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Sterling silver jewellery problems -- Galearis, 11:53:45 09/05/02 Thu

Hello Mr. Laird,

It is a pleasure to email you - especially over such an important matter. I would like to add a comment or two to emails that were posted by Bill Murphy at his GATA web site on the on-going sterling silver fraud. I was the one who broke this story in late August at the Eagle Ranch web site forum. Two of the people I first informed about this were my brother, Ted Butler and Bill Murphy at GATA. You saw my initial post of this, I presume, on the GATA web site. There has been considerable ensuing discussion about this on Eagle Ranch forum and I would urge you to read them in the archives over the past week or so.

If you do so you will find that I have formerly contacted our (Canada) Competition Board for action in this matter. FYI I include an amended copy of the letter; [] signify additional material added:

********snip

To whom it may concern,

Recently, a major international fraud in sterling silver products has come to my attention.

This fraud extends throughout the United States, Canada and Europe. The nature of the fraud involves misrepresenting a marked sterling standard of 925 parts of silver to copper with wares that are only silver plated. The majority of this "sterling" ware was found to be fraudulent in that the bodies of the items (excluding clasps, in chains that have a small piece of spring steel present) were found to be somewhat magnetic. Sterling silver is NOT magnetic to any degree whatsoever. From the degree of magnetism one is to suspect that the main metal involved is nickel (possibly, but not probably cobalt). I first discovered the problem with a heavy "sterling" bracelet that I purchased in a jewellery store last January. Wear on this "925 sterling" bracelet revealed silver plate on a duller, very slightly more yellow silver coloured metal that was harder than silver. This visible evidence again revealed silver plating over another metal. Please note that I am also familiar with rhodium finishes used on some sterling jewellery.

I discovered this problem in August of this year while in northern Ontario doing field work [in botany]. Within the week I visited Timmins, Ontario and a local mall there. The mall had two jewellery stores and a W-M department store. One of the jewellery stores would be what one would call term 'high-end'. I checked their stock of men's necklaces and bracelets and found the majority of them to be magnetic. I should point out that these magnetic findings ALSO included the majority of large sterling chain merchandise in the W-M store.

When I arrived back home in southern Ontario, I checked the sterling bracelets and necklaces in a local town's only jewellery store. Again, the majority of the stock tested positive with the magnet.

As I am actively networked on a daily basis with numerous individuals that have varying degrees of expertise in precious metals (most of these individuals were U.S. citizens), I was able to elicit good responses and several took the time to visit local jewellery shops and/or test their personal jewellery in their respective areas. They in turn contacted others who undertook this simple survey. The results were the same as I found for those that did this in the United States and Europe and a few expanded their search to earrings etc. Problems were also found in this area as well, although the extent is unknown.

What is inferred by this 'spot testing' campaign is that at minimum it would be more difficult to find men's sterling chain jewellery that is not fraudulent in purity in every jewellery store, department store (including W-M) and mall kiosk in the United States and Canada than jewellery that is present that is real sterling product. The majority of this merchandise is apparently made by one manufacturer and imported. [I have since checked other outlets for sterling merchandise - even to the extent of visiting a yard sale, flea markets and collectible shows. In every case I found suspect magnetic jewellery that varied in frequency in each retail establishment from 20% to 80% of the sterling chains checked. The yard sale (and two booths at a flea market) revealed ALL items to be magnetic and consisted of "sterling charms" - with no indication of source of manufacture. All the chains were of newer manufacture, and yard sale charms were owned for three years.]

All suspect jewellery found with the exception of one reported to be from Singapore are marked 'Italy".

In every instance it is marked '925' and marketed with signs near or on the box as 'sterling silver'.

Anecdotal evidence would seem to indicate that this problem is growing. I say this because two years ago I bought a sterling chain marked 925 and "Italy" and it tested out to be real sterling silver. I have since found that these chains, identical in style and size can now be found to be magnetic.

This would indicate that old 'good' sterling has been sold off gradually and is now being replaced by fraudulent product.[It may also indicate that 'knock-off' wares may be the source of the problem.]

