Gold -- Sharefin, 03:07:02 01/27/03 Mon French and Scottish Journalists Write More Sense About Gold Than The UK Media Fascinating to see positive articles in French newspapers such as La Tribune and Le Figaro about gold, while British journalists steer well clear. Typical of the Brits is the Daily Mail with the throwaway comment, “The days when gold dominated the UK market are long gone,” or the Financial Times which is meant to set an example in such debates, saying simply that “the looming threat of war in Iraq helped sustain buying interest in the metal.” Agreed, there are exceptions. The Times ran a piece saying that net investment in gold by individuals is soaring and it is not unusual to see people walk into banks in European countries and buy 10 kgs of gold in bars which they then stuff in their ruck sacks. The level of debate as to why they should do this and why the price of gold is on the move is, however, limited. “The movement is largely due to a reduction in supply by the big mining companies, coupled with increased buying by hedge funds and other professional investors” is as intelligent as it gets. In fact it has been the Scotsman which is the only UK newspaper which has got to the nub of the issue with an article entitled, “Why gold is gaining in a world awash with dollars.” Ian Lamont, who is an Edinburgh based commentator and former stockbroker says, “The dollar has been able to remain fundamentally and seriously overvalued for years because the rest of the world was gullible enough to believe that the US economy would always overperform and thus its bonds and shares deserved a premium rating.” He continues, “ Some 75 per cent of central bank reserves, plus a great deal of non-US private wealth, is held in US dollars. Now that the Fed has declared it will ‘print' as many dollars as it takes to combat deflation, holders of US dollar assets will have to be extraordinarily naïve not to realise that an unlimited increase in the supply of US dollars means dollars will inevitably be worth less….. There is one standard against which this debasement of currencies can be measured and one asset which investors can own to protect themselves: that standard and that asset is gold.” Gold -- Sharefin, 02:38:12 01/27/03 Mon The Great Bear Market In Gold Lasted So Long That Only The Old And Bold Remember The Last Bull Market “With age comes Wisdom”, or so one hopes. And with wisdom comes the realisation that things are never quite as they seem to be and the best way to analyse the future lies in a study of the past. This may appear as a bunch of truisms, but apply them to gold - its past and its possible future- and a few things fall into place. Why, for instance, do so many commentators glibly attribute the present revival of the gold price to the possibility of war in Iraq? As a variant today the Financial Times Markets Report put it down to ‘speculative buying'. This was pinned on a comment from a Mr Jeffrey Christian of CPM Group suggesting that speculators were betting that people who sold the February Comex Futures contract would find it hard to buy the physical gold needed when this contract becomes deliverable on January 31st. Well it is a point, but it can hardly be held responsible for the fact that gold rose by nearly US$10/ounce last week and by US$5 the week before. It has now broken through a high point last reached in 1997. But just to show that the Pink'Un doesn't give a toss for the gold story one way or the other, it is now going to be without a mining editor as Matthew Jones is moving to an editing job on world news there and no one is lined up to take his place. On the same day the newspaper carried a piece saying that hedge fund managers have been switching out of falling equity markets and into commodities, particularly gold. John Reade, a precious metals analyst at UBS Warburg was quoted as saying that this switch in policy is confirmed by the fact that there are a record number of positions on the Comex gold contract in New York. He then went on to claim that there is a war premium of US$30 to US$50 in the present price of gold. It would be interesting to know his reasoning. Yes, there was a price spike at the time of the Kuwait war, but things were very different then . Equities were booming and the dollar was strong. Hardly the sort of conditions on which gold thrives. Maybe the answer is that most of these commentators and analysts have never seen gold on a bull tack before. They have been brought up on a diet of paper currencies interspersed with assurances that gold has had its day. Looking back over the past 23 years to January 1980 when bullion topped out at US$800/oz, it has been in a basic bear market ever since with exception of a few spikes such as the one caused by the Washington Agreement on Central Bank sales. Traders and advisers in any market that maintains the same trend for such a period are bound to assume that it will last forever. Out of that grew the view that gold had had its day. When analyst Andy Smith of Mitsui Precious Metal changed to a bull last year it was easy to see that it caused him real pain as it went against the grain. Even now he finds it hard to maintain a bullish stance and has fallen back to talking in riddles. Gold -- Sharefin, 01:58:57 01/27/03 Mon Nuts And Bolts Why is gold rising? There has been enough literature put out recently, if you have been paying attention, to come to the conclusion that it's not because of the threatened war with Iraq. As a matter of fact, I would hypothesize that a war between the US/Britain and Iraq may occur, because gold is going up. It's the old chicken/egg conundrum, and you should endeavour to become aware of which is first, if you expect to keep your financial nest egg in tact, going forward. Indubitably, I think it is becoming increasingly important, as the gold bull market progresses, for investors to make themselves aware of the actual 'nuts and bolts' of why gold is rising. Having a firm understanding of the actual underpinnings of the process that is currently unfolding will increase the probability that you will not misread the real reason(s) gold is ascending in price, and keep you where you should be under these conditions, invested in gold and it's related equities. In a nutshell, gold's recent rise, in US dollar terms, has everything to do with the currency. More specifically, it has everything to do with the money supply. Baring in mind that this analysis is going to be relatively straight forward, as in order to present a comprehensive accounting of all the factors behind gold fundamentals, as it relates to money supply, would necessitate an examination of the behemoth's historical price sensitivity to relationships such as those found in phenomena like 'Gibson's Paradox'. For the purposes of this essay, we will refrain from such expeditions, and get down to what I consider to be the real 'nuts and bolts' of the matter. ~~~ If my channel lines are drawn correctly, gold may have already given us the signal that we are about to take out the 1996 highs, as it has entered a new growth channel. If gold can close above the $365 level, for three consecutive days, it has a good chance of running up to the $400 to $425 area very quickly. Lets keep our fingers crossed on that one.  Gold -- Sharefin, 01:52:14 01/27/03 Mon Sparkle Or Shine, Gold Still Glitters Investment in precious metals jewellery and precious and semi-precious stones jewellery is not only the game of disposable income on a personal level, but also culture and heritage. The World Gold Council (WGC) profiles the appeal gold has in Indian society. "Its demand cuts across age, gender, geography, and social and economic class. Gold is desired by businessmen and their wives; it is coveted just as much by farmers and their wives. For centuries, the only method of saving that was known to Indians in the villages and small towns was gold. Even with the availability of new financial products in the market, gold remains an integral part of the investment portfolio of many Indian families. It comes good in times of economic and political uncertainty, as is borne out by its performance last year when it delivered a return of 20 per cent in rupee prices from January 1, 2002 (price per 10 gms of standard 24K gold in Mumbai was Rs 4,640) to December 31, 2002 (price per 10 gms of standard 24K gold in Mumbai was Rs 5,580)," reads a statement issued by the WGC. It is this neverdying lust for gold and jewellery and, of course, your kitty of disposable income that almost everyone in the trade and industry is chasing. ~~~ Thus, for a lay man or an avid investor, it is really confusing as regards to what one should opt for, keeping in mind the two main aspects of investments - safety and resale / return value of investment while keeping with the trends and fashion of the times. ~~~ Among the three main players, it is the WGC which is the most aggressive on this front, as WGC's associate director (Jewellery, India) Hiroo Mirchandani says, "India's gold demand cannot be taken for granted." A check of the markets in New Delhi and Mumbai reveals that gold still wins hands down. Buyers and sellers still back the yellow metal for one main reason -- it fetches the best returns at the time of resale. ~~~ Yet, Mr Verma believes gold is the best investment. "After all, there has been a 30 per cent jump in gold prices in the last two years. In fact, I expect the price of 10 grams to cross the Rs 6,000 mark in the next 15 days," he says. WGC's Hiroo Mirchandani has facts and statistics to support gold. "In India, 72 per cent of the population lives in rural areas and depends on the monsoon for its livelihood. There is limited availability and knowledge of financial products, widespread poverty, no social security net, and a vulnerable currency alongside exchange control. Here, gold jewellery, which makes up 90 per cent of gold consumed in India, has been viewed as an important family investment for decades." Ms Mirchandani feels gold is a safe instrument because of its low risk, reliable store of value. "It is an excellent portfolio diversifier, and an asset of last resort in times of uncertainty, because of its high liquidity which can be converted to cash in case of emergency," she says. "Banks, cooperative banks, moneylenders and pawnbrokers, all accept gold jewellery as security for loans." Gold -- Sharefin, 01:30:59 01/27/03 Mon For now, the outlook for gold is golden War worries generated a lot of ugly financial numbers last week. The stock market sunk and the dollar piled up an unprecedented nine-day losing streak against the Euro. Then there was gold, the shining investment story of 2002 that continued to advance and reach a six-year high last week. Gold for February delivery climbed to $368.40 by Friday, the highest closing price on the spot market since the end of 1996. Gold thrives on anxiety and economic uncertainty. The threat of war, especially a conflict that lacks support from American allies, qualifies in spades. Gold prices, up about 25 percent last year, have gained another 5 percent this year. So here's a fair question: What would happen to gold if we all woke up tomorrow to discover Saddam Hussein living in exile somewhere other than Iraq? Crisis over. The short answer is easy, gold prices would take a big hit. An answer covering a longer period of time - the balance of the year or over the next few years - is more interesting. I asked several professional investors who are also gold fans to estimate the temporary effect of war jitters on current prices and got mostly consistent answers. ''The war premium is maybe $15 to $20,'' says Boston hedge fund manager Paul Stuka of Osiris Investment Partners. ''At some point, will that come out? Absolutely.'' The biggest number I heard was $30 per ounce. No matter, it's clear gold prices will take a significant fall whenever Iraq ceases to be the worry it is today. But gold fans believe in a secular, longer-term bull market for the metal that did nothing but disappoint its owners over 20 years. The two keys: currencies under pressure, and basic supply and demand. Reflation, an economic buzzword for the new year, is the development that would boost gold prices. Gold bulls believe central banks in the United States and elsewhere, worried over the threat of deflation to their currencies, will ''reflate'' by printing more money. That would lead investors to move more of their money into hard assets. Stuka notes the current gold rally that began in November wasn't triggered by any war-related developments. He points to a speech delivered at the time by Federal Reserve governor Ben Bernanke, laying out steps the Fed could take in the unlikely event Japan-style deflation did occur. Fed chairman Alan Greenspan brought up the subject of deflation in unusually blunt public comments the next month. Gold -- Sharefin, 01:26:12 01/27/03 Mon As alternative investment, gold's future looks bright After watching the value of his stocks sink for three years, Ken Jensen began 2003 looking to diversify his portfolio by considering a long-forgotten investment. His search led him far from his stockbroker's office to Harlan J. Berk Ltd., a coin and collectible shop in Chicago's Loop. There, on the second day of the new year, Jensen went shopping for gold. "Well, the stock market keeps going down," said Jensen, a 55-year-old Chicago business executive. "I invested in gold a long time ago. I thought it was time to revisit it." ~~~ "Nobody believes it," Holmes said, referring to last year's price run-up. "That's the most positive part." Gold -- Sharefin, 01:20:35 01/27/03 Mon Suit says collusion robbed gold of its luster Two years ago, a leading New Orleans gold executive, stumped over the low price of gold, stumbled onto what he saw as a scheme to manipulate its price by one of the world's biggest and most politically connected precious-metal producers and an old-line Wall Street investment bank. In the post-Enron world, hedging, derivatives and off-balance sheet accounting are no longer dry financial numbers but the stuff of collusion and conspiracy, with the result that New Orlean's Blanchard and Co. filed an antitrust lawsuit against Barrick Gold Corp. and J.P. Morgan Chase. The suits accuses them of suppressing gold prices in the past to profit by short-selling and acquiring mines on the cheap. Barrick, which runs a far-flung network of gold mines in North and South America, Africa and Asia from its Toronto headquarters, dismissed the complaint as ''ludicrous and totally without merit'' when it was filed on Dec. 18. J.P. Morgan did not return a telephone call. ~~~~ The Blanchard lawsuit alleges that Barrick's price manipulation has netted it $2 billion. The gold producer negotiated ''pot-deferred sales contracts,'' derivative contracts through which a bullion bank, acting on Barrick's behalf, borrows gold from a central bank at a lease rate of approximately 1.5 percent and sells that gold into the spot market. ~~~~ A derivative is a complex financial instrument that derives its value from something else, such as a bet that interest rates will stay low. Companies use derivatives in transactions like currency hedges to guard against an abrupt change in exchange rates. But derivatives like interest-rate bets are dangerous because they grow exponentially when interest rates rise. But Barrick also had a hedge in its derivative contracts. If gold prices go down, Barrick has negotiated a higher price. But if gold prices rise -- always the big danger in such derivative operations -- Barrick's special contracts allowed it to postpone repayment of the borrowed gold, sell its own gold production for the higher spot rice and repay the loan when the gold spot price falls, according to the lawsuit. So a contract that allows Barrick to postpone judgment day if gold prices go up is quite unusual. Some of Barrick's deferred sales appears as off-balance sheet assets. Blanchard's lawsuit alleges that this type of derivative contract is illegal, violating anti-trust laws. ''It is an anti-competitive and anti-trust violation,'' said Neal Ryan, Blanchard's spokesman. ``You have one company that is allowed to trade at no risk, never having to cover or lose. It automatically changes the playing field for other gold companies. No other gold company has these advantages.'' Barrick was a bit player in gold when it was incorporated as a Canadian company with one mine in 1983. Twenty years later, after a flurry of acquisitions as other companies dropped out in face of declining prices, it is the second-largest gold producer in the world. The captains of world power have traipsed through its boardrooms. Former President George Bush, the father of the current president, has been a special advisor. Former Canadian Prime Minister Brian Mulroney sits on the board. Former presidential confident and lawyer Vernon Jordan, former Senate majority leader Howard Baker and former German Bundesbank President Karl Otto Pohl have also been on the international advisory board. J.P. Morgan has not escaped scrutiny in this. Speculation that the bank had billions of dollars in gold derivative exposure traveled on the Internet, prompting the bank to announce that it had asked the Securities and Exchange Commission to investigate these rumors. ------- Please note the reaction of gold to the announcement of this law suit. Gold voted affirmative with a $20 rise. Now that is saying something...^o-o^....  Gold -- Sharefin, 00:58:24 01/27/03 Mon Hoarding Raises Gold Price Investors with idle money are increasingly choosing gold rather than housing, a trend that has raised the price of the valuable metal and encouraged smuggling. According to sources in Chongno, where around 3,000 jewelers are concentrated, big "hands" have been buying up large quantities of gold, sometimes spending hundreds of millions of won at a time. The rising demand has pushed up gold prices. The precious metal was selling at 54,000 won per 3.75 grams last week, the highest price since the financial crisis in late 1997. The Korea Jewelers Association forecast the price will rise further, even after the Lunar New Year holidays. "The looming war in Iraq has pushed up gold prices, while the stock and housing market, the traditional destination for investors, remain unprofitable. These factors are directing investment to the gold market," a market observer said. But the rising demand has also prompted gold bar smuggling. According to the Korea Customs Service (KCS), the amount of gold seized last year skyrocketed to 156.1 billion in 39 cases, approximately 40 times more than 2001. "Most of gold circulated in the market is probably contraband," a KCS official said. A salesperson at a jewelry shop in Chongno said, "On average three or four people visit us daily to purchase as much as a hundred million won worth of gold. Most of customers are housewives in their 40s or 50s." A middle-aged housewife visiting a jewelry shop said, "The gold market has begun to be a popular target for return-minded investors, even more popular than stock or real estate." Market insiders estimated jewelry shops in Chongno deal in between one and two billion won worth gold every day. "The trend reminds me of the fact that the wealthy went out to hoard gold during the financial turbulence in late 1997. It was a big contrast with middle- and lower-class people actively participating in gold-collecting campaigns to pay off nation's debts," a professor in Seoul said. "When the economic outlook is unclear, it is not very appropriate for some wealthy to make a corner in a particular item," he added. Gold -- Sharefin, 00:52:42 01/27/03 Mon Have investors missed the gold rush? I assume most investors are aware that gold stocks and the related precious metals funds were the top performers for the second year in a row last year. The top precious-metal fund was the Royal Precious Metals fund with a one-year return of 153 per cent, which was well above the average gold fund return of 75 per cent. Precious-metal funds tend to be small in size because of investor skepticism. That's because gold still has a bad reputation, due in part to past volatility and the "chicken little" image of gold investing. In reality, gold investors do not have to fearful of the collapse of our Western economies - they may simply wish to diversify their portfolios. Gold -- Sharefin, 00:48:38 01/27/03 Mon Gold Oil and War The obvious drive of oil and gold to higher prices under the flowering drum song of war, suggests some fundamental economic issues that have threaded through society for at least the last couple of centuries. Gold -- Sharefin, 00:34:23 01/27/03 Mon Buy central fund if you want gold in your RRSP Less risk than gold stocks Question: May I hold gold bullion inside an RRSP? Answer: Gold, silver and other precious metals in any form, for example, bars or certificates, are not qualified investments for RRSPs, however there is still a way to own gold in registered accounts without directly buying gold mining shares, says Peter Boronkay, an investment executive and certified financial planner with ScotiaMcLeod in Vancouver. According to Mr. Boronkay, the Central Fund of Canada Ltd., founded in 1961, provides a low-cost alternative to purchasing bullion on a personal basis and is the only bullion investment that qualifies as Canadian property for RRSPs. The fund is strongly correlated with the price of gold, with less risk than gold mining shares, and the fund has a conservative management team with a 40-year track record. The fund's assets are split about 56% gold, 42% silver, 2% cash. Gains on sale of fund units are treated as a capital gain, while sales of bullion may be treated as income. As well, the fund pays a 0.25% dividend. Gold -- Sharefin, 00:28:53 01/27/03 Mon Miners glitter in Vancouver maneuver Gold explorers seen poised for further gains In yet another sign that bullion fever is spreading across North America, a Canadian conference organizer expects more than 2,000 people to attend a weekend gold show. The Vancouver Gold Show presents what some regard as the riskiest companies in the gold trade -- Canada's crop of tiny minerals miners. On