happening with physical gold bullion inventories. ~~~ And when I asked him what he made of the breach of resistance last week - he told me that he expects two “impulses” - an initial one into the $350's and another to the $400 area - “not tomorrow” but “more quickly than you might expect.” He stated this with such matter of fact conviction - that it sounded like these were already “fait accomplis”. As certain as the sun will rise in the east. He went on to say “We made a lot of money last year on the gold stocks and we plan on doing it again this year” (I am paraphrasing). Given his esteemed opinion, given the timing, we just might have an extremely rare occurrence here - a boni fide short squeeze. ~~ The other interesting observation is watching the gold price outperform the gold stocks for a change. I've had numerous readers express concern about this. For instance where gold bullion has made new five year highs, the stocks are still well below their highs of late May/early June. Gold -- Sharefin, 18:42:59 12/22/02 Sun Gold ripe to break free from long term bear trend Gold is poised to spring free of a multi-year bear trend if the latest rally, which has shoved prices up some 10 percent since the start of December, holds the metal above $350 an ounce, technical analysts said on Thursday. "Gold has reached a crucial pivotal point. It is probably going to be the most important period of any since the 1980 highs around $800," London-based analysts J.P. Morgan said in a report. Spot gold (XAU=) raced to its highest level in nearly six years on Thursday as increasing fears of war against Iraq lured investors into the precious metal which is often viewed as a relatively safe asset in times of tension. After peaking at $353.75 in Asian trading, gold steadied to around $348.00 an ounce in London. The analysts who study charts of historical price patterns argued that the rally had taken gold to levels where it could soon take off. "It's like a sleeping giant that's just woken up, we've almost forgotten just how quickly gold can move and how dramatic it can be," independent technical analyst Cliff Green said. The yellow metal has been gearing up for the move for some time, even before a false alert in September/October 1999 when prices moved from a low of around $250 to peak at $338 an ounce in three weeks. "The size of that base -- gold has probably been consolidating really since 1997 -- can support significantly higher prices," independent technical analyst Cliff Green said. "I'm certainly a $400/oz person and maybe even higher." Gerry Celaya, chief strategist at UK-based Redtower Research said long term charts indicated a move up to $420 an ounce or even higher -- if only gold can crack $360. "From a purely technical point of view, it is a great break out. If we can sustain the move above $340, then you have to be thinking that $360 is vulnerable for $380 an ounce," he said. "But until we break above $360 on a sustained basis, we would be favouring a pull back to that $330/326 breakout zone." J.P. Morgan analysts said a sustained break of $350 an ounce would end the correction down from the 1980 high, which could project a rally towards $430 -- levels unseen since 1996. But a much longer term move back up to the lofty $800 level would need support from a sustained bear market in the U.S. dollar and equities, they added. In the shorter term, analysts were concerned about the speed of gold's sizzling rally, with the metal gaining just over $30 in less than three weeks. That could cause the market to overheat and fail at the crucial $350-360 level. "It would benefit from some form of consolidation or digestion so that we avoid that on this particular occasion," Green said. But failure at this level could see gold shoved right back down to its 1999/2001 lows around $254 over the coming two to three years, J.P. Morgan's analysts said. They said the large positions held by investment funds on the COMEX futures market in New York could pose a threat because if these funds decided to sell the price would drop quickly. "Excessively bullish market sentiment, and exceedingly long fund positions on COMEX favour this outlook," they wrote. Gold -- Sharefin, 18:41:25 12/22/02 Sun Gold rush in Beijing after 50-yr ban lifted Local shops opened their doors to individual gold buyers in the Chinese capital on Wednesday for the first time in the country in over five decades. Direct sale of gold bars to individuals was suspended immediately after the founding of new China in 1949, when its government monopolised the business. The ban was considered the 'last stronghold of a planned economy'. Fiat vs Gold -- Sharefin, 18:38:06 12/22/02 Sun Weekly Money Flows IN FOCUS: GOLD - This week's chart is a prime example why sideways channels and breakouts from sideways channels are watched so closely by technical traders. As you can see, once a channel is broken it tends to carry through with force as this textbook technical chart is showing. MZM (Money Zero Maturity) - Greens-panic and crew are really spooked as the printing press has pumped out an annualized 20% increase in the money supply over the last two months. Did anybody hear about a 20% tax increase announcement from the government because if they keep up the same pace over the next year then that is what it is. US DOLLAR INDEX - "The buck is so close to breaking through its last support line you can almost taste it. It looks like it will break down through 104 next week and if that happens there is no telling what might happen next. This could cause a flood of technical traders to rush in setting off a potential cascade and/or chain reaction through all the financial markets. I don't want to get overly dramatic but it is my opinion that the Dollar is the final linchpin that keeps the dying US bull market on life support. Once that goes it will be time for the death scene of the current cycle and the potential rush of foreign investors coming out of the US markets would create a vacuum that US investors can't possibly hope to fill. Got Gold?" That is what I wrote last week and it has fulfilled. The U.S. buck appears to be deathly afraid of the 200 day MA and now there is no support below for it. I just checked on the long term charts to see the last time the US dollar was this low and I had to go back to February 2000 to find the last time. You talk about being in a rut, well the US dollar has now entered a three year rut so you have gold on a five year breakout move and the buck in a three year down trend move. How much more evidence is needed to indicate that we are experiencing a fundamental financial shift in the markets. If you don't think that this will affect the stock markets over the short to medium term then you better think again. This looks like a secular trend change |
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