The reason I have been on the watch for this sort of thing is two-fold. I am a collector of sterling and have studied the supply fundamentals of silver mining and its role in the financial markets price 'fixing' for years. The official (visible) above ground supplies of silver are all but depleted world-wide and most assuredly there is an increasing problem for commercials to find their silver bullion raw material. That fraud would surface was almost guaranteed and I have been watching for it - as another sign of severe supply deficits. That this was going to happen as an 'end phase event' was, for me, predictable.

But this has nothing to do with your mandate in this problem; it just serves to give you some background in my motivations for reporting this to you.

You have a very great scandal on your hands that is going to provide considerable disruption to consumers and retailers alike.

Finally: I have found on the net a manufacturer of sterling chains that would appear to be a manufacturer of this jewellery style. I , of course, have no idea whether or not these designs are patented and unique only to this manufacturer, but at the very least it will provide pictures of product that is suspect - in style. Again, I am not accusing this company of wrongdoing. One of the style forms of these chains (for example) is called "flat marina". As a rule retailers are not aware of the manufacturer, only the distributor.
http://www.[deleted].com/

I close with my final point that you may or may not have gleaned from my words. This fraud is an international one that impacts very seriously on the whole retail jewellery industry. This is a systemic problem of grave proportions. I invite you to investigate this aggressively. It should not even involve that much field work by your staff. Simply send a staff member to a local jewellery store that sells mass merchandise in sterling silver jewellery wares.

Please respond to this email and verify that it has been read. If it is not against policy to do so, please keep me informed of your findings.

Best regards,

*****unsnip

Another comment posted in the Bill Murphy James Joyce issue states that nickel (which is, as you know, weakly magnetic) is also used to plate sterling. I submit, based on PERSONAL experience, that the plating material [on the items I have observed] is silver (is quite soft and is readily scraped off) and reveals a silvery duller metal underneath that most assuredly does not have the right hue AND is very much harder than any silver I have ever seen. Rhodium is, as you may also know, a silvery precious metal that is often used on sterling jewelry because it does not tarnish. The use of this metal is perfectly legitimate - although it has a very slightly different hue to it from silver also. Rhodium is not magnetic, of course. However, these magnetic items are NOT nickel plated real sterling, nor are they rhodium plated.

No, the fraud involves [silver] plating over another metal, most likely nickel, (steel in the smallest braided chains), and this fraud is very huge, indeed.

Note: when checking for magnetism please try to keep gravity out of the equation. Make sure the chains are vertical in orientation and free-hanging when one draws close the magnet.

The public reactions of those with an interest in the precious metals markets over this situation (and some of the minor information errors that are also being posted by others) would seem to require it given additional attention. I invite you to post this email, if you feel the importance warrants it.

Best regards,

Galearis


Gold -- Sharefin, 08:28:17 09/05/02 Thu

Gold investment less than hoped

Gold has received more attention as a safe-haven asset since the September 11 attacks in the US last year and after more than a year of financial market turbulence.

Yet the rise in investor interest in the metal has not been as overwhelming as some gold bulls had hoped.

Recent figures from AMG Data Services show a cumulative net inflow of $192m into gold and natural resource equity funds since the end of August 2001, exceeding the $107m invested in US Eagle coins in the past year.

However, Andy Smith, analyst at Mitsui in London, is dismissive of the fund flows. He concedes that the AMG figures do not include investments in gold shares by general equity funds. But seen in context, he argues, "they compare unfavourably with the takings of almost any popular film".

With $114.8m in box office takings, "Spiderman grossed [about] two-thirds as much in its first weekend of release as gold equity funds [attracted] in a year," said Mr Smith.

He pointed out that takings for Goldmember, less than a month after its release, were fast approaching the $192m mark. Adrienne Roberts


Gold -- Sharefin, 08:24:34 09/05/02 Thu

Canada Aug foreign reserves rise, gold sold

Sales of 88,181 ounces of gold settled in August, leaving
gold holdings on August 31 at 0.8 million ounces. The
government has a policy of gradually selling off its gold
reserves and replacing them with interest-bearing instruments.