Friday morning, the scrappy miners' shares were afire, with some, such as Navigator Exploration (CA:NVR: news, chart, profile), up 6 percent in a day and almost 50 percent in a week of Canada-based trading. As gold surpasses $365 an ounce for the first time in six years, and platinum near a 17-year high of $650 an ounce, investors, bankers, analysts and ordinary folk are showing renewed interest in the exploration sector. The value of small mining companies is double, triple and, in some cases, 10 times their worth of two years ago. Gold -- Sharefin, 00:23:49 01/27/03 Mon Gold soars to six-year high Gold, the investment haven, soared to a six-year high of $US368.25 an ounce in New York on Friday night, as investors dumped shares and the US dollar as war lurched closer. Friday night's $5.20 an ounce rise in the gold price took the gain this year to $20.20 an ounce, or 5.8 per cent. Commodity analysts believe gold could hit $400 an ounce should war break out, but believe it will fall back to between $330 and $350 an ounce once these immediate tensions have been resolved. ~~~~ Commonwealth Bank commodity strategist David Thurtell said Iraq had played a big part in the latest rally. Growing concern over North Korea had also given gold a push, he said, since many of the big users of gold were in eastern Asia - India, China, Indonesia, South Korea, Japan and Pakistan. "Gold trading is usually fairly quiet in Asian trading time but in the last two months we have seen some quite big movements," he said. "North Korea seemed to set it off." Mr Thurtell said the weakening US dollar had also underpinned the rally, as it made gold more attractive to non-US buyers, while falling global sharemarkets had also prompted investors to move out of shares and into the precious metal. "The planets have all lined up for gold in the last two months," he said. Gold -- Sharefin, 00:15:13 01/27/03 Mon Gold To Be Remonetized! First by the "Malaysian Dinar" June of 2003, the "US Dollar" will Follow June of 2004: The Gold Price Will Continue to Float On December 23, 2002, I wrote an article for the gold community reviewing the presentations made by Chairman Greenspan and Bernanke, a Governor of the Federal Reserve. I concluded that gold will be remonetized for the dollar by a revitalized and modernized Federal Reserve Gold Certificate Ratio. In my opinion, this development is, without a doubt, final proof that this current bull market in gold is generational, not secular. When Chairman Greenspan referred to the period of time since Chairman Volcker took anti-inflationary action, late in 1979, by saying, “We have come full circle,” I believe he was referring to the entire scenario. That was during the Nixon administration when gold exited the dollar. Now gold will be used to revitalize both the economy and the dollar. Gold -- Sharefin, 00:07:47 01/27/03 Mon $372 Then Between $410 & $420 - War Premium or Economic Impetus? What a world of contradictions. Elliott practioners are pounding their chests saying. "We told you so, maybe." Gold stock traders are gold bears. Others ask, "Gold is over $354, so where are the derivative bankruptcies?" The stock market is suffering from acid reflux. Remonetization is being discussed openly in North America and Great Britain. So what in the world does all this mean? What this gold-related cacophony means is that, as always, bull markets must climb a wall of total disbelief. The total flux in the gold community is a phenomenon common to the infancy of any bull market. So why would you expect anything but this? Let's take these apparent contradictions one at a time. We have talked Elliott almost to death. Let me just say that I did not have a single person accept my offer of a $100,000 legally binding wager that gold would trade above $400 in 2003 when we broke out of the Teacup. I actually expected to hear from Mr. Prechter, but was greeted only by total silence. Not one Elliott practitioner out there would lay down their funds on that wager. So, I have to assume that they are all noise and furry without substance. I believe in myself. Wagering on that belief causes me no concern. We do it every time we take a position of merit and size. So why not accept a wager on a market outlook? The answer is probably because the Elliott followers do not trade and are only talk. Most of the time, those that advise others financially cannot trade their way out of brown paper bag. I know most of them, and with the minor exception of Harry Schultz and Ira Harris (former partner and talking head on Bloomberg), you can take what I just said to the bank. I suspect this may be true in the great Elliott predictor of gold's demise at $360. The evidence certainly suggests it. Gold Share Lethargy Unfortunately, the gold share traders appear like lemmings. If they aren't jumping off a cliff, they are bouncing off the walls for sport. They look at bullion and just say, “No.” They have been bears from $354.50 to present. If they stay true to form, they will turn violently bullish at just the wrong time. True, there is precious little to select from in the gold and silver public companies that qualify as value in terms of ethics and being shareholder friendly. True, it is hard to buy a significant position in a gold producer who is massively short of gold either by decision, by contract requirements of a non-recourse loan, or by having made the acquisition from hell. But among the mountain of strange fellows, there is value out there. I caution those that are declaring non-confirmation between the gold price and gold shares. Gold is fine, although gold shares/companies are typically a mountain of questionable entities run for the benefit of management. Personally, I have built my own company because I do not know anything out there I am willing to own millions of shares of. Do you really? They are laying out huge shelf offering. Some have changed their accounting rules to hide the economic results of derivative hedging from obvious view. Others are charging their derivative losses against individual projects correctly, but suggesting technical difficulties with the projects for the resulting bad performance. It is the derivative debit that is causing the decrease in economics of the project -- not a mining cost factor as suggested. Another factor for the lethargy of the shares is the nature of the new gold trader. The new gold trader is simply opportunistic, without understanding gold, flitting with every market opinion. Given a poor selection of companies in an environment screaming for stockholder friendly transparency, what do you expect? ~~~ Derivative Dealers in Trouble Where are the derivative dealers that are supposed to be killed by gold above $354? Well, they are where they are supposed to be, getting killed. Do you not know how to recognize a short squeeze in the making? Can't you see the fight at the close to keep the settlement price down so as to ease the margin calls on the short? I told you when the commercial interest makes a mistake, that it is one hell of a mistake. Do you think all those commercial shorts are happy tonight? Wait until next week! Do you think that when Enron knew they were in trouble, they hung a sign out saying so? No! They spoke to bull the Enron shares as they sold their own shares. So why do you expect a major gold cartel member to announce they are being crucified? Just look at what the market did when it closed over $305 and over $354. So do not swagger around saying derivatives mean nothing. So far they have meant $371 today minus $305, which is $66 for the gold price. I gave you those two prices and explained what they meant and then the arguments started. Look at the result and stop arguing. The derivative dealers are in real trouble. Next week I will tell you why I believe those derivatives are the greatest exercise in self-delusion since the tulip craze, but we will hold that for another day. ~~~ Conclusion: Gold's first target as given is $372. We got $371 today. Gold's next target is between $410 and $420. Keep in mind that unless changed for practical business reasons, the Elliott Wavers that have the gold share traders petrified, yells uncle officially at $401. The wavers will probably change the number because declaring “uncle” after terrifying the elder gold community members cannot be good for business. Gold -- Sharefin, 23:56:08 01/26/03 Sun Mining giant to lose control China National Gold Corp. is likely to lose control over 95 percent of the country's gold mines as a result of the central government's plan to separate government administration from state-owned enterprise management. The mining giant currently controls about 1,200 gold mines nationwide under a concession which was given in 1979 to manage gold mining and smelting operations. Under its authority the company could license new mines and provide policing against illegal gold trading. The State Economic and Trade Commission, however, decided to withdraw those functions. Under a proposed new name as China Gold Group Corp., National Gold will retain operation and management over 56 gold mines, including 45 wholly-owned plants. For the rest, it already holds a majority stake. The 56 mines account for 20 percent of China's total gold output, which was estimated to exceed 190 tons last year. ~~~ National Gold is also planning an initial public offering in April through one of its arms, Zhongjin Gold Corp. It will be the first gold mining company in China to sell shares publically. Gold -- Sharefin, 23:49:47 01/26/03 Sun Shorts Attacking the Gold Miners Many gold investors have noted, with consternation, at the divergence between the price of gold and the performance of the gold mining stocks. Gold has generally been trending higher while the miners are going nowhere. The theory goes that the miners lead the price of gold but that doesn't seem to hold water here as gold keeps heading north. So why the divergence? Perhaps the answer is in the high levels of short-selling in the miners. Most gold investors are aware of the shorts on the metal itself and the hedges that some of the miners hold. For some reason, there are shorts attacking the miners too. Perhaps they think that there is too much euphoria in the gold miners or that the gold miners are a good area to short because they've risen so much. Or perhaps an an entity doesn't want a lot of people bidding up the miners which would take attention from tech stocks where executives exercise huge numbers of options when prices rise. And heavy shorting can drive down the price of a stock. ~~~ Strangely enough, a large rise in the number of shorts can be bullish because it can result in spectacular short squeezes where shorts get panicked and cover at market driving the price higher and higher. I look forward to that happening in the miners when earnings reports come around. And not having a lot of shorts can be bearish as there aren't shorts that become desperate to buy at market. Of course gold is in a bull market so these stocks should trend higher with the price of gold as earnings will grow with the price of gold.  Gold -- Sharefin, 23:48:26 01/26/03 Sun Posted at the Bullion Bar ------------------------- Turning the corner in Gold -- Patriarchi Sam, 12:19:23 01/26/03 Sun The corner has been turned in the Gold market, just as the corner was turned by silver 20 years ago. What no one has keyed in on, is that the profits in Comex gold of the longs, is enough (if they take delivery) to propel gold much higher (limit up for over 20 days). If long comex holders accept delivery of only 18% of their positions, the game is over, and COMEX is finished. Have a good day Gold -- Sharefin, 23:43:59 01/26/03 Sun Gold prices hit six-year high as investors seek haven in event of war Gold prices rose to a six-year high Friday as stocks dropped, increasing demand for the metal as an alternative investment. A weaker dollar made the dollar-priced metal cheaper for buyers using other currencies. Gold prices have climbed 5.8 percent this year, extending a 25 percent rally in 2002. Increased concern that the United States will attack Iraq to force disarmament helped prolong the rally by sparking demand for the metal as a haven. "This is not just the speculators moving into gold; we're seeing new investment," said Dan Vaught, an analyst at A.G. Edwards & Sons Inc. in St. Louis. "When people see the Dow down again after three years of consecutive drops, the bigger surprise would be if people didn't go into gold." Gold -- Sharefin, 23:33:27 01/26/03 Sun Strong rand hurting South African gold miners South Africa's top three gold mining firms are expected to post mostly flat to lower earnings in the three months to the end of December, hurt by a lower rand gold price after the domestic currency strengthened. A plunge in the value of the rand at the end of 2001 to a low of 13.85 against the dollar, and a 25-percent rise in the gold price, propelled profits of most South African bullion producers to record highs early last year. But the rand appreciated by nearly 40 percent against the dollar last year, translating into a five-percent decline in the average rand gold price received in the quarter under review, analysts said. Periodic Ponzi Update PPU -- $hifty, 23:24:51 01/26/03 Sun Preiodic Ponzi Update PPU Periodic Ponzi Update PPU Nasdaq 1,342.14 + Dow 8,131.01 = 9,437.15 divide by 2 = 4,736.57 Ponzi Down 244.89 from last week. We just may see the elusive sack of potato's formation this week! <:-0 Thanks for the link RossL Go GATA ! Go GOLD ! $hifty  Gold -- Sharefin, 23:16:21 01/26/03 Sun Private placement for Central Fund of Canada Central Fund of Canada Limited announces that it has entered into an agreement with a major Canadian dealer to sell, subject to stock exchange approvals, on a private placement basis 3,500,000 Class A shares for aggregate gross proceeds of U.S. $15,295,000. The shares are being issued at a non-dilutive price of U.S. $4.37 per share, being approximately Cdn. $6.71 at the exchange rate of 1.5350. Of the net proceeds of the offering, U.S. $13,624,200 will be used to purchase an additional 22,400 fine ounces of gold and 1,120,000 ounces of silver with approximately U.S. $800,000 retained, after expenses of the issue, as working capital. The new total of issued and outstanding Class A shares of Central Fund of Canada Limited will be 39,297,520. After giving effect to this offering, the holdings of Central Fund will be represented by approximately 261,328 fine ounces of gold, 13,066,381 ounces of silver and approximately U.S. $3,875,000 primarily in cash. Gold -- Sharefin, 23:14:01 01/26/03 Sun How they put a price on gold IN A SMALL, wood-panelled room in the heart of the City, a bizarre ritual involving five bankers has been taking place twice a day for more than 80 years. The room is located in the London headquarters of merchant bank NM Rothschild, a stone's throw from the Bank of England, and the arcane ceremony is performed in order to 'fix' the price of gold. The gold-fixing ritual is aimed at providing the market with a snapshot of the spot price of gold at a particular moment in time. It is currently showing gold surging to fresh six-year highs on an almost daily basis as investors pile into the safe-haven metal amid fears of war with Iraq. The first fixing took place on 12 September 1919 in a bid to restore London as the marketplace for gold after the First World War. The original instruction for the meeting stated: 'The principle to be maintained with regard to the sale of gold in the free market in London is that everyone attending the gold fixing is entitled to buy or sell gold on equal terms with everyone else present. It is also agreed that only one price shall be quoted and shall represent the price at which all supplies can be absorbed.' The principle guarantees that large volumes of gold can be bought and sold at one fixed, clearly posted and undisputed price. As a result, central banks, mines and investors use the fix as their reference point when doing business. This is especially useful when the market is volatile. The gold-fixing procedure may be anachronistic but its uses are ever evolving. Martin Fraenkel, a director at NM Rothschild and chairman of the committee, explained: 'Many contracts, including derivative contracts, use the average fixing price over a defined period as their benchmark. The process is very efficient and, because of that, it is continually being applied to new applications.' He added that the transparent mechanism of the fixing is also important to its widespread acceptability. So what actually happens during the gold-fixing ceremony? The procedure is surprisingly straightforward. At precisely 10.30am and 3pm, Monday to Friday, representatives of each of five London bullion houses - currently NM Rothschild, Deutsche Bank, Societe Generale, HSBC and Bank of Nova Scotia - gather in the fixing room. The meeting place at NM Rothschild was chosen because of its central, convenient location. The chairman, who sits at the head of a long, leather-topped table, opens proceedings by suggesting a starting price of the mid-point between the most-recently traded bid and offer prices. The other representatives, who are seated at small desks in each corner of the room, relay this price via open telephone lines to their dealing rooms. The chairman then asks who wants to buy and who wants to sell, and how many 400-ounce bars they wish to trade. If there are more buyers than sellers, he will move the price higher. If there are more sellers than buyers, he will move the price lower. This procedure is repeated until the number of buyers equals the number of sellers, at which point the price will be declared by the chairman as fixed. It is estimated that up to 20 tonnes of gold a day are traded through the fixing. On an average-day, the fixing will last five to 10 minutes, but this can increase dramatically during times of volatility. Gold -- Sharefin, 23:09:46 01/26/03 Sun Gold To Test $400 Regardless Of Iraqi Outcome The incessant drumbeat of war has helped to drum up tremendous interest in gold, sending this traditional safe haven asset above $367 a troy ounce Thursday in New York, a level not seen since late 1996, but gold still has room for gains, an industry analyst said Friday. Market fundamentals are now in place to carry gold over $400/oz later this year, even if U.S. soldiers never set foot in Iraq, says Akio Shibata, chief economist with Japan's Marubeni Research Institute, According to Shibata, gold's improving supply and demand situation over the past three years is a more compelling reason to invest in gold than the current "war premium". "An eventual outbreak of a war with Iraq could very well serve as the catalyst that pushes gold over $400, but the market fundamentals have improved so much over the past few years that a test of this level was already well in the works," said Shibata. For 2003, Shibata expects gold will easily clear the $400 mark before it meets with any significant profit-taking. Even if there is a significant pull back in gold later this year, Shibata expects a solid floor around $320. ~~~ Shibata noted that investor sentiment toward gold started improving in September 1999 when 15 European central banks signed the Washington Agreement, pledging to limit their collective annual gold sales to 400 metric tons for five years. "At that time, gold was trading around $250/oz, which many saw as the lowest possible level for the metal. The Washington Agreement flushed out a lot of bargain hunters and prices have been steadily moving higher ever since." With the gold price recovering from late 1999, many mining companies began rethinking their hedging practices, Shibata said, which in turn helped to tighten supply. "The 'Big Three' mining companies - Newmont Mining Corp. (NEM), Anglogold Ltd. (AU) and Barrick Gold Corp. (ABX) - started buying back gold to close out some of their short positions," explained Shibata. Last week, London-based commodity research firm Gold Fields Mineral Services reported that the global hedgebook in 2002 contracted by a "substantial" 352 tons. "The motivation behind the large fall in global hedge positions was the strong and sustained increase in spot prices and more importantly, expectations that they will continue to rally," said Philip Klapwijk, Managing Director of Gold Fields Mineral Services in London. Gold -- Sharefin, 23:08:01 01/26/03 Sun Indians rush to sell gold as prices hit peak It's a gold rush of a different kind at Mumbai's Zaveri Bazaar. With gold prices closing at an all-time high of Rs 5,850 per tola, people are lining up to sell their family gold. This is in a country that has the distinction of being the world's largest gold consumer.  Investing for a killing : C.K.D. -- PNB, 21:24:02 01/25/03 Sat Previously I considered that the US was threatening China with the 'We will not be challenged as a superpower' tantrum. There is a possibility that the new emerging threat to 'Pax Americana' is emerging from 'Old Europe', and it is this superpower that the U.S. fears. Is the young, arrogant U.S.A. being blindsided by a New Force in the Old World? Could 'Old Europe' have been biding it's time while the U.S. ran up huge debts with no tangible backing? Could the financial precariousness and political rumbustiousness of the U.S. have signalled to the E.U. that the time is ripe for reasserting it's place in the world? France and Germany are considering joint presidency, and considering allowing their citizens to vote in each others elections. (http://straitstimes.asia1.com.sg/world/story/0,4386,167713,00.html) The E.U. will swallow up more and more nations, and may extend to areas not previously considered 'europe'. This is the birth of the United States of Europe, and it is backed by Gold and goodwill from many nations. America's bid to become the defacto superpower may have all but failed. Military might is all that remains after it unfortunately squandered decades of international diplomatic goodwill over the last year. In the throes of economic decline it is threatening to lash out at countries popularly branded as 'evil' but an axis of peace has unexpectedly formed in the E.U. backed also by China and Russia. More countries will sell the USD and buy the Euro and Gold. The Yuan will break it's peg to the USD and the U.S. will never see $18 oil and $300 Gold again. The days of world USD pricing are over and can be seen in all commodities. Foreign USD will come flooding back to the U.S. and offset local deflation - but who is going to end up holding all the cash? The man in the street? I think not. The UN is accused of being spineless, but people forget that is was formed with the intention of preventing war. If the US goes into Iraq without the UN, the UN will be destroyed in all but name in the same way the League of Nations was. However, regardless of UN backing or not, we are now in such a predicament that World War Three is a guaranteed result. Iraq with UN backing : Arabs will rail at the UN for not enforcing other resolutions even-handedly w.r.t Israel, and will find many sympathisers. Iraq without UN backing : the UN will be destroyed and there will be no world forum for discussing solutions to Korea, Taiwan, Balkans, Africa, South America, Chechnya and nuclear proliferation in Central Asia. We will see unparalleled abrogation of treaties as evidenced already. The world will degenerate into nation states in a period of economic decline with deadly results. Similar to the proxy wars fought in Africa between the US/UK and Russia/China, we will see proxy was fought in other regions, predominately asia. As evidenced in the Gold price beginning it's ascendency before S11 and Iraq, there are systemic geo-political and economic risks not seen since the Cold War ended. Now the Gold War has begun. The tactic of government bankruptcy used against Russia so successfully are now being applied to other rivals. In these circumstances, only countries backed with tangible tradeable assets will endure. Invest in physical Gold. While governments invest for a killing in C.K.D (Crush - Kill - Destroy) it's a BOOM market. Gold will increase in value (purchasing power) in ALL currencies. Get yourself a little of the 20m cube. One ounce each. No pushing!  in re. Japanese rates fall below zero -- Giovanni Dioro, 07:00:34 01/25/03 Sat With this give away, free for all policy in Japan by the BOJ, no wonder the japanese people have been buying tons of gold. They smell a rat. Richard Russell -- Sharefin, 03:02:18 01/25/03 Sat Gold The metal is in the position where traders have to whine, "It's too high, I can't buy it, I just haven't got the guts to chase it here. It's got to correct somewhere along the line -- and then I'll buy it." Yeah, right. This is the way a bull market advances, while leaving the crowd out. Only we die-hard gold bugs are making money here, only investors who believed that real intrinsic money is preferable to fiat paper that is being ground out at no cost by the Fed's printing presses. "What's wrong with the gold shares?" I'm asked, "Why aren't they surging with gold? I just ran off a chart of gold divided by HUI, the "Gold bug's" index of unhedged gold shares. From February 1987 to October 2000 gold shares outperformed the metal by a wide margin. Since October 2000 gold has outperformed gold shares. The ratio is now just about where it was in February '87 -- so that's the story. The stocks moved up first, then gold moved up, and now they're about even as they relate to each other. ~~~ History tells us the flow of gold points the way to where the power is. The stronger the nation, the more gold it accumulates. Show me where the gold is being accumulated and I'll show you the next world power. Fiat -- Sharefin, 22:19:14 01/24/03 Fri Tokyo stocks end down on Wall St fall, fund report Japanese stocks closed lower on Monday, led by Sharp Corp and other blue-chip exporters following a tumble on Wall Street and a media report that a hedge fund with holdings in Tokyo equities would close down. ~~~ Traders said a weekend report in the Financial Times newspaper that a long/short hedge fund called Eifuku with $300 million in assets would close down hurt sentiment, encouraging investors to take profits following recent gains. "This hedge fund report was one factor hitting stocks today, but the bigger issue is still weak U.S. stocks," said Norihiro Fujito, senior investment strategist at Mitsubishi Securities. ~~~ An analyst at a European securities firm said Eifuku, whose assets were collected from Japanese and European investors, failed late last week. Eifuku could not immediately be contacted for comment. The analyst said Eifuku's strategy of shorting banks had run into trouble due to recent rebounds in bank shares. He said the fund was unwinding its positions. ---------- Email chatter: Japan's Eifuku Investment Management has liquidated its Tokyo-based hedge fund after it plunged 98 per cent ($300 million assets) in seven trading days, the fund's manager told investors. Fiat -- Sharefin, 22:12:00 01/24/03 Fri Japanese rates in 'one-off' fall below zero Japan ventured into uncharted territory on Friday as overnight call rates fell below zero for the first time in the country's history. The overnight call rate on Y15bn of funds traded between foreign banks fell to minus 0.01 per cent. Because of the negative rate, borrowers are in effect being paid for borrowing funds because they will have to pay back less than they were lent. With long-term interest rates already virtually nil under the Bank of Japan's "quantitative easing" policy, bankers said on Friday the move into negative territory was more a symbol of the country's decade-long economic malaise rather than an indicator of future financial chaos. ~~~~ "This is all part and parcel of a growing loss of faith in Japan's future," said Marshall Gittler, strategist at Deutsche Bank in Tokyo. "JGB movements are telling a story that deflation is set to continue indefinitely." Gold -- Sharefin, 07:37:56 01/24/03 Fri Gold strengthens further on speculative buying Gold strengthened again on Wednesday night as aggressive speculative buying set in after the US close. The metal hit a six-year high of $364.50 an ounce in Asian trade, fixing at $364.70 yesterday afternoon in London. Jeffrey Christian at CPM Group suggested that speculators were positioning themselves to take advantage of a possible price spike caused by congestion in the New York market at the end of this month. The February Comex futures contract becomes deliverable on January 31. Mr Christian said speculators were betting that people who sold the February contract would find it hard to get the physical gold they need to deliver against their February positions. "They will thus want to buy offsetting February contracts while either closing out these short positions or rolling them forward into future delivery months," Mr Christian said. He pointed out that as of January 21 there was a total of 11.2m ounces of open interest in the February Comex futures contract, compared with only 1.7m ounces of bullion stocks registered against Comex positions. Gold -- Sharefin, 23:00:24 01/23/03 Thu Gold futures climb near $368 "Many market participants have the $400 level in their sights," he added. Frederic Panizzutti, a gold analyst at GoldAvenue, a major gold online trading company, warned that while $400 is a possible target sometime this year, "gold remains very volatile and we shall expect many erratic trading sessions in the coming months." ~~~ Traders eye dollar moves In addition to the "war rhetoric" and weakness in the recent weakness in the U.S. equities markets, gold has hit new highs "as the U.S. dollar continues to trade like a lead zeppelin," Nedoss said. The dollar fell to fresh multi-year lows versus the euro for the sixth-straight session Thursday. ~~ Salomon Smith Barney analyst John Hill also believes gold equities have under-performed but "it's just a matter of time." In a research note, Hill blamed the divergence between the performance of physical gold and equities on several factors, including lack of conviction that the gold rally is sustainable and operating challenges and hedging issues among industry majors. But "given the 'anticipatory' nature of gold equity valuation, we believe it will take time for the shares to discount prices above $340 per ounce," he said. Fiat -- Sharefin, 22:55:03 01/23/03 Thu Mizuho, With $100 Bln in Bad Loans, May Need Bailout April 2003 may be even worse for Maeda. By April 1, the start of Japan's fiscal year, the CEO will have to evaluate all of Mizuho's bad loans by using the new standards imposed by Heizo Takenaka, Japan's 52-year-old minister of financial services. Mizuho says its bad loans amounted to $44 billion as of September, while Standard & Poor's estimates the total could be as high as $100 billion. Once those loans have been evaluated under the new rules, analysts say, a dangerous chain of events could commence. First, Mizuho's risk-adjusted capital -- its capital after bad loans get subtracted -- may dip below the minimum level of 8 percent of total capital recommended by the Basel, Switzerland-based Bank for International Settlements (BIS). `Big Fear' ``That's my big fear,'' says Hisanori Kataoka, a Tokyo-based analyst at S&P, the credit rating unit of McGraw-Hill Cos. If Mizuho's risk-adjusted capital drops to less than 8 percent, it would be in violation of the Basel Capital Accord, a capital adequacy agreement signed in 1988 by 10 nations including the U.S., the U.K., Japan, and Germany. Violators of the Basel Accord are barred from conducting business overseas. ~~~ Bad Loans Grow This time, analysts say, a swift government bailout of Mizuho may not be enough to restore confidence in the banking system. That's because the amount of Japan's bad loans has ballooned. According to David Atkinson, Japanese bank analyst at Goldman Sachs Group Inc., Japan's deposit-taking institutions hold bad loans worth a total of about $1.37 trillion -- the equivalent of one-third of Japan's gross domestic product. The Japanese government's large outstanding borrowings -- which stood at $5.19 trillion as of September 2002, according to the Ministry of Finance -- have also constrained its ability to issue more government bonds or use taxpayers' money to bail out a leviathan like Mizuho. According to Moody's Investors Service, in 2002 Japan's outstanding government debt was 157 percent higher than its GDP. Japan's GDP amounted to $4.24 trillion in 2001, according to the World Bank. Such a high level of debt prompted Moody's last May to lower Japan's long-term government debt rating to A2, a notch below the A1 grade it gives to the government of Botswana. That puts Japan's government debt just four steps above junk. ~~~ The nightmare scenario: If Mizuho begins to totter, analysts say, it could fan the fears of depositors in other bad-loan- burdened Japanese banks, causing them to withdraw their money in a panic. There would be reverberations across global capital markets as Japanese banks tried to meet those demands. ``If Japanese depositors try to withdraw their assets en masse, Japan's banks would be forced to pull in their overseas holdings,'' says Akio Mikuni, president of credit rating agency Mikuni & Co. Using data from Japan's Ministry of Finance, Mikuni estimates Japan's external assets, consisting primarily of U.S. stocks and bonds, currently stand at about 400 trillion yen. Gold -- Sharefin, 22:21:50 01/23/03 Thu Gold price targets $365/oz mark Gold rose steadily in post New York trade, as fund buying on the Comex Access system filtered through to spot gold, said a Sydney trader with a big bank. The buying, fueled by a heightened sense that war is imminent following reports that a Russian military officer claimed a US-led attack against Iraq would take place in the second half of February, led gold to climb higher particularly amid thin trade prior to Tokyo trading hours, said Charles Dowsett, head of precious metals trading at ABN Amro Australia. The gains then triggered buy-stops from Japanese trading houses, despite a weaker yen. Gold -- Sharefin, 22:15:06 01/23/03 Thu Gold prices upped Merrill Lynch increases spot gold estimates, gold miners' profit forecasts; Analysts at Merrill Lynch raised estimates for gold prices and increased its profit forecasts for several gold miners, while separately boosting its investment rating on Del Monte early Wednesday. In a morning note, Merrill Lynch raised its spot gold price estimates for 2003-2005, and raised 2003 estimates for the following gold miners based on the assumption. Gold -- Sharefin, 22:12:43 01/23/03 Thu Comex gold futures briefly stretched Comex gold futures briefly stretched above the $360-per-ounce level to fresh six-year highs of $360.10 Wednesday as a combination of war jitters, a weak U.S. dollar and woeful equity markets maintained buying interest in the bullion arena. The most-active Feb contract closed at the highest settlement in the contract's history at $359.90 - $2.40 higher on the day. Dealers said overnight reports from Russia's Interfax news agency that a Russian military officer claimed a U.S.-led attack would take place in the second half of February proved the main item noted by players as their prompt for buying, although President Bush's reiterations that Iraq was still not complying with United Nations' demands also served to stoke the geopolitical fires. The traffic was not wholly one-way, however, as some fund long liquidation and dealer selling were noted into the strength throughout the day. This prevented prices from decisively overcoming the resistance in place at the psychologically significant $360 mark.Indeed, that level is seen remaining Feb's initial key hurdle over the coming days.However, should the dollar and stock markets remain shaky and geopolitical tensions stay taut, that resistance is expected to be eroded over time to target the $365 and $370 levels as the next major objectives.On the spot market prices reached a high of $360.65 to also scale levels not seen since February 1997, and like Comex gold an upward bias is expected to continue defining activity over the coming days.Again, the $365 and $370 levels are the next clear upside targets, although some profit taking and dealer selling are expected into the strength to limit any price spikes.  Gold -- Sharefin, 22:04:06 01/23/03 Thu Pop Goes the Bubble III - Sell Dollars, Buy Gold Now! The stock market and the housing market are not the only bubbles left in play. The biggest one, the granddaddy of them all, the one within which and upon which all other bubbles reside is the U.S. dollar. The dollar is perched on a precipice, ready for a plunge, and the natural beneficiary will be gold. The price of this barbaric metal is set to rise as men behave more and more like barbarians. ---- Note: This website was a few months ago advocating that gold could/would fall to below $200 in the vain attempt to sell Elliott Wave Marketing to their viewers & make money. I personally contacted them & raised the issue with them of using Elliott Wave Marketing to make money off their patrons by solicting badly written articles & they vigorously denied this. Seems that the POG has made them eat their own words. Next thing we'll be seeing is Tim Woods subscribing to GATA & claiming that he knew they were right all along.  Gold -- Sharefin, 21:57:19 01/23/03 Thu Barrick CEO Says Hedging Program Misunderstood A string of setbacks and worries about its hedge book has seen shares in Barrick Gold Corp , the world's second-largest gold producer, fall while other gold stocks bask in one of the biggest gold rallies in years. But Randall Oliphant, Barrick's chief executive, told Reuters that the share price was reacting to misconceptions about gold hedging and would rise as investors familiarized themselves with the Barrick growth plan. Barrick shares have fallen about 12 percent since January 2002 when gold began its steady rise from $280 an ounce to over $350. It has underperformed the broader Toronto Stock Exchange gold index, which is up 23 percent in the same period. In comparison, stock in Denver-based Newmont Mining , the world's biggest gold producer, has risen 40 percent, while AngloGold Ltd , the world's third-largest producer, is up 35 percent in Johannesburg. Gold -- Sharefin, 21:50:48 01/23/03 Thu Escalating war worries, weaker dollar, less producer hedge selling help keep metal shining. Gold prices rose to a six-year high Thursday as worries of war with Iraq escalated and the dollar continued to weaken. Around noon ET, gold rose more than two percent to hit $365 an ounce in New York, its highest level since January 1997. It was set or "fixed" in London at $364.70 an ounce, also its strongest level in six years -- and 30 percent higher than this time last year. "We believe this is a defined trend," said Dave Meger, senior metals analyst at Alaron Trading. "the next target is up around $400 and we think it's a realistic target, given the fundamental changes in the gold market." Gold -- Sharefin, 21:45:40 01/23/03 Thu The Deregulation Of The Gold Market In China Over the past decade severe distortions caused by official pricing policies have brought about widespread smuggling of gold into and out of China. Estimates vary, but levels of inward flows may have fluctuated between 50 and 400 tonnes in any one year. The hidden cost to the Chinese balance of payments may have been of the order of US$500 to US$4bn. The new freedom of the People's Bank of China in setting pricing policy without State Council (Chinese cabinet) permission should alleviate this over time. The official data for mine production have been distorted by these unofficial inflows, and although mines must still sell to the People's Bank, they have in the past been stocking gold in anticipation of domestic price rises. The true levels of production may therefore not be as high as the 170 or so tonnes recorded in 1999. ~~~~ Chinese domestic demand for gold is potentially enormous: consumption per head is only half that of India, one fifteenth that of Taiwan, one thirtieth that of Hong Kong. Gold jewellery manufacture is expanding rapidly. The World Gold Council (which is actively promoting gold jewellery sales via television soaps) has drawn up a road map for liberalisation in conjunction with the Chinese authorities. This could take place over the next two to three years, and would involve linking the domestic to the world price on a Gold Exchange. There are thorny problems to grasp here. including whether RMB convertibility under the WTO is a necessary condition for the Exchange to function. ~~~ 1. Gold Supply The exact amount of gold mined annually in China is unknown, perhaps even to the Chinese authorities, but even including illegal mining is unlikely to much exceed 250 tonnes a year - about the same as one large Western company. There may, however, be a vast historical stock of gold jewellery in private hands; this has been estimated at as much as 5,000 tonnes. Total gold mined since the setting up of the People's Republic is unlikely to have exceeded 2,000 tonnes. Unofficial flows into China may have been vast: for example, some estimates from the industry put the level at 400 tonnes in 1989, 200 tonnes in 1997. Alignment of domestic to world prices will reduce some, but not all of these flows. China's official gold reserves are reported at 12.7 mn oz, 395 tonnes (at say US$3.9bn equivalent to 3% of total reserves), but may be much more - one estimate is 1000 tonnes. Domestic supply alone is unlikely to have provided the higher level, but the Chinese authorities have been very active buyers in the market, as well as in hedging. Given that current official holdings of gold are a small proportion of total reserves, and the potential for large private purchases of gold jewellery, coins and bars, it is unlikely that liberalisation of the gold market in China will unleash a supply of gold on the world markets from official sources (in contrast to the large silver sales in early 2000 from official reserves). However, as the experience of Korea showed in the 1997-8 Asian Financial Crisis, large amounts of scrap can be generated under the right conditions. 2. Demand For Gold Over the next few years China can be expected to import at least 200-300 tonnes of gold annually, and possibly much more: At 12.7 mn oz, and 3% of total reserves, China's official gold holdings, if correctly reported, look underweight. Other official purchases cannot therefore be excluded, particularly as the People's Bank may need to smooth the domestic markets once structural reform gets underway in the next three years. Purchases might amount to several hundred tonnes. A level of 15% of reserves (US$154 mn) would imply a holding of 77 mn oz, 2400 tonnes Demand for gold in jewellery fabrication has been accounting for nearly 200 tonnes a year over the decade. Much of this product will have been exported, but some will have been sold domestically. An increase in per capita demand from the current 0.2 grams to between 4 to 9 grams per year (as say in Hong Kong or Taiwan) could in theory result in huge demand (4000 to 9000 tonnes per year). Balance of payment and administrative constraints would swiftly likely to curtail this classic "China demand" scenario. 