Fiat -- Sharefin, 08:21:51 09/05/02 Thu

Dollar vulnerable as Iraq, economy jitters increase

The dollar slipped on Thursday, lifting the euro closer to parity and fuelling gains in the safe haven Swiss franc as investors grew nervous that a possible U.S. attack on Iraq could undermine the U.S. economy.

"The overriding theme is the nervousness towards the U.S. outlook and equities are compounding market fears. Uncertainties over a possible attack is making the dollar weaker,"

"Things are deteriorating everywhere and it's not a positive world. Currency markets are lagging nowadays and this suggests the market is lacking conviction as to where things are going"


Gold -- Sharefin, 08:19:50 09/05/02 Thu

Al Qaeda's Wealth Still Intact, Says Swiss Official

Most of al Qaeda's wealth has been converted into gold and diamonds and is now beyond the reach of banks, leaving the group with enough funds to stage more attacks, the Swiss attorney general said yesterday.

Attorney General Valentin Roschacher, overseeing his country's efforts to track al Qaeda assets, said European prosecutors believe the group had transferred most of its assets from cash to other valuables before the Sept. 11 attacks.

The Washington Post reported Tuesday that the al Qaeda network and Afghanistan's deposed Taliban militia sent several shipments of gold to Sudan in recent weeks. Sudanese officials denied the report, which said the gold was sent by boat from Pakistan to either Iran or the United Arab Emirates, and then by chartered airplanes to Khartoum.


test -- Galearis, 10:19:59 09/04/02 Wed

test


Gold -- Sharefin, 08:08:10 09/04/02 Wed

Past CEO Of World Gold Council Recruits Leading Journalist To Voice Her Displeasure.


“Hell hath no fury like a woman scorned”. It would appear that Ms Fukuda - pronounce it how you will - is less than happy about the way her term as CEO of the World Gold Council came to a rapid end when Chris Thompson took over as chairman. Indeed, she has used as her champion Christopher Fildes, a venerable and respected journalist specialising in banks and financial services, who has always had a warm spot for gold.

On her behalf Mr Fildes claimed last week in his column in the Spectator magazine that there had been ructions within the Council with the last chairman Bobby Godsell of AngloGold resigning on the eve of the Annual Meeting. This may be one interpretation of the fact that Bobby was simply too busy as chief executive of AngloGold to give the job the time it deserved, whereas Chris had just handed on the baton at Gold Fields and become non-executive chairman so had time, enthusiasm and energy. What is not in dispute is that a significant number of major gold producers were not happy with the lead being given by the WGC and hence a dissident group called the Gold Marketing Initiative had come into existence to push the idea that it, rather than the WGC, should be backed in putting new financial weight behind a marketing and promotional campaign for gold jewellery.

The steering committee of the Initiative was made up of representatives from AngloGold, Barrick Gold, , Sons of Gwalia, Gympie Gold, Kinross Gold and Randgold Resources. Quite a powerful little group and they had armed themselves with an independent report from the management consultants McKinseys suggesting that a contribution of US$4/oz from each gold producer would produce an annual marketing budget of US$160 to US$200 million which should be sufficient to add 340 to 500 additional tonnes of gold jewellery demand by 2006. This came at a deliberately embarrassing moment for the World Gold Council which had just come out with its “Glow With Gold” promotion and managed to persuade its members to double their contributions in 2001 to US$2 per ounce of gold produced to pay for a gold-re-branding exercise and a push on advertising.

Minews toddled along to interview Ms Fukuda about this campaign and was greeted by a monologue liberally interspersed with jargon from the worlds of advertising and rebranding. Questions were simply not answered and the only pauses were when the lady lit another long , slim cigarette. Even the revelation that Minesite owned the website Glowwithgold.com, as neither the WGC nor its promotional consultants had bothered to register it, brought no end to the torrent of words. Suffice to say that a lot of money was spent on the campaign and it is virtually impossible to quantify what impact it had on sales of gold and gold jewellery.