3. Gold Mining Proven reserves were cited as 4,265 tonnes in 1997. Of this, about 563 tonnes was available to be mined immediately: this in effect gives supplies for only two to three years at current rates of production. New capacity is adding only about 10-15 tonnes per annum. China may therefore face stagnating or declining levels of domestic supply. China invested heavily in gold mining in the 1980s and 1990s, but official annual investment is falling sharply. Budget constraints suggest consolidation. China's gold mines are small in scale, with even the largest producing only 3 tonnes. Even the top thirty mines produce less than one third of total production, the rest coming from very small operations. Fiat vs Gold -- Sharefin, 20:47:16 01/23/03 Thu Bobby Godsell: CEO, Anglogold MINEWEB: Your point of looking at new areas - you must then presumably believe that the higher gold price is here to stay? BOBBY GODSELL: Yes, we do. Absolutely. Firstly, we don't predict, because the market sets, and because this is quite a volatile price in the short term. But everything that we see suggests that the dollar price is at least going to stay where it is, or continue to appreciate. And it's not just the war in Iraq. People believe US equities were going to grow by 30% per annum, forever. They believed the dollar was going to be king, forever. They believed that economic growth was going to deliver astronomical, in fact impossible levels of growth. I don't know how a company can grow 30% a year forever, a very large company. So I think there was a kind of cloud-cuckoo land of easy money around, and all of that has gone. Against that, I think gold now looks like a very much more attractive element in somebody's investment portfolio. ~~~ MINEWEB: Looking ahead to the gold price itself, you have said that you think this is a level that will be improved upon. If you were to take a three- to five-year view, would it be consistent with an upward trend, whereas we've had the sliding trend for 20 years. BOBBY GODSELL: Well, look, we've never been in the business of predicting prices even three days away. The weather forecasters could do a better job. One would have more faith. What I think is interesting is that investment sentiment is wholly positive now, whereas it was wholly negative for most of the last two decades. It's the investment buyer of gold, the investor buyer that actually determines the price. And certainly sets the ceiling. And that's where the volatility is. However, one must note that no more than 10% of gold offtake goes in any investment from, bullion or bullion coins or anything of that kind. It is jewellery that actually determines the floor. And we are focusing increasingly to make sure that we expand our customer base, because 3000 tons or a 4000 ton market, a bit more than that, goes in jewellery offtake. That's the downside. I mean if the world were to go into a terrible recession, jewellery sales would decline. Probably, if the price went to $1000, jewellery sales would decline. So we are in a real business and we are looking at what we can do to modernise product, modernise manufacture and modernise retail. Jewellery has had a bad time. De Beers have got a similar analysis, as have platinums, and we've got to keep our customer base. If we can keep a secure floor on this industry, then we should benefit from the positive investor sentiment. MINEWEB: So many people in consumer-related industries, and you're mentioning just that now, are looking at China for the future. The recent developments there? BOBBY GODSELL: Very, very exciting. Again, in Asia people buy gold because it's money and because it's beautiful. It's one thing. Indian peasants buy it for dowry purposes, the Chinese buy it for both. In the West, it's quite hard to know how much real gold there is in a piece of jewellery, and there are very, very high margins. It's one of the things we would like to see change. As China grows, we could see that market quadruple in size, from about 150 tons now more to the Indian level of like 800 tons. That would be a structural change and would have positive price effects in our industry. MINEWEB: And concerns that there might be a structural change in India going the other way? BOBBY GODSELL: Well, look, India - there are lots of complicated things. Firstly, there's been a very high price which just had to impact. Then there's been a bad monsoon, and that has it's impact. Then there's been a bad horoscope, because people buy for dowry purposes and if you have fewer weddings you get fewer purchases. But Indian demand has come back quite well in this last quarter. I don't think we can take them for granted and I think what we're looking at is younger, more modern consumers, who want sexy jewellery, they want modern jewellery, they want apparel, they want fashion. And that market is not necessarily well served. You know, businesses that forget their customers - and in the end, our customers are the jewellery, it's the individuals buying jewellery -deserve to go out of business. MINEWEB: Going back for the last 23 years since the gold boom of '79, '80, was there any other time during this period when you felt as confident as you've expressed yourself this evening? BOBBY GODSELL: Look, one has to be careful. There was a big price spike above $400 around the Kuwait war. But you know, the background again was very different, it was equity kind of crazy time, it was a very strong dollar, it was a different interest-rate regime. So I would say I don't know, 23 years is too long. But certainly for the last decade, I think you know, the stars are aligned in a way that they haven't been for the past ten years.  Fiat vs Gold -- Sharefin, 20:41:52 01/23/03 Thu Brewing the next Bre-X In a rising market as we are currently enjoying, the risks actually increase throughout the sector because more projects come into play, investors become inured to doing their homework and chancers invade on the whiff of easy profits. Investors new to the sector need to be aware that it takes a special class of management to bring a mineral deposit to account and continue adding value. Even then, there are myriad temptations that can cripple an otherwise healthy company; Stillwater Mining being apposite. Most of all, investors must beware of the handful of unscrupulous promoters currently running up small stocks, many whose best experience with gold is a wedding ring or their last fleecing. There is presently a scheme underway whereby newsletter writers and web site publishers are being cut in if they help build companies on the back of inflated stock flogged to unwary investors. Gold -- Sharefin, 06:45:27 01/22/03 Wed Newmont Mining CEO Sees Output Drop In '03 Newmont Mining Corp. (NEM), the world's largest gold company, will probably produce slightly less gold in 2003 than the roughly 7.5 million ounces last year, Chief Executive Wayne Murdy told Boerse Online. The U.S. company, which merged last year with Normandy Mining of Australia and Franco-Nevada Mining of Canada to become the world's biggest gold company, expects to make further acquisitions in the future but not in South Africa, Murdy also told the paper. The prospect of a U.S.-led war against Iraq hasn't affected the gold price significantly, Murdy said, adding he would expect a quick resolution that would likely lead to a limited price decline. Murdy said the price of gold had the potential to reach $500-$600 an ounce - the highest levels since the early 1980s - by 2010, according to the paper. Gold -- Sharefin, 06:31:54 01/22/03 Wed Gold - metal or not? By all means, stability of the precious gold has made it special. It has lost its consumer characteristics long ago. Like the first money, gold has started performing quite different functions - saving, trade servicing and others. As the civilization was swiftly developing, its increasing boons (taken as their summarized prices) led to a deficit in gold. There were many money substitutes, and none of them survived. But paper banknotes, supervised by the vigilant state, within the past two centuries were able to eliminate the money deficit. The gold, initially a guarantee to banknotes, has turned into a “ghostly” half-visible commodity. It is curious that at the earliest stage of paper banknotes' existence their “gold price” was quite conventional to talk about. Things have changes to the contrary in the recent years: now we are used to talking of “paper price” for gold. But gold is still a metal with an especially sophisticated mining technology. Miners and metallurgists are good at their job. And despite geological conditions of mining becoming more and more complicated, actual volumes of gold production are growing. Another obvious tendency in the recent decades has been the demand stably exceeding supply (mining) 20-25%. As soon as (in 1971) the States ceased supporting the dollar with gold reserves (thus putting an end to the Bretton Woods system) stable gold prices fell into oblivion. According to the Classic Economy, consequences were predictable - a huge hike of prices. The theory seemed to be proved in the early 80-s, when a troy ounce cost up to $850 (hand in hand with a surge in oil prices).  Otherwise, the theory proved to be very distant from the reality. In the past two decades fluctuations in prices on gold have occurred almost independently from the real production and consumption. The matter is that central banks have stocked gold amounts nearly equal to 12-year world production output. The gold reserved are mostly thought to serve as defensive weapon to shield the world currency markets from speculative attacks. At the same time the most influential players on the global market have become more enthusiastic in their market game. And today it is not supply/demand correlation, but financial giants coupled with leaderships of many countries, who are pricing gold. The way it is being done A survey by the Gold Anti-Trust Action Committee (GATA) of January 1999 found that a culprit of low gold prices is a cartel of international banks. According to GATA's experts, the cartel has been manipulating on the gold market since 1994 together with assistance of high officials from different countries. The cartel allegedly includes the Bank for International Settlements, J. P. Morgan, Chase Manhattan, Citibank, Goldman Sachs, Deutsche Bank, às well as the Secretary of the US Treasury L.Summers, the Chair of the Federal Reserve A.Grinspen and the President of the New-York Federal Reserve W. McDonough. GATA reported that “these banks and their elite clients were in a habit taking a lease of gold from central banks at annual interest as low as 1%. Then they sold the gold on the market and allotted the profits to the Treasury Department of the US”. On the expiry of leasing contracts they buy off the gold on the market and return it to the central bank. Profits gained from the operation were, understandably, kept to the wheller-dealers. GATA makes a supposition that the “gold cartel” dumped a price on gold “several hundreds dollars beneath the natural balance level”. In the aftermath a gold price dropped from $388 in 1995 to $273 in 2000. Now the cartel is making its best to hold in the price, failing which its gold leasing is becoming too expensive. In its turn, the GATA considers bringing the world prices on gold up to $600/ounce a priority of its policies. These efforts have been enthusiastically backed up by many manufacturers, including 300,000 members of the South Africa's Miners Trade Union. The National Union of South African Miners announced the time had arrived to unmask international cartels, which had gone to all lengths in the past years in their bean counter. GATA is convinced that it was the “gold cartel” who sank the Australian dollar, in order to make Australia's gold miners sell in advance as much production as possible at higher local prices. The world gold mining could not help being influenced by financial dealers. Meanwhile, deposits are gradually running out. As has been estimated by World Gold Council, the 10 leading gold mining countries (except Russia) have in the depths just 15 td. tons of gold. The amount is actually next to nothing: --- only 40% of the world banking reserves; --- gold amounts enough for 6 years of mining with the present rates; --- gold amounts enough for 4-5 years of consumption with the present rates. In short, a dramatic decline of gold mining is soon to come. So, the gold metal trade is tailing itself along. Gold influx to the world markets is relatively small, compared to its combined deposits. And it makes the gold market easier for the cartels to deal with. According to "Forbes" (an article of April 5, 2001), “the state, for instance the USA, finds it logical enough to print as much money as needed to sustain the price on the desirable level”. By now the state debt of the USA has exceeded 6 trillion dollars, i.e. over 500,000 tons of gold at the current prices, or 10 times as much as the total world reserves (meaning all gold saved in banks and thoroughly explored deposits). Thus, in the final analysis the debt has been created by a money printing press of the Federal Reserve System of the States. Now with the global economic slump and a credibility gap with respect to various securities many are pinning hopes on the gold, as a stability warranty. In 2001 a troy ounce cost $270,15, while by now the price has risen to $327 (of November 2002); the market is awaiting further hikes. In a struggle between manufacturers and financial magnates positions of the latter are, surely, stronger. Today the gold traded at a reduced price is the Klondike for investments. Central banks throughout the world are afraid of a strong jerk up in prices, because it would dramatically spoiled attractiveness of shares and bonds, which are the basis of the contemporary world economy. As for the world gold mining, a soon relief is coming. Gold prices are expected to go up. The only question remains wide open - up to what extent? Gold -- Sharefin, 06:29:47 01/22/03 Wed Deutsche Bk Upbeat On Nickel,Gold,Platinum '03 Deutsche Bank Global Research is most bullish about the outlook for nickel, gold and platinum, raising its forecasts of these metals for this year in a recent report. For gold, this is the third time in less than a year that the bank is raising its forecasts for the metal, Peter Richardson, head of global commodity research at Deutsche, told Dow Jones Newswires late Tuesday. "We've been getting increasingly bullish on the gold price for the last 12 months," he said. Deutsche first raised its gold price forecast in March 2002, and in another report in September, "we thought this was the beginning of a bull market," he said. With the most recent report issued Jan. 13, the German bank forecasts gold will average US$340 a troy ounce this year, 6% higher than its last forecast of US$321/oz. In 2002, spot gold averaged US$310.70/oz, up nearly 15% from its 2001 average of US$271/oz, making it one of the best-performing financial assets. At 0110 GMT Wednesday, spot gold was quoted at US$358.87/oz. Gold's potential to rise higher will come in the first half of the year, "when the demand for safe haven assets is likely to be at its highest" due to uncertainties regarding Iraq and North Korea, he said. Apart from geopolitical concerns, changes in the dynamics of producer hedging, faltering confidence in the U.S. dollar and supplier discipline will continue to underpin an environment of a rising gold price, he said. While he agreed that a rising Australian dollar against the U.S. currency could encourage Australian gold producers to re-engage in hedging, investors' favorable disposition to relatively unhedged producers, evident in the share markets, could curb those desires. In the late 1990s, global gold producers built hedges to protect themselves against falling prices by selling future production at set prices. However, the practice backfires when gold prices rise, and with geopolitical and economic uncertainties on the rise since late 2001, investors appear to prefer those gold producers who hedge relatively less. ANZ Global Institutional Bank recently advised Australian gold miners to start hedging after the Australian-denominated gold price, which rose to its highest level in 15 years, could have peaked, as the Australian currency is likely to continue appreciating. Gold -- Sharefin, 05:51:56 01/22/03 Wed Bank gold sales flare up again The debate about central bank gold sales is flaring up in London again, given fresh impetus by the revelation that Portugal has sold 15 tonnes from its reserves. Although the Portuguese were careful to point out that the sales fell within the Central Bank Gold Agreement (CBGA), this was still a dramatic announcement -given that Portugal has never sold any of its gold before. ~~~ Rhona O'Connell at the World Gold Council suggests the Portuguese transaction “looks very much like the exercise of options purchased some four and five years previously, in which case the bank was either called away on a short call position or exercised a put.” Merlin Marr-Johnson, analyst at the HSBC investment bank, reckons the Portuguese were probably “called away” on the 15 tonnes when the gold price reached US$350/oz in December. ~~~~ The irony is, says Marr-Johnson, that this is a time for the central banks to hold on to their gold as it is the only investment providing them with a decent return at present. “They are losing money on dollars, euros, bonds and equities. And there is no inflation to wear down the US's massive debt.” Barclays Schwab picks up this theme when he says that the most important implication from the Portuguese sale is that, “despite a slide in the dollar and an outbreak of global instability, gold sales remain very much on the central bank agenda. Indeed, a $100 rise in the gold price is viewed as a selling opportunity and not an argument for re-evaluating sales programmes.” (The Canadians, Dutch and Swiss also sold central bank gold in December, along with the Portuguese). Gold -- Sharefin, 05:49:41 01/22/03 Wed Blow Hot, Blow Gold What is important to note is that this sharp gain in gold price over the year is not accompanied by any sudden boom in demand for the precious metal in the country. "The demand for new gold in the country at higher price level was limited, particularly since August `02, when gold crossed the Rs 5,000-mark,'' pointed out a bullion dealer. ``On the contrary, there was selling of gold and jewellery by holders at every rise in prices.'' As a result of this, import of new gold in the country has fallen in the second half of ‘02. ``Import of gold in ‘02 is estimated hardly 450 tonnes in the country, which is the world's largest market for precious yellow metal importing annually 600-650 tonnes,'' the dealer added. Gold -- Sharefin, 05:42:33 01/22/03 Wed Central Banks still favour dollar, gold reserves -survey Most central banks have no plans to increase euro holdings of foreign exchange reserves but expect total external reserves to rise further, a survey of 54 central bank reserve managers published on Monday showed. The survey of the central banks, which control foreign exchange assets worth $1.1 trillion -- around half outstanding official-sector reserves -- found that they favour the dollar as the dominant reserve currency and safe-haven gold. ~~~~ SAFE-HAVEN GOLD STILL FAVOURED The survey expected safe-haven gold to retain value as a reserve asset. "The main arguments in its favour...are that it is seen as providing insurance against a possible crisis or catastrophe and that it is not the liability of any country," it said. "No acceleration of gold sales by central banks is anticipated and some purchases of gold are expected by some. Most take the view central banks will go on selling gold at about the rate seen in recent years." Gold -- Sharefin, 05:38:36 01/22/03 Wed Buba rebufs calls for it to sell forex reserves The Bundesbank reiterated on Monday its foreign exchange reserves were not up for grabs, rebuffing suggestions that part of them should be sold to finance business initiatives or repairs after recent floods. The German central bank said the reserves played a vital role in underpinning confidence in the euro and any sale would require the approval of the European Central Bank. "In conclusion, the bulk of Germany's currency reserves are not available for 'alternative' purposes," the Bundesbank wrote in its January monthly report. ~~~~ The central bank pointed out it was prevented from selling its gold reserves by the 1999 Central Bank Gold Agreement. It said that even when the agreement expires in September 2004, it could only sell off its gold gradually in order to prevent a sharp fall in world gold prices. War -- Sharefin, 05:33:15 01/22/03 Wed 'Crude oil could hit $100' The price of crude may soar to US$100 a barrel if Iraq sets oilfields ablaze in the event of a US-led war, leading to a global disaster, according to former Saudi oil minister Sheikh Ahmed Zaki Yamani. Saddam "could destroy Iraqi oil wells... and strategic reserves would thus fall... and a barrel could reach between $80 and $100," the co-founder of the Opec cartel said late on Monday. The United States "would be the cause of a global disaster if they strike Iraq," he told a conference in the Qatari capital. Gold -- Sharefin, 05:31:59 01/22/03 Wed Malaysia's gold dinar a significant contribution If Malaysia's proposal for the implementation of the gold dinar goes through, it will be one of the country's significant contributions to the economy of the Islamic world. Mustapha Mohamed, executive director of the National Economic Action Council, the Malaysian government's economic think-tank, said the success of trading in the gold dinar would also be an indication of Malaysia's commitment to the devolopment of the Muslim ummah. "It would also be a testament to the strength of Islam," he said in his speech to about 1,700 participants of "The Development and Civilization of Islamic Thinking" seminar, organized by the Inland Revenue Board, which opened at Wila Yah Persekutuan Mosque here on Monday. Prime Minister Dr Mahathir Mohamad had proposed the use of the dinar for trade as it was a "stable currency with intrinsic value that would not fluctuate violently and was not open to speculation." The dinar, said Dr Mahathir, was a very practical way to solve the economic and financial woes that beset the world today. Mustapa, who is a former deputy finance minister, also said that it was of great importance that Muslim nations around the world be united to meet the future challenges of a more complicated world. "Malaysia can be an example. As it is now, a lot of other Muslim countries have sought our advice and expertise on how we handled our privatisation program and the success of our Islamic banking and capital markets." Mustapa said if all Muslim countries took a common stance they would be able to take care of the development needs of member countries although it may not be possible to launch an Islamic Monetary Fund, and "compete with the bigger World Bank or the International Monetary Fund." Gold -- Sharefin, 05:28:54 01/22/03 Wed Farquharson Bullish On Oil, Gold Bob Farquharson thinks the recent jumps in oil and gold prices go beyond the prospect of war in the Middle East. Farquharson is chief investment officer of A.G.F. Management Ltd. (AGF.B) and lead manager of the firm's C$800 million Canadian Growth Equity fund. About 35% of the portfolio is in those two sectors. He said one of the greatest challenges in money management is to spot a trend - one that will last for a period of time - and to spot it as early as possible. While war fears and a weak U.S. dollar have certainly played a role in the gold price's ascent, it's not the whole story, he said. Gold has endured a weak price environment for a very long time. The result has been little money flowing into the commodity's exploration and development, which means gold mines are depleting and few replacements are waiting in the wings. "If gold consumption continues to grow as the world gets moderately wealthier, then we're going to have a relative shortage of the commodity," Farquharson told Dow Jones. Gold -- Sharefin, 05:20:56 01/22/03 Wed Hedging halcyon days are over The current strength in the gold price may have helped the market to temporarily exorcise one of its biggest demons; hedging. The latest hedging survey by London-based consultancy Virtual Metals, shows hedging at its lowest level in six straight quarters, a trend pundits believe will continue for some to come; but nobody's saying for just how long. ~~~~ Asked by Mineweb at what price gold price producers might be tempted back into hedging production and what effect their return to forward selling would have on the price, Smith said: “The gold price 'effect' will likely already be 'pronounced' before gold miners re-hedge earnestly; that is, spot gold would be much lower - sales would tend to be into weakness, just as de-hedging was into strength. It would probably take a couple of big spot price falls to break the mindset that the market will give producers 'another chance' to hedge from higher levels.” But Smith also points to interest rates as one of the largest determinants of hedging for gold producers. Regardless of the attractiveness of hedging, Smith believes a poor terminal case of poor liquidity and a lack of depth in the gold market, will leave hedging below its hey-day of the 1990s. “If global interest rates were higher when spot gold fell, the attraction of a contango lifebelt would be enhanced. (There will be no 'Washington Agreement' among gold miners on new gold hedging!) I'm not forecasting this lower spot-higher rates combination in 2003 by the way. But I am forecasting that gold liquidity - the depth of gold derivative markets, gold's 'moneyness' if you like - will probably not recover on any price scenario, so there will be less hedging (than there was in the late 1990s) at any mix of price, interest rates, volatility or local currencies,” said Smith. But even if Smith is proved wrong and the conditions once more become favourable for producers to hedge, investment fundamentals have undergone a marked sea-change in the last two years. Investors looking for pure gold exposure have made their voices heard by aiding the outperformance of non-hedgers over their hedged rivals. “The Titanic turned two years ago in gold boardrooms and in AGMs. Now blanket gung-ho hedging is a thing of the past and those boardrooms have had to listen,”  Fiat vs Gold -- Sharefin, 05:10:43 01/22/03 Wed Silver Australian Dollars Instead of Russian Gold Ruble Russian Sberbank starts selling foreign gold coins to Russians Capitalism is the state of mind, when a value has only one goal - profit. Everything else does not matter. The most important thing to do is to sell something. It does not matter, what and to who. National interests stop playing any role at that. Will the Chinese buy it? Let's sell it to them. The Central Bank of Russia, the Finance Ministry and the Russian government were about to put a gold ruble into circulation after the financial crisis of 1998. If they decided to do so, the Russian economy would be totally different now. Probably, the situation with bank deposits would still be the same as now. However, selling gold coins on the home market would definitely allow the state to accumulate a lot more money, than it has at the moment. Russian liberal reformers did their best in order to not let it happen. First of all, their American teachers said no to the gold standard in Russia. Second of all, a gold ruble would be dollar's worst enemy. There was a time, when the USA spent a lot of its efforts in order to reduce the value of gold for the world financial community. Thirdly, Russian people's priorities would change. The people would definitely prefer to keep their savings in gold, foreign notes would not matter at all. This would eventually make dollar leave the Russian economy. The USA would not like it at all. However, it deems that the Russian government is longing for the love of the White House. So, what do we have now? Russia's gold and value reserves dropped. Sberbank, the major bank, in which the majority of Russian depositors keep their money, decided to sell gold coins to Russian people. However, those coins will not be rubles, but foreign coins made of precious metals. This is another way to invest in foreign countries' economy. Sberbank released an official statement today, in which it was said that the sale of Australia's classic investment coins would start until February 1. This time, Australian investment coins are silver coins of 50 Australian cents and of one Australian dollar. Fifty-cent coins are made of 999 standard silver. They were produced on the threshold of the Chinese New Year, so they depict the images of a goat and of a hieroglyph, which signifies this animal. One-dollar coins depict a unique animal of the Australian continent. The Australian money is known for up-to-date coining technologies, first and foremost. Certain Australian coins are really valuable collectibles. By the way, Sberbank's press service also informed that last year the bank managed to sell 300 thousand foreign coins of precious metals to Russian people. Gold -- Sharefin, 04:58:41 01/22/03 Wed Fund manager says gold foreshadows volatility A spike in gold prices to near 6-year highs last week suggests commodities will fluctuate widely in the months ahead, a leading commodity futures fund manager said. "We're at a secular low period in commodities that we're not likely to see for a while. This will mean more volatility," said Toby Crabel, president and CEO of Crabel Capital Management LLC in Milwaukee, Wisconsin. "It's like a pressure cooker. We don't know where the steam will come out of the pot, but it's forceful and will be forced out," Crabel told Reuters in an interview. ~~~~ ONE SCENARIO "Gold has been going up very steadily. Prices start to rise because of a lot of reasons. Using gold as a starting point, then interest rates are pressured and then stocks are pressured (negatively) eventually," Crabel explained. He forecast a scenario of more volatility and some sustained trends depending on the supply/demand situations in each market. "This cycle could go on for a while. It could just be beginning as commodity prices lag the movement in gold prices," he said. "We have a pretty good Federal Reserve chairman, but Greenspan is likely to retire soon and I see no viable replacement and that could create a level of uncertainty that could exacerbate whatever problems we have," Crabel added. He says he is not smart enough to figure out which markets will trend, but he expects that gold will probably move higher. "Things were calm and stable for 5 or 6 or 7 years and that was a relatively peaceful time, but we will have more volatility and some trends ahead," Crabel said. Gold -- Sharefin, 04:43:02 01/22/03 Wed GOLD FEVER TRUMPS GOLD-HEDGE FEVER In the December 20, 2002, issue of the Canadian newspaper National Post, economist Martin Murenbeeld, Ph.D., published an article under the title "Gold Hedge Fever", giving a clean bill of health to Barrick's hedge plan by calling it "perfectly defensible". Gold producer Barrick has sold forward tons of future output, by some estimates to the tune of 5 years of mine production. Dr. Murenbeeld correctly states that the origins of hedging go back to agricultural economies. Farmers need futures markets where they can sell forward their production in order to lock in a good price, or to reduce the risk of a price decline that could be ruinous to the farming business. Unfortunately, the author forgets to mention that farmers would never accept commodity exchange rules that allow speculators to sell short futures contracts in excess of one year's output. They know full well that unlimited short speculation would be prejudicial to their interest, as it would suppress farm prices below the marginal cost of production. In fact, short selling in excess of one year's output is outlawed for farm products. In addition, exchange rules limit short sales for other commodities as well, including gold. If these rules are not enforced it is because exchange officers have adopted a "see no evil, hear no evil" policy. They don't want to invoke the ire of their biggest client. The "gold-hedge fever" of which Dr. Murenbeeld speaks is a euphemism for the invitation Barrick has issued to gold speculators to abandon their traditional haunt, the long side of the market, and to get aboard the bandwagon of short speculation, in order to drive down the gold price so that Barrick's hedges may flourish. Gold speculators have always understood the true nature of gold. They know that the devaluation of currencies must show up in the leap-frogging of the gold price, usually in advance but, in any case no later than at the time of the fait accompli. Speculators also know that the louder politicians shout from their rooftops that the national currency will never ever be devalued, the more likely it is that soon they will eat their words. Revaluations of currencies are virtually unprecedented. The Deutschemark and the yen have been revalued a number of times as a result of arm-twisting from Washington, in order to camouflage the devaluation of the dollar. Because of this obvious devaluation-bias speculators have traditionally been long in gold. The gold price is another proxy for the devaluation of the dollar. This was changed temporarily, in response to the bullying of Barrick. Hence the "gold-hedge fever". But when the bluff of the bully-boy is called, as it must be when governments reach the end of their rope and devalue again, then speculators will reverse themselves with the speed of light. At that time genuine gold fever will take hold, trumping the wholly artificial "gold-hedge fever". The Economics of Gold Mining What Dr. Murenbeeld does not understand, and Barrick does not want to see, is that the task of the gold miner, far from maximizing annual profits, is to maximize the useful life of the mine in his care. Only in this way can he maximize total yield realized over the entire life-span of the mine. Only in this way can he make it sure that no value is left behind when the mine is exhausted and closed down for good. This follows from the fact that gold is the monetary metal par excellence. I quote monetary scientist and historian William Rees-Mogg who wrote in The Times on January 6, 2003: "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 cost 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 to pay for a war. It is an asset which is not represented by someone 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 in the gold market." ~~~~ Paper Profits May Evaporate before Realized "Barrick could not share its secret with anybody because the 'miracle' can only be accomplished through fraud. If one wanted to be charitable, one would assume that the accounting firms do not understand what they are certifying. Otherwise they would not give their good name to this chicanery aiming at misleading the public. Unfortunately, there are signs that suggest otherwise. The accounting profession may be a full accomplice in this conspiracy to defraud. It is not, has never been, and never will be possible to sell gold forward at a price higher than the highest price bid by the markets during the year under review, any more than it is possible to turn lead into gold profitably." "Here is what Barrick is doing. It sells gold borrowed at the low lease rate, and invests the proceeds in high-yielding U.S. Treasury paper. Then it re-calculates its revenues boosted by the interest income (owing to the positive spread between the yield on Treasury paper and the gold lease rate) as if it had been received through a higher sales price on gold per ounce. Why is this a fraud? Because the transaction remains incomplete, and profits are only paper profits, as long as all the deals have not been closed out and gold has not been returned to the owners. It may not be possible to realize those paper profits. It is quite conceivable that these forward commitments will have to be closed out at hideous losses. For such a scenario nothing more drastic needs to happen than for the price of gold to return to a higher level where it has already traded for years or decades -- before the entire deal is closed out and the borrowed gold returned." "Barrick simply assumes that 'what goes up must come down'. If the price of gold goes up, say, $200 per ounce, then it is duty bound to come down at least that much in due course. Those with financial staying power, such as Barrick considers itself to possess in good measure, will be able to ride out the storm caused by temporary spikes in the gold price. They can roll over all futures contracts showing a loss, several times if necessary, until the gold price comes down again. Barrick and others will, therefore, always be able to close out their deals at a profit." "The fact remains, however, that all Barrick has accomplished is to have swept margin calls under the rug, thereby concealing a potentially unlimited liability from its shareholders and creditors. Therein lies the fraud, which SEC and other watchdog agencies should uncover and expose..." Fiat vs Gold -- Sharefin, 04:14:48 01/22/03 Wed The Moral Failures of the Paper Longs Based on my readings of GATA's work (www.lemetropolecafe.com), my readings of Ted Butler's work (www.butlerresearch.com), and a little application of common sense, I see clearly that the gold and silver futures markets are manipulated and controlled by the endless creation and selling of futures contracts. It is clear to me that the futures contract creators and sellers are the deceivers. It logically follows then, that the paper longs are the primary ones being deceived. I believe it is a moral failure to be deceived. We are not to be deceived. What do people say? "Fool me once, shame on you. Fool me twice, shame on me." Shame on the paper longs for being deceived! True, the manipulation affects the entire world. It hurts miners all over the world. It continues to hurt long term holders of the actual physical metal, while at the same time, helping buyers of physical metal by providing the metal at artificially low prices. It hurts those who have invested in gold for a lifetime and now wish to sell for their retirement, but it helps those who are younger and still working, and who are able to continue to buy gold and silver at today's liquidation-sale prices. But market manipulation is temporary, and when it ends and the price is restored to a true market value, some will be hurt, and others will benefit. When futures contracts default, it will not hurt the miners and owners of physical metal, who will benefit from the subsequent rise in price and shortage of the metals. But the paper longs will be among those who suffer the most. I believe they will either receive a cash settlement offer, or perhaps nothing. So the paper longs are deceived into thinking that they will receive the promises of gold and silver as written in the contracts they buy. Gold -- Sharefin, 04:02:14 01/22/03 Wed Gold Rises to Its Highest in Almost Six Years on War Concerns Gold rose close to a six-year high as concern mounted among investors of a looming war in the Persian Gulf, which could boost oil prices and hurt global economic growth. U.S. President George W. Bush yesterday said nations should not be deceived by Iraq, which he accused of not disarming. Those comments and an order to send two U.S. aircraft carriers and extra troops to the Persian Gulf helped buoy demand for gold, seen by investors as a haven in times of economic volatility. ``There's safe haven buying and Iraq is the main issue,'' said James Moore, an analyst at TheBullionDesk.com, a research company. ``There will be a continued shift of money away from equities and the dollar, feeding its way into commodities such as oil and gold.'' ~~~ Hedge funds and other speculators have been buying gold futures contracts and hold close to their largest number of contracts since 1996. A report from the Commodity Futures Trading Commission showed they held a net 60,662 contracts in the week of Jan. 14, down from 63,563 the previous week, which was the largest position since February 1996. Fiat -- Sharefin, 04:00:19 01/22/03 Wed Dollar Hits 39-Month Low Against Euro The dollar retreated against most key rivals Tuesday, hitting a fresh 39-month low against the euro and a four-year low against the Swiss franc as a stream of hawkish commentary from the Bush administration convinced currency markets that war was almost inevitable. Gold -- Sharefin, 03:56:08 01/22/03 Wed The never-ending war The Kondratieff wave cycle is a controversial study of economic activity in capitalist societies detailing the rise and fall of stock markets, commodity prices and interest rates. Kondratieff's original study focused primarily on England although it has been more popularly applied to the United States. One intriguing aspect of the Kondratieff wave was the association of wars particularly to the peaks (summer) and the troughs (winter) of the cycle. ~~~ But then that is what the Kondratieff winter is about. And that atmosphere we continue to emphasize that the one investment that can and will thrive is gold and other precious metals. The Kondratieff winter is about the collapse of paper assets. In economies that are overburdened with massive amounts of debt such as we are for the consumer, corporations and governments the only way out is either debt collapse or massive reflation to inflate the debt away. Both will end badly as paper currencies become more and more worthless. During the Great Depression while the Dow Jones Industrials fell 89% from its peak, gold stocks as represented by Homestake Mining rose over 700% during the same period.  Gold -- Sharefin, 03:49:50 01/22/03 Wed Rising gold prices add 40% value to jewellery exports The persistent rise of gold prices right through April-December '02 inflated jewellery exports from India in value terms by about 40% - the highest during the last five years. "With the dollar getting weak some countries which have earlier been intending to reduce their gold reserves have currently shelved the idea. As price shot up, jewellery manufacturers started vaulting bulk quantities of gold expecting a further price increase," a top official from Gem and Jewellery Export Promotion Council (GJEPC) said. "Export of gold jewellery during March are expected to rise with the Indian exporters trying to sell the maximum amount before the year end. The sale is further expected to increase due to an increased demand from the Middle East due to the forth coming Dubai festival in April," the official added. Gold -- Sharefin, 03:34:11 01/22/03 Wed Sure sell, that's exactly what the gods of the gold bull market want you to do March Dollar Index was down .50 to a new low. On the monthly chart it appears that the dollar is on a whole new leg down. March euro up .69 to a new high of 106.98. March yen down .21 to 84.79. The declining dollar has to be striking fear in the hearts and pocketbooks of foreigners who are holding trillions in US assets. If foreigners start to sell heavily -- watch out! Feb. gold down all night as usual, but by the close of today's session Feb. gold was up .70 to a new high of 357.50. Many warnings from "experts" to the effect that gold is "too extended" and is probably topping out. Maybe -- but remember, bull markets will do whatever they have to do -- to advance with the fewest number of investors on board. Thus, talk of gold being over-extended serves to keep newcomers out and oldsters taking profits. So is gold "over-extended?" Hey, this is a bull market in gold so who the hell knows! The experts sure don't. ~~~ Russell Comment -- "Forget your gold cycles, this is a bull market, and that's the only cycle I'm interested in."  