Anyway Ms Fukuda, through her doughty champion, reckons that the new regime at the World Gold Council has a plan “ which seems to be to move further away from customers.” The only translation of this is that she does not approve of her Glow With Gold campaign being wound down, nor with the fact that some of the ideas put forward by the Gold Marketing Initiative may now be taken up as Chris Thompson has already brokered a truce. It is certainly not fair to say that he and his new chief executive James Burton are not going to spend on promotion of gold and gold jewellery. In an interview with Minews last month Chris Thompson confirmed that they were committed. However they are going to give equal impetus to developing new instruments for investing in gold and in persuading the public and fund managers that gold in one form or another has a place in any diversified investment portfolio.

This was the trick Ms Fukuda missed, though to her credit she did appoint Dr Rob Weinberg to promote gold as an investment to fund managers. He identified two major problems which were ignorance about gold and the hassle involved in actually buying it and was making big inroads in solving these by running a series of seminars round the country which were well attended. He was also working on gold investment products, but had to contend with the archaic system of annual budgets at the WGC which has much in common with the civil service. This has now been changed to project budgeting so plans can be followed through , but the first product is still unlikely to appear before next year even with James Burton and Simon Village putting their shoulders to the wheel.

This is a pity as timing is everything in investment and the time for gold may well be now. As Christopher Fildes pointed out in the same article, an ounce of gold would have bought a cross section of the Dow Jones Index a hundred years ago. In the 1920s the price climbed to 18 ounces as equities came into vogue, but they then fell back to a value equal to only two ounces of gold in the Great Depression. Equities recovered in the 50s and 60s, but in the Bear Market of the 70s an ounce of gold once again bought a similar slice of the Index. In the mad dot com days of the 90s gold slid so far that it took 45 ounces to buy this same slice. It now costs 29 ounces, but history indicates that the game is far from over..

Pity Gordon Brown did not learn a bit of financial history at school before he sold our gold assets. As Christopher Fildes said in his article for the Daily Telegraph yesterday, the first thing he would do if appointed to the present vacancy for Deputy Governor at the Bank of England would be to buy it back. He then made a delightfully ambiguous reference to a previous holder of that post, also a journo, who had his moment of fame by having it away on the floor of the Parlour of the Bank of England Worth reading.


Gold -- Sharefin, 08:06:19 09/04/02 Wed

Japan, Australia Sales Unwind Gold's Gains

As well, sales could have emerged from those disappointed by gold's marginal
rise despite the beating on the U.S. equity markets, the U.S. dollar and the
weak economic data.

"The gold market's reaction to the worldwide stock plunge was disappointing to
say the least, and suggests that gold is still top heavy," says a Tokyo-based
trader of gold futures.

Resistance is still firm around US$315/oz, he said, while a European bank trader
noted that a German bank was said to be selling gold above that level.

Gold now needs other market factors to climb out of the US$308-US$315/oz range
it has been trading in the past few weeks, the European bank trader said.

"The longer it stays here, the more likely it will disappoint," he said.

With gold still range-bound despite the host of traditionally bullish factors,
trading interest is thin, the traders said.

But the Sydney-based trader said that should the U.S. equity market post another
big loss later, gold could rise.

JP Morgan, in its latest daily technical analysis report issued late Tuesday,
said gold's upside is limited.

This is because the daily technical charts still show it to be overbought, it
said.

However, the bullion's strong support at US$312/oz is a good sign.

"We are impressed by the way US$312/oz support has held, and look for the rally
from there to extend to US$314.80/oz and then US$318/oz before another attempt
to top out," the report said.


Gold -- Sharefin, 07:52:05 09/04/02 Wed

Randgold closes out 2004 gold hedges

UK-listed gold miner Randgold Resources said on Wednesday it had closed out 148,500 ounces of call options for 2004.

This was in line with Randgold's strategy of maintaining the fullest possible exposure to the gold price, Chief Executive Mark Bristow said.

"We're fundamentally not hedgers, other than in those cases where revenue streams need to be protected on capital projects or debt finance," he said.