Lenny's Corner -- Sharefin, 03:11:08 01/22/03 Wed GENERAL COMMENTS: As the events of the world continue to unfold, usually in a fearful manner, the gold market has rallied sharply these last two weeks to press against technical resistance at the $360 price level. The financial world, which seems to convincingly believe that a war in Iraq is inevitable, has bought the gold market, the oil market, and has pummeled the USD relentlessly. It is clear that everyone is standing on the same side of the rowboat, that we see markets that are clearly dominated by speculative fervor, that now have a very significant "war premium" built into current prices. We clearly have runaway bull markets in gold, oil, and the European currencies. Prices are currently well above fundamental supply/demand "value" and the markets are clearly anticipating perhaps not the worst case, but a very bad one. These are obviously dangerous markets to trade, more so than has been the case for many years. But, the trend in gold is most decidedly higher and more and more mainstream analysts are now touting the ownership of gold, having missed the first $100 move of the bull market. Trust me, the market is now almost completely dominated by the investor or speculative concern and physical off take is simply awful. Lease rates for gold remain at virtually zero for the shorter-term durations and constructive reports of actual physical demand are virtually impossible to find. Investors and speculators are buying derivatives, or futures, while the actual metal remains unloved and unwanted. This should not be a great surprise, as "paper gold" is so much more cost efficient than the underlying precious metal. But, the downside risks of the gold market have been greatly enhanced not only due to the lack of physical demand at these lofty price levels but the fact that the current price of gold is maintained solely by the psychology of investors and speculators. And we know how quickly that can change. ~~~~ There has been much talk among traders and analysts of late about the correlation between the values of the shares of the gold producers and the price of gold. While gold remains a dollar or three below its 5-year highs, the gold stocks are still 30-50% off their highs seen earlier last year. It was once strongly believed that the gold stocks PREDICTED, or led, the price of gold, but this correlation is now very dubious. Could it be that the gold shares are telling us that this rally in gold is not to be believed? Doubtful, as gold continues to rally while they falter. What I believe is really happening is a realization of the fact that these two markets are not as positively correlated as many gold bugs would like to believe. Central Bankers continue to sell gold into the market, thumbing their nose at the humiliating experience of the British Treasury who sold half of their gold reserves at an average of $275, now about $85 less than the current price. Canada, Netherlands, Portugal, and the Swiss sold gold into its rally in December. It seems that the $100 rally in gold only encourages the Central Banks to continue selling their gold reserves even though it is the best performing asset on their books. They are selling their winners, and holding onto their losers such as the USD and equities. This makes very little sense in the current geopolitical environment and speaks volumes about the market "savvy" of these purported professionals. I am frankly amazed that there has been no public outcry from the citizenry of these nations due to the actions of their Central Banks, especially the British. It would appear that the Central Banks will certainly continue to be sellers into this bull market in gold and that there are few Central Banks willing to add to reserves. Oh yes, China and Russia are adding gold to their reserves but, MOST IMPORTANTLY, they are NOT buying gold in the open market, using hard currencies, but only buying internally produced gold for their native currency. Look, if you were a Central bank, and had the chance to add gold to your reserves for paper money that you could print at will, you would, of course, do it. This is the case with both Russia and China. They are not entering the global market and spending Dollars, they are buying internally produced gold for their local currency, while other Central Banks are selling gold for USD on the open market. It is strictly a one-way street. I would expect continued selling by the Central Banks, perhaps even accelerated as time goes by, and these sales depend upon the willingness of the speculative crowd to buy. However, history teaches us that the Central Banks, who should the sharpest in their knowledge of the markets and of the economy, tend to be sellers at the bottom and buyers at the top. Perhaps they are just leaning against the wind. ~~~~ Gold producers continue to be the MAJOR buyers of gold in this market, far outshadowing the demands of the speculative crowd for physical metal. As per Virtual Metals and Haliburton Mineral Services (sponsored by Rothschild), the international global hedge book, representing some 65% of global production, continued to shrink in the 3rd quarter of 2002 to 2692 tons, falling by some 15 tons. Still, all in all, about 2700 tons, counting just 65% of the total, remain either to be bought in the market to offset gold previously sold forward, or delivered into the market. If mathematically computed to about 3600 tons, this comprises just less than 2 years of total global production of gold, still a really hefty amount. AND, given the fact that stockholders of gold producers now consider ANY hedge to be complete anathema, it would appear that the demand for gold from this sector would continue to be evident. Andy Smith, who has been the most accurate, as well as the most controversial, gold analyst in the business notes that hedge book reductions by just four of the largest gold producers contributed 4.9 Billion USD of gold demand, while purchases of gold eagles, inflows into USA mutual funds that invest in mining concerns and Comex speculators total only $730 Million USD. It is most important to know exactly where the demand is coming from, and it is not the physical marketplace, it is not India or China or Japan, it is from the very gold producers who should, naturally, be sellers of gold who are now forced to be buyers. It certainly is a most strange world. ---- Sometimes I think Lenny is too close to the paper world of NY. Gotta admire his savvy though.(:-))) Gold -- Sharefin, 03:04:02 01/22/03 Wed India: All that glitters is gold - for now! In March 2002, Mr. Shah put some of his surplus money in the stock market and the remaining surplus money he gave it to his wife. Mrs. Shah put all that money in gold. And today, Mr. Shah walks with a frown on his face while Mrs. Shah is beaming ear-to-ear and also seems to look wiser. This is probably the story in most of the Indian households. All those who had invested money in gold have raked in the maximum profit and has indeed proven to be the best investment too, having given the maximum return on investments. And this surge in the prices of gold has not yet ended. Gold recently scaled a 6-year high of $360 an ounce. Selling has almost come to a standstill as every seller is now hoping that prices will rise further. This is in complete contrast to the situation in the early months of 2002, when consumers opted to sell when gold touched $300 an ounce. The domestic market is following in the footsteps of the global market where weakness in the dollar, blazing crude prices and fears of a US attack on Iraq have catapulted the yellow metal to this 6-year high. The fears of an attack by the US and its allies on Iraq has especially led to the bull run since gold is seen as a safe-haven asset. ------ Look at this chart & then read the rest of the story. Seldom is the overall view explained. For 30 years now the price of gold in India has been appreciating. Indian's know where to invest for the long haul Why else do they buy so much. To often I see critique of India's future buying power with little to no regards for concepts that are not understood. They buy & hold to save their wealth as they watch their fiat erode in value.  Gold -- Sharefin, 22:49:55 01/21/03 Tue Gold Share Fair Value Indicator - pdf file In view of the renewed interest in gold and gold stocks, Proteus Capital has updated its Gold Stock Fair Value (FV) Indicator. The Indicator is based on a proprietary formula reflecting the relationship between gold stocks and the bullion price. The Chart shows the monthly average gold price and value of the XAU gold and silver stock index. The red line is Proteus Capital's plotted on the right hand scale. The FVI is based on the relationship between gold stocks and the bullion price. It should be noted that during the late 1980s and into the early 1990s, gold shares were undervalued relative to bullion but didn't rally - instead, the under valuation was eroded by the decline in the price of the metal. At other times, especially when the gold price has been either stable or rising, if the FV Indicator is below 0% it indicates a rise in gold stocks. Based on closing prices on January 15, 2003, the FV Indicator points to a 20% rise in the gold stocks if they were to return to fair value against gold at $350 per ounce.  War -- Sharefin, 22:28:20 01/21/03 Tue Russia leases nuclear bombers to India £1.9bn arms deal to give India power of mass destruction across Pakistan and China India last night signed a £1.9bn deal with Russia to lease four long-range nuclear bombers and two nuclear-capable submarines, in a move which campaigners say will dramatically escalate the arms race on the subcontinent. On a visit to Moscow, India's defence minister, George Fernandes, said the agreement - which will also see Russia throw in an ageing aircraft carrier, the Admiral Gorshkov, for free - will be finalised by the end of March. "We have agreed that all efforts will be made to complete the three contracts," Mr Fernandes said. India and Russia will also pump more money into a joint programme to develop a new long-range nuclear-capable cruise missile, the BrahMos, he revealed. The massive deal will dramatically improve New Delhi's ability to deliver its nuclear warheads. It follows months of simmering tension between India and its arch-rival Pakistan, the world's newest declared nuclear powers. The two countries almost went to war in June last year, and for 10 months deployed a million troops along their shared border. India is believed to have more nuclear bombs - between 60 and 150, compared with Pakistan's 20-60. It also has a much larger conventional army. But defence experts believe that Pakistan, which secretly acquired much of its missile technology from China and North Korea in the 1990s, has better means of getting them to their targets, and this is an edge which New Delhi wants to eliminate. ~~ Under the package, India will lease four Tu22 M3 long-range aircraft - capable of dropping nuclear bombs on China - as well as two Akula class submarines, which are nuclear-propelled and can deliver nuclear warheads. India's existing submarine fleet is not nuclear capable. Indian officials say that in the event of a nuclear attack by Pakistan, the new Russian subs, which can hide underwater for months at a time, would be able to launch a devastating response. From the Far Side -- Sharefin, 22:20:42 01/21/03 Tue ElGordo (01/21/03; 17:51:25MT - usagold.com msg#: 95145) Whoa Chapman and Tice (prudent bear fund) caught in scam @ leigh I visit worldnetdaily often, just saw your link. Its amazing that this story is featured so prominently. I looked at Silverado a few weeks ago. I was interested in the new coal tech they talk about and then I noticed a correction they made in a news release saying that the company actually had no ownership in the tech, it was their VP that had ownership of patent rights. For months they had sucked in investors indicating it was silverado the company that had the rights to the clean coal technology. This company is VERY odd. I see Chapman was promoting it, there goes his reputation! I will never take him seriously again. As far as Tice of Prudent Bear Funds, wow, they are in Silverado for 1 million shares plus 1 million warrants I believe. What a disaster. How could he be snookered by Silverado like that that? That Goldseek site has also been heavily promoting Silverado and several analysts on it have been pumping a lot of weird small gold companies. The prudent bear fund is going to wind up looking like a bunch of morons on the front page of the WSJ one of these days! lol Too bad. Watch out for companies listed on the vancouver exchange, thats for sure. The mainstream media is going to take a swing at goldbugs soon I bet. The fact that Tice got snookered is quite a story. Trouble in bugland for sure. Gold -- Sharefin, 22:17:01 01/21/03 Tue Gold gain is imminent, forecaster says 'Fear index' shows metal poised for rapid rise With the U.S. dollar swan-diving, researchers and economists who aren't affiliated with investment banks are staking claims to looming mayhem in financial markets. One of the boldest of those forecasts comes from James Turk, editor of subscription newsletter Freemarket Gold & Money Report and a longtime bullion researcher. Turk often takes to calling the dollar "the peso" in his missives, which have been increasingly precise in forecasting the 18-month gain in gold prices. Turk calculates a "fear index" by multiplying U.S. gold reserves by the gold price, then dividing it by M3 money supply. At its most basic interpretation, the index represents the lack of faith most investors have in gold and the surplus of faith they have in Federal Reserve paper assets. The index at the end of December stood at 1.06 percent, a historic low since 1971, when Richard Nixon took the dollar off the gold standard. "It means that 1.06 percent of the dollar is backed by gold (the U.S. gold reserves) and 98.94 percent is backed by debt owed to the Federal Reserve and the banks," Turk explained to me Tuesday. "It has been my contention that the biggest bubble of them all is not stocks or home prices, but the dollar." Cut to the chase: Turk sees gold, currently at $355 an ounce, rising to $366 by the end of January, which is just 10 days away. The price of the metal will reach $934 an ounce by February 2004, he says. Fiat vs Gold -- Sharefin, 08:13:29 01/21/03 Tue The Precarious Position of the US Consumer Each time retail sales in the US increase and beat the Street's estimates by a small amount, Wall Street cheers and pushes the market higher. However, I seriously question the use of retail sales in the US as a measure of economic strength, for two principal reasons. In my opinion, retail sales that are not accompanied by a rise in industrial production are highly questionable as an indicator for the domestic economy. They are a far better indicator for the strength of the Chinese economy, because rising US retail sales are leading to a widening of the US trade deficit with China, which is increasingly supplying the US market with consumer goods. Consider the following. The US housing industry is booming. However, US production of appliances is flat to moderately down compared to a year ago. Or take the home furnishings industry, which should be a prime beneficiary of strong home-building activity. However, furniture imports into the US have jumped 71% since 1999 and now comprise between 40% and 50% of all sales. According to an economist who has studied how US industries have been affected by rising imports, half a million workers lost their jobs in the furniture industry between 1979 and 1999. This is in stark contrast to China, which has become one of the world's largest manufacturers and exporters of furniture, claiming 10% of the global market share. In the first seven months of this year, furniture exports - principally to the US - rose 35% to more than US$3 billion. Perhaps Fed governor Ben S. Bernanke should consider this point when advocating an ultra-easy monetary policy. ~~~~ In recent reports I have repeatedly drawn the readers' attention to the rise in housing and commodity prices over the last 12 months. The purpose was to show that, although we are in a deflationary environment for manufactured goods, principally because of the rising supply of “cheap” consumer goods from China, a shift has taken place in the last two years from inflation of equities (or a bull market for equities) to inflation of hard assets such as residential real estate and commodities. But whereas it would appear that housing inflation in the UK and the US is nearing an end, commodity prices appear to have completed a multi-year base and are poised for further gains. 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 24% over the last 12 months. Also, as I have pointed previously, commodity prices have 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. However, what do we mean by “once fundamentals improve”? For one, 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 statements didn't go unnoticed by the believers in sound money (gold), who subsequently pushed gold prices through an important resistance level. Therefore, if easy monetary policies bring about higher commodity prices, interest rates, which usually move in tandem with commodity prices will rise and bring an end to the current unsustainable mortgage-refinancing boom. And once the consumer can no longer borrow against his house in order to sustain his spending habits, consumption and along with it the economy are likely to collapse. As a result, I would look at selling US equities during the present rallying phase, and avoid the US dollar and US treasury bonds. In my opinion, the Euro, gold and Asian emerging markets will continue to outperform US equities, as they have already done so over the last 18 months. Gold -- Sharefin, 07:40:03 01/21/03 Tue The Perils Of Success Last month, Alan Greenspan spoke to the N.Y. Economic Club and sounded, for a while, like his old self. "Although the gold standard could hardly be portrayed as having produced a period of price tranquility," he conceded, "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, had allowed a persistent overissuance 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." Mr. Greenspan was setting the stage. He might have added that no central banker in all of history had ever succeeded in proving the contrary. Every fiat currency the world had ever seen had shown itself 'subject to excess' and then subject to destruction. ~~~~ Gold is found on earth in only very limited amounts - only 3.5 parts per billion. Had God been less niggardly with the stuff, gold might be more ubiquitous and less expensive. But it is precisely the fact that the earth yields up its gold so grudgingly that makes it valuable. Paper money, on the other hand, can be produced in almost infinite quantities. When the limits of modern printing technology are reached, the designers have only to add a zero...and they've increased the speed at which they inflate by a factor of 10. In today's electronic world, a man no longer measures his wealth in stacks of paper money. It is now just 'information.' A central banker doesn't even have to turn the crank on the printing press; electronically registered zeros can be added at the speed of light. Given the ease with which new 'paper' money is created, is it any wonder the old paper money loses its value? ~~~~ "Evidence of history suggests that allowing an asset bubble to develop is the greatest mistake that a central bank can make," wrote Andrew Smithers and Stephen Wright in "Valuing Wall Street," in 2000. "Over the past five years or so the Federal Reserve has knowingly permitted the development of the greatest asset bubble of the 20th century." When the stock market collapsed, Mr. Greenspan's policies began to look less prudent. During his tour of duty at the Fed, the monetary base tripled, at a time when the GDP rose only 50%. More new money came into being than under all previous Fed chairmen - $6,250 for every new ounce of gold. Gold -- Sharefin, 07:33:35 01/21/03 Tue Gold seen higher in 03/04 on weak dollar,war threat The average gold price is seen rising 10.5 percent in 2003 due to further weakness in an already ailing dollar and the metal's reputation as a safe-haven asset, a Reuters poll of leading metals analysts showed on Tuesday. The global survey of 21 analysts forecast that gold A similar Reuters poll of analysts surveyed in July 2002 had indicated that the precious metal would average $320.00 an ounce in 2003. Gold averaged $310 an ounce in 2002. Analysts said prices would remain volatile in 2003 and said their forecasts could change significantly depending on the outcome of any war in Iraq and how the dollar fared against major currencies. "Basically this is a very complicated world where, contrary to the experience of the 1990s, having some gold insurance in your portfolio is a good idea," said Nick Moore, metals analyst with JP Morgan Securities Ltd. Many in the market were caught out by a red-hot rally last year which sent gold prices up by some 25 percent, as a cocktail of bullish factors attracted fresh investors to the metal, making it one of the best performing financial assets in 2002. Geopolitical tension and fear of further terror attacks, along with investors reallocating portfolios to incorporate gold as the dollar and stock markets sink further, were the main factors seen supporting prices in 2003. But prices could take a hit if any war in Iraq proved short- lived, thus calming oil prices and stabilising the dollar, while the spectrum of investors would need to be broadened to continue supporting prices. Most analysts were expecting a battle against deflation in the U.S. and Europe to hit the dollar hard and benefit gold. "U.S. inflation will surprise to the downside leading the Fed to engage in unconventional methods in the battle against deflation from mid-year," said Dresdner Kleinwort Wassterstein's analyst Kevin Crisp, who forecast an average 2003 price of $350/oz. "The result will be a further weakening in the U.S. dollar, low growth and low investment returns." ~~~ Gold may also benefit from a continued lack of Central Bank selling due to their obligations under the Washington Agreement. "Ironically it is more likely to be a palliative such as an extension to the Washington Accord rather than falling bombs which is likely to lift gold into its new upper range," Ross Norman of TheBullionDesk.com said. Other analysts feared discussions for a new agreement in 2004 could introduce further volatility into the market. Gold -- Sharefin, 07:26:13 01/21/03 Tue International gold hedge book continues to shrink The international gold hedge book continued to shrink in the third quarter of 2002, contracting by about 5 per cent, according to a recent study by Haliburton Mineral Services and Virtual Metals. The research is based on a gold hedging indicator, sponsored by NM Rothschild, which looks at the impact of all contracts a producer enters into using the net delta, which calculates the impact in terms of an equivalent sale of gold into the spot market. The study, which covers the cumulative hedging activities of 98 gold producers, found that the global hedge book declined by 4.8m ounces (150 tonnes) to 86.6m ounces (2,692 tonnes). From September 2001 to December 2002 the total fell by 15m ounces (466 tonnes). "We wait with interest to see next quarter's figures, which will reflect in detail the sharply