Apotheosis of Gold, Silver… -- Wlavio, 07:52:04 09/04/02 Wed


Silver is a progressive option, but not at the present stage yet… If you have came across our prognosis of development of the price of gold, dollar and euro, we have a hint there that the game of gold will get over on silver and other metals. And be careful with bars! After inspections of their contents of carats and factual presence of gold in a bar. If this scandal will be extinguished, no one will know the price of gold for a long time. And this is why the shares will crash down, and not without the influence of two governments. Therefore it is possible to speculate with shares now, but for how long?


Gold -- Sharefin, 07:49:50 09/04/02 Wed

Gold posts modest gains

The price of gold rose $1 (U.S.) an ounce yesterday to $313.40, a modest rise given the weak U.S. dollar and the dismal stock markets around the world.

"We shouldn't be too greedy," said John Ing, the president of Maison Placements Canada Inc., a Toronto investment dealer. "The safe-haven aspect of gold is to keep its value."

Gold's ability to stay above $300 an ounce last month appears to have given investors renewed confidence in the shares of gold mining companies. The S&P/TSX Canadian gold index rose 3 per cent or 5.5 points yesterday to 190.22. The index is up 36 per cent since reaching a recent low in late July.

But for traders there are reasons for caution, some analysts say. There is not a whiff of inflation, and the economic weakness could hurt jewellery demand.

It is also unlikely that gold producers will continue to unwind their hedge positions as aggressively as they did during the first half of 2002, said Dennis Gartman, author The Gartman Letter in Suffolk, Va.

On the positive side for gold, governments will probably continue to print more money to help inflate the world's economies, and the U.S. dollar is likely to continue to weaken, said Martin Murenbeeld, the author of Gold Monitor, which is published by M. Murenbeeld & Associates Inc. of Victoria.

It is also logical to assume that there are growing political reasons for investors in some countries such as Saudi Arabia to sell U.S. dollars, Mr. Murenbeeld said. He speculates that this could lead to an interest in gold as an alternative currency for Islamic states.

Investors in the Far East and Middle East have been buying gold, and that should help it break through the level of $330 (U.S.) an ounce (gold closed at $327.80 in early June) and go significantly higher, Mr. Ing said.


Gold -- Sharefin, 01:24:45 09/04/02 Wed

Why the Gold Cartel Will Fail to Prevent a Primary Gold Bull Market

The Real WHY They Are Trying to Prevent it
by James Sinclair & Harry Schultz
September 3, 2002



JP Morgan/Chase appears to be the main member by accident or by intention of the Gold Dealers short seller's club.

JPM (NYSE Symbol for JP Morgan/Chase) has received, in our opinion, from Central Banks, lease agreements, whereby they are able to receive physical bullion from the central bank paying now 3/4 of 1% per annum. JPM and/or their clients are free to use or sell this gold in any manner they want. JPM themselves or on behalf of their clients appear to have used it to sell violently at key technical points. $312.50 to $314.80 (today) -$315 & $329.50-$330, thereby depressing the gold price.

Recently, Moody's Credit Rating Service downgraded JP Morgan/Chase's credit rating. Following that, Standard & Poor's Credit Service downgraded JP Morgan/Chase's credit standing based on specific derivative positions.

The actual figure of derivative positions on the book of JP Morgan/Chase can be found registered at the office of the Controller of the US Currency. The Controller of the US Currency reports to the IMF which shares its data with the BIS.

Therefore, the positions carried by JP Morgan/Chase is public, but the public has no real idea on how to find it (or what it means).

The total of all derivatives on the books of JP Morgan/Chase on all underlying assets is $24 Trillion US dollars. Yes, 24 Trillion.

The size of the Gold Derivatives on JP Morgan/Chase's books is $46,000,000,000 - $60,000,000,000, depending on valuation methods. Yes, $46 to $60 Billion.

All gold derivative dealers use "Risk Control Software" to manage their gold positions. This program maintains the risk of the gold derivative to the dealer according to the risk percentage that is decided upon by the trading management at the inception of the transactions.