appreciating US dollar gold price seen in the closing months of 2002," said Ted Reeve of Haliburton Mineral Services in Toronto. "We expect this to have a substantial bearing on the next set of calculations." In terms of years of production committed to price protection programmes, the collective gold producers still had 1.9 years of output tied to hedging but this was down from the 2.2 years of 12 months ago. Australia's commitment to hedging remained virtually unchanged at 2.8 years. The report found that the greatest decline in exposure has come from the African-based mining companies, at 1.4 years down from 1.8 years seen in September 2001. Over the 12-month period the Africa hedge book has fallen from 27.3m ounces to just under 21m ounces. The consolidation in the international hedge book has been a function of the mining industry going through a restructuring, "but the appreciating international gold price over the past two years has certainly played its part", said Jessica Cross, chief executive of Virtual Metals. "The almost exponential growth in hedging seen in the 1980s and the 1990s occurred in an environment of weaker US dollar gold prices. In an improved price climate, further reductions in the exposure to price protection should not come as a surprise," she added. Gold -- Sharefin, 07:12:00 01/21/03 Tue Third Quarter 2002: Gold Hedge Book Continues to Shrink According to the Gold Hedging Indicator - pdf file The international gold hedge book - the cumulative hedging activities of 98 gold producers, representing 65% of total gold production - continued to shrink during the third quarter of 2002, declining by 4.8 Moz (150 tonnes) to total 86.6 Moz (2,692t). Over the past 12 months (Sept to Sept) this total has fallen by 15.0 Moz (466t). • Haliburton Mineral Services and Virtual Metals Research and Consulting in researching the Gold Hedging Indicator, (sponsored by NM Rothschild & Sons Limited) publish this single number which gives the closest measure of the actual influence of total hedging on the market. This net delta measure, calculated by NM Rothschild, continues to provide the authoritative benchmark on hedging on a quarterly basis. (See text box for a fuller explanation of the net delta and the difference between this and measuring the total committed ounces to hedging.) • Throughout the third quarter of 2002, the US$ gold price continued to rise, albeit moderately, while the Gold Hedging Indicator fell. This was as a result of a decline in call option positions (a direct consequence of higher gold prices) as well as a reduction in net forward positions. “We wait with interest to see the next quarter figures which will reflect in detail the sharply appreciating US$ gold price seen during the closing months of 2002. We expect this to have a substantial bearing on the next set of delta calculations, ” says Ted Reeve of Haliburton Mineral Services. • In terms of years of production committed to price protection programmes, the collective gold producers still had 1.9 years of output tied to hedging but this was down from the 2.2 years of 12 months ago. Australia's commitment to hedging remains virtually unchanged at 2.8 years. The greatest decline in exposure comes from the African-based mining companies at 1.4 years down from 1.8 years seen in September 2001. • On a regional basis, different trends continue to emerge but says Jessica Cross of Virtual Metals, “the real regional impact is only likely to be seen in the fourth quarter figures which will take into account the strong recovery of the South African Rand. Our approach to measuring the net delta which is price sensitive will give us much greater insights into the dynamics of the hedge book during the fourth quarter.” • On a net delta basis, the Americas totalled 43 million ounces, down 3.3 million ounces on Q3, 2002. Over the same period, the Africa hedge book on a net delta basis stood at a touch less than 21 million ounces (653 tonnes), marginally down from the 21.8 million ounces (678 tonnes) of the previous quarter. This quarterly figure actually masks the fact that the Africa hedge book has shown marked contraction over a full 12-month period down from 27.3 million ounces (737 tonnes) at the end of September 2001. Hedging associated with the Australian producers remained remarkably stable throughout the September 2002 quarter, down a mere 0.7 million ounces to 22.6 million ounces (702 tonnes) and this stability has characterised the regional book for the past 6 reporting quarters. The only exception was Q2 2002, a period that saw the Normandy hedge positions transferred to Newmont and the Hill 50 hedging transferred to Africa via Harmony Gold's acquisition of the mine. • “Without doubt, the international hedge book has shown continued consolidation.” says Jessica Cross, “This has been a function of the mining industry itself going through a restructuring but the appreciating international gold price over the past 2 years has certainly played its part. The almost exponential growth in hedging seen in the 1980s and the 1990s occurred in an environment of weaker US$ gold prices. In an improved gold price climate, further reductions in the exposure to price protection should not come as a surprise. Unlike the trend of the 1990s, the producers through much of 2002 elected not to add materially to their hedges as the international price has appreciated and it remains be see if this philosophy continued during the fourth quarter. ” Gold -- Sharefin, 06:52:30 01/21/03 Tue Investors take a shine to gold as fears rise Falling stock markets, predictions of recession, fears of a full scale war in the Middle East and a weak dollar all add up to one thing - a huge rise in the price of gold. A wave of buying by private individuals in recent weeks has sent the price rocketing through the $350 an ounce mark to a six-year high. The rush on the part of people throughout the world to convert their savings into something hard and tangible has destroyed the arguments of those economists who have been arguing that gold as a store of value is past its sell-by date. They may have persuaded Chancellor Gordon Brown of their case - he famously sold off half of Britain's gold reserves at an average price of $275 an ounce - about 70 per cent of the price he would get today - but ordinary men and women in the streets, souks and bazaars have obviously not been listening. Net investment in gold has nearly trebled in the past year and the practice of converting cash into gold, normally associated with India, Japan and Middle Eastern countries, is spreading to the UK. But as the price of gold increases, so do the warnings that it is far from being a straightforward investment. Especially considering that it is still about 70 per cent shy of its 1980 record price of $835. Close Wealth Management, part of the merchant bank group Close Brothers, for example, warns investors to treat the precious metal as a trading asset rather than a buy and hold investment. The price of gold is volatile and in real terms it did not recover its 1572 price until the 1980s. Gold -- Sharefin, 06:45:22 01/21/03 Tue Alan Goldspan Seemingly out of the blue, the U.S. Federal Reserve chairman is hinting at a return to the gold standard. If so, currency markets are in for a shock Last month in a speech before the Economic Club of New York, Alan Greenspan praised the gold standard, the first time he has unambiguously done so since joining the U.S. Federal Reserve. "Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800," he stated. "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, had allowed a persistent over-issuance of money." Is Greenspan returning implicitly to his long-held strong beliefs, which he voiced explicitly before he became Fed chairman, of having the gold price guide U.S. monetary policy? If so, that would mean keeping the gold price (in terms of the dollar) stable. Under this standard, as Greenspan accurately points out, the price level in the United States stayed stable through wars and much technological and political upheaval. The implication is clear: There is no problem achieving such stability in future, even if the United States goes to war, and even if much technological and political upheavals continue. During the six decades since the Americans left the gold standard, prices rose tenfold. This happened not because these decades were more turbulent than the preceding 13, but because of the faddish belief, rationalized by much of the economic profession, that central bankers could do a better job managing monetary policy by setting interest rates and exchange rates than by market-guided, gold-price-anchored discipline. ~~~ Based on Greenspan's earlier speeches, we may then speculate on what might have caused him to pursue the erroneous policy, and what may have led to his drastic change of mind. It was in 1996 that Greenspan made his famous speech on "irrational exuberance" at a time the Dow was in the 6,000 range. Since now, six years later, the Dow is hovering between 8,000 and 9,000 even after expectations of lowered growth rates, terror, war and Latin American upheavals, Greenspan may have realized his mistake, thinking that the 6,000 level was too high, and that he must apply restrictive monetary policy to lower it. Also, last year, finally, Greenspan started to talk about deflation. Since Greenspan had been an ardent believer in the gold standard before becoming chairman of the Fed, he may have put together the sequence of events and recognized the errors of his ways. After all, if one looked at all these facts and sequence of events over the last six years through a "gold price" perspective, they should not have been a surprise. They were predictable. This realization does not imply that the Fed will now buy either treasury or other government bonds (the two options that he and Bernanke raised in their speeches) with newly minted dollars until gold goes back to the US$400 level. With war and diminished growth rates on the horizon (even with the fiscal stimulus), the global demand for the dollar is not what it was in the late 1990s. Choosing a rough, rounded average of US$350 as a target may be a reasonable guess for a Greenspan "target" point. He might have chosen it already: He knows that the global demand for the dollar has been declining since 2001, yet the monetary base is up by roughly 8% over the last year. Unsurprisingly, the dollar has been in decline relative to most major currencies, sliding to a level where it should have been. If my analysis is in the right ballpark and Greenspan from now on uses the gold price to guide his monetary policy, no further significant increase in the price of gold should be expected. If demand for the U.S. dollar continues to drop, the Fed will issue treasury bonds, and if it rises, it would buy them or other government bonds. Once the U.S. dollar becomes "as good as gold," even if informally, and with the present fiscal stimulus, capital will flow to the U.S., the euro will weaken, and so will the Canadian dollar. Richard Russell -- Sharefin, 06:39:12 01/21/03 Tue Market Comments Richard Russell Dow Theory Letters Inc. Printer Friendly Version eMAIL this Article Market Comments We are moving ever deeper into the belly of a great primary bear market. For the sake of my new subscribers, let me again describe the second phase of a bear market. In the second phase of a bear market (and the second phase is usually the longest phase), stocks go down as they discount deterioration in the economic, social and political fabric of the nation. Is the social and political fabric of the US deteriorating? I think it is. ~~~ At any rate, my point is that we're now moving more deeply into the classic second phase of this great bear market. I was interested in Felix Zulauf's comments about gold in Monday's issue of Barron's (page 24). Zulauf founded a Swiss asset management firm. Says Felix, "The policy of the US central bank is going to destroy the dollar. Confidence in the US currency at some point will collapse, and you'll have a run on the US dollar. Money can't go to other currencies, because they have to support the dollar. Gold will act as a monetary currency without the liabilities of ill-guided central bankers. Another way of looking at it is to say that the US has underinvested in capital investments to supply the goods that US consumers are demanding. You have spent your money by buying on credit instead of investing. The Chinese are investing. They are building an empire. "The US is the largest debtor nation. About $3 trillion are held by foreigners if calculated at the purchase price, and foreigner are still buying US assets. Last year they bought about $45 billion of US equities, but that will change at some point. When people realize there are fundamental problems in the US economy, the dollar will begin to decline in a major way. The process actually started in 2001. Other central banks will at some point then try to support the dollar, because if it declines too much, it will hurt their exports. They will be forced to adopt the same policy as the US central bank, and you will have the whole world creating more fiat currency. That's when gold will really run." Fiat -- Sharefin, 18:44:24 01/20/03 Mon Japan bankruptcies near record Nearly 20,000 firms went bankrupt in Japan during 2002, the second-highest number of corporate failures since World War II. And experts predict that this year even more companies will go under, because the government is pushing Japanese banks to adopt stricter accounting standards. Later this month the Financial Services Agency will begin a second round of special inspections to examine the balance sheets of the country's banks. Firms that have little prospect of paying back their loans are likely to be cut off from further financing. Gold -- Sharefin, 18:39:03 01/20/03 Mon That Sinking Feeling: Deflation in Goods and The Dollar A rebuttal to "Gold & Gold Shares," opinions issued this weekend, January 19, 2003, by my respected colleagues Andrew Smith and Robert Prechter separately and for various reasons reviewed. Many economic commentators agree that we are at a major turning point. I agree with that. However, I argue that most analysis of where the economy is headed is wrong because of a fundamental misunderstanding about two crucial things: deflation and the dollar. This has implications not only on the US economy and whether we are headed for another Depression, but also the price of gold and the direction of equities markets. ~~~ The answer hinges on the dollar. If the dollar declines, gold will rise. The inverse is also true, but I believe that there is no case now for dollar strength other than short-term rallies from oversold conditions natural to all markets. As we know, the value of a real estate investment is determined by location, location, and location. The US dollar, the US dollar and the US dollar will now determine gold's value as indicated by the USDX (The US Dollar Index). As the USDX declines, gold will rise. This editorial, IMO, offers significant recorded historical fundamental evidence with clear definition of the condition, deflation, to respectfully rebut those who claim (such as my honorable and respected colleagues Robert Prechter and the Elliott Wave technical analysts and Andrew Smith in his $310 to $385 prognosis) that we are headed into a Deflationary Depression and taking the price of gold down. Gold in fact recently touched $360, a significant level. Gold has gained its price level not because of any public participation. Buying gold shares does nothing for gold bullion price. Buying gold coins does nothing for gold bullion's price. Trading in paper gold futures does nothing for gold bullion's price. Trading in gold options does nothing for gold's price. Instead, those who are responsible for the recent, and probably future, of the price of gold price are the Asian and Islamic buyers. Their trading desk managers understand technical analysis so it is no surprise that these technical levels are being hit, reacted from and proceed to the next, one after another. Thus the dichotomy between the strong gold price and the recently weaker gold shares can thus be easily explained: because almost the entirety of the public participation is focused on gold shares and the professional (Asian and Islamic) buyers are focused in cash gold bullion itself. Gold shares are likely to rally as individual investors see the fundamental support built in to the price rise cash bullion. It is not as if one cannot feed into the other but, in my opinion, the following is certain: - Gold will not go significantly lower for any significant amount of time from here! - Gold will trade over $400 in 2003 - The US Dollar is your measure of what gold will do now and into the foreseeable future until we maximize this entire major bull market! Gold -- Sharefin, 18:32:51 01/20/03 Mon Nationalist Weekly Market Commentary Now for the rant! Prechter's latest EWT on deflation is a total misdirect. He says that Bernanke cannot monetize debt and reflate without causing monetary chaos. Duh! Look! We all know that the forces of deflation are strengthening. We know that the real economy is going to contract. We know that the government will monetize debt, and we know that the monetization will cause a currency and credit collapse. Arguing that Greenspan/Bernanke cannot monetize debt is like arguing in 1996 that Greenspan cannot allow an irresponsible asset price bubble and debt balloon! But unlike Butthead Prechter, who wants to get paid for uncovering abstract truths, I have an account that must keep heading north or I don't eat. That means I have to be right about when to pounce on these developments so that my account keeps going up. Hell, if we had all followed Butthead's recommendation that we go short in January 1996 and had held our positions, we would all be bankrupt and out of the game. Butthead Precther keeps talking about people panicing into safe "cash equivalents" as asset prices deflate. OK, Butthead, where the hell are these safe "cash equivalents"? I look at the Rydex federal money market fund an it is jammed full of Fannie Mae commercial paper. Fannie is leveraged 140 to 1 and has no Federal guarantee. Is this the safe cash equivalent that investors will flee to in a crisis? Look at the regular money market funds and you see the paper of special funding corps in the Bahamas - are these your safe cash equivalents? We need to know when we must flee the money market funds into real cash. And when the time comes to acquire real cash, we have only two choices - $100 dollar bills or gold. Everything else is just credit. And if you withdraw enough $100 bills to protect your wealth, you will find yourself on the FBI terrorism watch list. Apparently it has not occurred to Butthead Prechter that the reason the dollar is collapsing and gold rising is that a pessimistic minority knows exactly what the deflationary forces will accomplish and what policy response deflation will provoke. They want to get some gold before the gold window is closed yet again, as it ultimately must be, in order to force people to value imaginary dollars. What Butthead fails to sense is that these bearish investors understand just how quickly the system could unravel. Meanwhile, Butthead insists on seeing rising gold prices as bullish bets on the past - as evidence of investor concern about inflation. Thus, in Butthead's view, investing is not about making money, but rather about vindicating abstract conclusions about the economy - you must place your money on the side of abstract truth and damn the consequences. And at the end of the day, mere gossameres of his imagination - preferred wave counts and fibo targets projected into the future - lead him to insist that 200 imaginary dollars will buy an ounce of gold. He paints himself into the corner of believing that in the chaos of a debt collapse the imaginary dollar will be a desirable safe haven for your wealth; - that despite gold's rise and the dollar's decline, the dollar is the more real and valuable of the two. In this sense, Butthead's version of EWT suffers from the same defect as fundamental analysis - it has no inherent mechanism that will prevent you from losing everything in a death spiral when you are wrong. For EWT traders, if the market charges past the "ideal" reversal point based on fibos or wave count "look and feel" targets, then Butthead adjusts his target while you lose your ass. Often times, his stop points based on wave projections will be a 10% to 20% loss. Suffer 5 or 6 of these in a row and you are out of the game. Ok, end of rant! All that said, I must confess that there is a 70% chance that Prechter's intermediate term forecast for stocks is right on target - hard down into the May-June time frame. But his forecast for gold is hazardous to your wealth. So keep your eye on the charts! Gold -- Sharefin, 09:19:44 01/20/03 Mon The gold game plays on Gold just finished up for the seventh straight week, at $357.20. Overbought? Maybe not. Mark Hulbert's Hulbert Gold Newsletter Sentiment Index measures the actual exposure to gold recommended by the letters he monitors that follow the metal. As of Friday night, it stood at 46.15 percent. Which is only about midway in the historic range - it goes from -31.5 percent in late 1997 to a peak of 89.6 percent, achieved when gold broke through $300 at the beginning of last year. Gold is now more than $50 higher -- its highest point for more than five years. Yet joy is decidedly confined. Hulbert, with his fascination with contrary opinion, views this as a bullish sign One particularly interesting gold bear is the Elliott Wave Theorist's Robert Prechter. Based on analysis of data by the Hulbert Financial Digest, he's had several runs of success in a variety of different markets. ~~~ Prechter is currently making a powerful and erudite case for deflation. For 2003, he predicts "the stock market averages declining more than in 2000, 2001 or 2002." He's recommending "interest-bearing cash equivalents... conservative measures." Yet he writes, "I am a staunch deflationist but not a dogmatic one. Since I am a technician, the markets ultimately dictate my opinion. As previous reports have made clear, [Elliott Wave Theorist's] forecast two years ago for gold to rally to $360 has been fulfilled... If gold rallies another 10 percent, however, then the presumed bear market rally will actually be the start of a new bull market, challenging or negating my monetary outlook." Gold -- Sharefin, 09:16:45 01/20/03 Mon Looking for Mr. Super-cycle Warning of new falls, Hochberg uses 300 years of data Hochberg, who worked at Merrill Lynch in the early 1980s, tells me the stock rally that began in October "is clearly a correction, a counter-trend move that is tracing out what we call an 'A-B-C' pattern. This means that the October lows will be easily swept aside in the next leg of the bear." Hochberg addressed other worrisome signs for U.S. stocks. His analysis provides compelling counterpoints to claims the 2003 stock market will enjoy its first winning year since 1999. The sentiment of investors is way too upbeat, Hochberg says. "It remains nowhere near what is historically seen at bear-market bottoms." Investors Intelligence surveys show twice as many believers as skeptics. Yet in 1994 and early 1995, a painful period for stocks, there were nearly 40 straight weeks of more bears than bulls, "the complete opposite of today," he says. What's more, the Standard & Poor's Commitment of Traders numbers show small investors "remain net-long S&P futures. At a true market bottom, this group of traders will be deeply net short, as they were in 1994." Additionally, Hochberg says the percentage of mutual fund cash is at a bull market high of 5 percent, "not at a bear market bottom of 10 percent to 13 percent." Hochberg prides himself on his data retrieval. According to Sindlinger & Co.'s weekly survey, the percentage of U.S. households in stocks is 56.7 percent, "exactly where it was at the Dow's all-time peak on Jan. 14, 2000. At a bear market bottom, this percentage will be 20 percent or lower," he tells me. Elliott Wave theorists track what they call "super-cycles," or sweeping trends that occur rarely. "The last two times the stock market was down four or more years in a row was in the last two super-cycle declines, which is exactly what the current decline is," he says. The previous instance was 1929 to 1932. Before that, stocks fell four straight years from 1837-1841. Hochberg also goes one better (or worse) on the super-cycle angle. "The decline from the 2000 peak is not only a super-cycle decline, but it is also a decline of one higher degree -- a grand super-cycle." The last grand super-cycle decline began in 1720. "During this sell-off there were three periods of four or more years of consecutive declines: 1737-1740, 1743-1747 and 1758-1762," he says. Elliott Wave degrees indicate the odds are "high" that investors will suffer a fourth year of declines in 2003. Fiat -- Sharefin, 07:59:57 01/20/03 Mon MOracles, Soothsayers and Fortune Tellers In an effort to bring certainty to our world and our financial markets, we rely on forecasts. We have weather forecasts, election year forecasts, financial forecasts, and even sports forecasts. The purpose of these forecasts is to lend a sense of assurance in a world that is unpredictable. It has been that way throughout human history. From emperors and kings to prime ministers and presidents, leaders and their followers have relied on forecasts to guide them in their decision-making. In the old days, we called them oracles, soothsayers, prophets, and seers. Today we have come to know them as weatherman, pollsters, economists, and analysts. Their job is to predict the future when the future itself is unknowable. They take uncertainty and by their forecasts make that uncertainty certain. ~~~ And What Does This Year Portend? The problem for the oracles and soothsayers this year is that the world and the financial markets have become more unpredictable. We have been in a recession and the current state of the economy is very delicate. For the first time in nearly half a century, the world economies are experiencing a synchronized slowdown and recession. The financial markets have witnessed three back-to-back years of double-digit losses, something we haven't seen since the years of the Great Depression and early 70's. The world is also more unstable today because of threats of terror and war. Rogue states are acquiring weapons of mass destruction, terrorist groups are multiplying, genocide is on the rise, and religious and revolutionary wars are breaking out around the globe. The era of peace and stability is over. We live in uncertain times. The forecaster's role will be difficult this year as it is compounded by geopolitical and economic problems. This has made forecasts more unreliable, raising questions over the forecaster's credibility. In response to inquiries, they haven't been able to read the entrails of economic data correctly. Their forecasts have been wrong for three consecutive years. Perhaps they haven't heard correctly from the gods? The second-half recovery in 2000 was postponed to 2001. Perhaps the correct interpretation was 2002 or will it be 2003 or 2004? Their problem is that the world and the financial markets haven't been following the script laid down at the beginning of the year. Instead of recovery, we got a recession. (The Bureau of Economic Research has yet to call off the recession.) Instead of rising corporate profits, we dealt with fictional earnings and scandals. In response, the markets didn't go up. They went down. Their forecasts of certainty have now been replaced with doubts, skepticism or ambivalence. So here we are again at that same time of the year when our dear oracles and soothsayers and market seers look deep into their crystal balls. We mere mortals wait with eager anticipation. Hopefully the oracles have read the various economic entrails and omens correctly and the years of famine are over. This year's forecasts look like more of the same. The message is that the famine is over and this year's financial harvest will produce a bumper crop for investors. Gold -- Sharefin, 05:57:28 01/20/03 Mon Gold's Rally Turns Mitsui Bear To Bull Gold's rally has turned renowned gold bear Mitsui Global Precious Metals analyst Andy Smith to a bull; now picks gold to trough at US$310/oz, peak at US$385, and average US$335 this year, after predicting in late November gold in 2003 would trade and average lower than in 2002 (in which actual range was US$277-US$355, average US$311). But slowdown in producers' de-hedging, lower physical demand could spoil party.  Gold -- Sharefin, 01:20:02 01/20/03 Mon Please note that the forum just rolled over. There's approx 20 new posts on the prior list so click here to see them. Nick Gold -- Sharefin, 01:07:12 01/20/03 Mon Gold Mines Exposed - as Gold Bull Market Enters Overdrive --WHY gold will go parabolic --HOW good gold news will be fatally bad news for many (most?) mines -- as the price rises. --"Hedges" is the wrong word. They aren't hedges! A pity. To clarify our position on hedging, we believe it's the right on any commodity producing company to set a price for their product in the future so as to be able to accurately project/budget future expenses against a known revenue. Our concern is not hedging. Our concern is the vehicles that are being used to hedge. And also the use of these instruments to bring on new production in a "negative market" for the commodity gold, which would otherwise have reversed its price negativity, i.e. a market price below total cost, then around $350. We experienced a 22 year bear market in gold prolonged artificially by the constant financially unnatural increase in production, not justified by natural market forces. It's a miracle the gold producers did not kill their own golden goose stone dead beyond revival. Now the gold producer's foolishness threatens gold's monetary application by artificially forcing gold too high in price, too early, before the fundamental equation is wholly behind it. Now that the ineptitude of the gold producing industry failed to kill gold on the down side, it seems they are about to try and kill gold by inadvertently forcing gold too high before its time. All the while the management of the gold producer sit in their ivory towers, smugly considering us alarmists. For over 40 years, We (separately or jointly) have analysed the price of gold more acutely than anyone in the exploration, development, advisory, media, mining field. But the leaders prefer to listen to only those who have sold them these instruments of financial incapacity. The instruments being used today are non transparent, unregulated, non market priced, private treaty unlisted arrangements. These instruments have no clearinghouse facility therefore they present significant counterparty risk. What a bill of good the gold banks have sold to the gold industry. It is in grave danger of significant financial problems as a result. It's so perverse these problems are brought on by the very bull market we have so long desired. The truth is out --- you read it first herewith and in HSL. HSL is the Free Gold Press leading edge. We are warriors in the war for sound money, transparency, governance and level playing fields; which is the stuff Free Markets are made of. Let's have a fast review before we reveal to you the shocking truth of greed gone wild in the gold cartel. Gold almost never leads a rise in the commodity market. Yet today it is. Gold is rising for other and sound reasons. Many key commodities (Soy, Wheat, and Sugar) are far below their cost of production and have been for the normal multi-year inventory takedown period. The equation that is the soundest fundamental reason for a gold bull market is a growing current account balance (overseas holders of US$'s) with a growing U.S. budget deficit plus a classic technical top in the USDX (index measuring $'s performance trade weighted) and a lower bond market. The Federal Reserve is in the tightest box since it was (illegally) founded in 1913. Its mission then and now is to prevent liquidity meltdowns. The Federal Reserve later this year will not lead interest rates higher, but only follow the market in catch-up action to the market reality of higher rates. If the Federal Reserve dared to lead interest rates higher in 2002, you would see NASDOG below 1000. That is being boxed in! US stocks show ongoing weakness, confirming a bear market. Notional Value of a derivative becomes Real Market Value at $354 gold as a product of risk control systems used by all gold banks and derivative traders. This is a key element of this analysis as the numbers you are about to see become real $ figures in the marketplace. Gold -- Sharefin, 00:44:16 01/20/03 Mon Gold glitters amid dismal markets Investors may be wondering if it's time to add some bullion to their portfolio - or whether it's too late. As with most matters pertaining to gold, the answer is: it depends, Last year was dismal for most investors and markets, with at least one notable exception -- gold. Bullion prices climbed by nearly 25 per cent in 2002 and have continued to hover close to six-year highs this month, propelled by a faltering U.S. dollar, skyrocketing oil prices and jitters over nuclear weapons in North Korea and a possible war in Iraq. Investors who bet on gold equities or precious metals mutual funds enjoyed Midas-like returns in 2002, with the top three such funds in Canada all posting one-year returns of greater than 100 per cent and the S&P/TSX gold index recording a one-year gain of 42.5 per cent. For 2003, most analysts have been forecasting average gold prices of $340 (U.S.) to $350 an ounce -- although those assumptions may move up, given rising Iraqi war fears that sent the benchmark New York Mercantile Exchange gold price as high as $359 this week. With those forecasts, and with the geopolitical picture looking anything but pretty, investors may be wondering if it's time to add a little glitter to their portfolio -- or whether it's too late. As with most matters pertaining to gold, the answer is -- it depends. Some analysts say the current bullion price is already built into gold equities. Others believe most of gold's recent gains can be chalked up to a so-called war premium, and that any cooling of tension between the United States and Iraq could see gold prices drop dramatically and lead to even steeper declines for gold equities. ~~~~ Mr. Zerb readily admits a collapse or even a correction in gold prices could turn his picks to duds. But he and many others say several factors are at working together to create a long-term bull market for gold. Those factors include a weakening greenback, war jitters, declining world gold production that is not expected to pick up until 2004 or 2005 when new projects come on line, low interest rates and less hedging by gold producers. Producers hedge, or use forward sales, to protect themselves against low or falling prices. Typically, producers borrow gold from a bullion bank, raise cash by selling it and reinvest the profits. Low interest rates and rising bullion prices made the strategy less profitable for gold companies. As well, investors last year flocked to non-hedged producers and shunned those with big hedge positions, such as Barrick Gold Corp., because they wanted full exposure to rising gold prices. Hedging has also come under attack from critics who allege that gold producers and banks have conspired to keep gold prices down. In December, Barrick and J.P. Morgan Chase were named as defendants in a $2-billion (U.S.) lawsuit that alleged they dumped gold on to the market to protect hedge positions. Barrick has dismissed the allegations as "ludicrous and totally without merit." As the conspiracy debate rages on, producers remain under pressure to reduce their hedge commitments, although some company executives and many analysts say hedging is a legitimate business strategy that is unlikely to disappear altogether. Gold watchers say hedging has fallen out of favour partly because investors are wary of complicated financial instruments in the wake of the Enron scandal. For gold stocks, this wariness has been amplified by the way hedging can obscure the impact of gold price changes on the bottom line. ~~~ When gold prices move by more than 10 per cent in a quarter, "it may be better owning bullion than the equities," wrote CIBC World Markets analyst Barry Cooper in a recent report. "In 1979, bullion outperformed gold equities by over 50 per cent, as the market did not reward the equities with the full movement of gold prices." Gold -- Sharefin, 00:37:41 01/20/03 Mon Party-spoiler or clever realist Major commodities analyst sees minor gold rally With gold's spot price near a six-year high, noted gold analyst Andy Smith on Friday released his annual price forecast for the rallying metal. Smith, quipping that author J.K. Rowling took longer to produce the fifth Harry Potter book than he had to issue a forecast, is bound to disappoint gold investors with his view. The Mitsui Global Precious Metals analyst calls for an average price of $335 an ounce for 2003. Spot gold's price Friday was flirting with six-year highs at $358 an ounce. The dollar was faltering, with the euro surpassing the $1.065 mark for the first time since October 1999. Smith, based in London, pegs the 2003 low for gold at $310 an ounce and the high at $385. This week, several London and New York bullion analysts issued optimistic forecasts for gold. UBS Warburg's John Reade called for an average $353 an ounce in 2003. Smith, in issuing his forecast, asserts that the mixture of war talk, fiscal turmoil in Latin America, reduced producer hedging of the metal and disenchanted stock-market investors have benefited gold to a great degree. The metal was up about $66 an ounce, or 24 percent, in 2002. Smith, for more than a decade until the September 2001 attacks on U.S. soil, was correctly negative on gold's prospects. He now says "the pace of gold-friendly political and economic shocks hitting the fan since 9/11 cannot possibly be sustained. Into the past 15 months has been crowbarred every kind of crisis experienced in the three previous decades." See: Gold's recent convert is no long-term bull. In Smith's view, the rush to gold has more resembled a trickle -- a blip on the screen of global capital flows. Smith points out that sales of American Eagle gold coins amounted to $140 million from September 2001 to November 2002, or less than the total takings of the movie "American Pie II." Smith maintains few new investors are buying actual bullion. "Between September 2001 and the end of November 2002, by far the biggest gold investors were miners themselves, closing or buying back their hedge positions," he says. The world's largest miners, among them Barrick Gold, Newmont Mining, Placer Dome and Anglogold, are reducing their forward-sales of the metal, a practice that for years weakened gold prices by contributing to bullion-bank leasing and selling of the metal. Charting gold investment from September 2001 through November 2002, Smith estimates hedge-book reduction by those four large miners contributed $4.9 billion of gold purchases. Yet a combination of gold Eagle purchases, inflows into U.S. mutual funds that invest in miners and New York futures speculators who were "long" the metal amounted to just $730 million. The practice of de-hedging, seen as a great boost to the stock prices of the world's largest miners, is no longer likely to impress investors, Smith says. "Shareholders may rightly perceive that much of the inflammatory derivative matter allegedly ticking in hedge books ... has been detoxed," he says in his report. In presenting his lengthy forecast on gold (and silver, platinum, palladium and rhodium), Smith gives marquee status to a technical analyst, Amanda Sells. Her view is more optimistic than his. Sells is an independent consultant to Mitsui Global. She sees "a dramatic change" in gold's long-term position. Sells says five years of resistance to the $320 level" is now busted. While the metal could suffer a setback (to $328 an ounce), Sells predicts "the break is a major one and augurs a significant shift and rise in the trading price of gold, with a move to and beyond the $403 target feasible." This week, another technical analyst, Jordan Kotick at JP Morgan, stated gold could approach $430 per ounce in coming years. See: JP Morgan technician sees $430 gold possible. Technicians are paid to create charts and ignore most of the "reasons" why a commodity or security is popular or unpopular. I asked Mitsui's Smith about the technical part of his yearly forecast. "On Amanda, it is deliberate that some creative tension be built into the report between Amanda's view and mine," Smith told me Friday morning. "Amanda does her own thing. Me mine. I finish my scribbles always before Amanda contributes. I don't have a model linking my approach and hers." Smith's 2002 gold-price forecast came close to pegging the high point for gold. He forecast a 2002 high of $355 an ounce, a level the metal reached Dec. 19. Soon after the Sept. 11, 2001, attacks, when gold flirted briefly with $300 an ounce, Smith placed a $340 price target on the metal. "Gold is clearly on death's door with the lack of interest, but these are not normal times," he said at the time. Smith's comments and published research, sent to Mitsui's institutional clients, turned heads in the gold trade. He had been mostly negative on gold's prospects for 14 years. See the story. Will this fresh forecast disappoint gold's long-suffering supporters? "I do not write to win popularity," Smith tells me. "Having written, though, and taken twice as many pages this year to explain a view as it did last year, a fair take would be that I am twice as confused, half as sure." Smith adds, "And - extrapolating this reasoning further -- the price movement may be less clear, too." ---- A far better analysis of Andy's comments than the rediculous commentary relased by Tim. Real reporting with no personal bias & no flowery lsd-like commentary spasms. The more one reads on the bias's of Tim's commentaries the more one should pull one's head in and start to think about the real drive behind the reporter. Definative bias that is anti-gold. 'nuff said...... Gold -- Sharefin, 00:29:36 01/20/03 Mon Gold price soars anew on war fears Futures rise US$7 an ounce on Iraqi warheads discovery The prospect of war in Iraq has pushed gold prices to six-year highs, but there are questions whether the price rally will survive a resolution to the crisis. Gold for February delivery rose US$7, or 2%, to $358.10 an ounce yesterday on the Comex division of the New York Mercantile Exchange. The spot price rose a more muted US$1.30, closing at US$352, its highest price since early 1997. Yesterday's rise was attributed to the discovery of empty chemical warheads in Iraq. But gold has been trending upwards since the beginning of December. During the past six weeks, gold prices have risen more than 12%. "Gold has been reinforced by the Iraqi tension, but definitely it is not the only reason for the move," said John Ing, president of Maison Placements Canada Ltd. Mr. Ing has predicted the price of gold will hit US$375 an ounce "when the first cruise missile is dropped on Iraq." But he believes there are two more important reasons for gold's latest rally. The U.S. dollar is falling, lowering its attractiveness to foreign investors. And recent buzz about gold has stirred interest in gold as an investment asset. Indeed, London-based Gold Fields Mineral Services Ltd. (GFMS) yesterday released a study that showed world demand for gold as an investment shot to 417 tonnes in 2002, more than double the 172 tonnes bought as an investment the year before. A weak global economy, weak equity markets and geopolitical uncertainty were factors that contributed to investor interest last year, GFMS said. "For the first time in years a virtuous circle may have developed with successive rises in the price creating fresh investor interest in gold," said Philip Klapwijk, managing director of Gold Fields. |
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