All the gold derivatives on the books of JP Morgan/Chase are short spreads. That means short of gold. If they were not short spreads, then JP Morgan/Chase would be extraordinarily pleased by the rise in the gold price and publicly bullish in their reports (which they are not).

The size of the total international position of short spread gold derivatives is US Dollars $300,000,000,000 according to IMF and BIS reports. If you convert $300,000,000,000 into ounces of gold at the present gold price, it equates to 900,000,000 ounces.

As gold hit $305, it triggered the logic of the "Risk Control Programs" to buy gold to maintain the risk exposure of the gold derivative short spreads for the gold dealers cabal/cartel of which J.P. Morgan/Chase is, in our opinion, a major player, if not the main player. As gold, with the help of the cartel, dropped from the high $320s, "Risk Control Programs" triggered selling of gold for the same reason. At $302-$305 "Risk control Programs" returned to neutral. Now you can understand the action of the gold market clearly.

If Gold closes above $330, the "Risk Control Programs" will start to demand that for each ounce of gold sold short in the short gold spreads, the dealers must own long approximately .623 ounces of gold.

At a close at/or above $354, the gold dealers cabal/cartel's "Risk Control Programs" will call for approximately .986 ounces of gold long for each ounce short on the gold derivative short spreads.

.986 ounces is practically one to one - one ounce short to one ounce long required to maintain solvency by "Risk Control Programs" at $354 gold.

If you equate the demand to the number of ounces of gold that would be created by a close at or above $354 by the "Risk Control Program" used by all commercial banks, gold banks and gold dealers in the gold derivative business, the number comes out to slightly above 886,325,000 ounces of gold. That number exceeds all the gold that all the central banks on the planet have in their possession including all the gold they have leased and not accounted for. Therefore, at $354, gold will have to go ballistic in price &/or the greatest bankruptcy in history will occur for the gold derivative dealers.

It is not the gold derivative position that worries the major investment banks that are the parents of the subsidiaries which are the exposed gold dealers. It is not the $46 billion to $60 billion in gold derivatives on the books of JP Morgan/Chase that worries them. It is the effect of an explosion in the gold derivatives on the balance of the US Dollar 23.7 Trillion in other derivatives on the books of JP Morgan that worries JP Morgan/Chase, IMO.

This is why JP Morgan/Chase and their other gold dealer cartel members are stopping gold at $312.50 to $314.80 today (as this is written) with the help, IMO, of central banks.

Such a manipulation to prevent the gold market from rising above $354 will fail because history tells us that no manipulation ever attempted has stopped a primary, fundamentally-driven bull or bear market in anything.

The two greatest traders that ever lived, (both expired), Bertram J. Seligman and Jesse Livermore taught that a successful manipulation must always be in the direction that the market wants to take -- fundamentally and technically. Any other manipulation not only fails, a manipulation against the fundamental and technical desire of a market will also create a coiled market that goes further in the direction of its intention than it would have gone in the first place. Therefore, the result of the attempt by the gold cartel to hold the market down will be to propel it higher than it would have gone earlier.

To complicate the problem, most gold derivatives outstanding today are as follows:

Non-transparent.

Unregulated.

Unlisted.

Not clearinghouse funded.

Not market priced.

Generally non-transferable as many are specific performance contractual obligations.

Without standard so that closing can't be made at will.

Totally dependent on the balance sheet of the granting entity.

Granting gold bank entities generally non-guaranteed as to trade debt, subsidiaries of international investment and commercial banks holding companies.

Now totaling $300,000,000 notional value internationally.

Approximately 89% of these transaction have been done with entities that have nothing to do with the mining industry as counter party to the gold bank derivative dealer.

Therefore, the gold market has come under continued selling by those entities (gold banks/gold dealers) who will suffer the most, assuming -- and we do -- that gold is in a Primary Fundamental Gold Market based on the "5 Fundamental Reasons" that sustain such an event.

The 5 Keys to a Long Term Bull Market in Gold on www.financialsense.com

A. The US Current Account must be in a deficit position and growing. Yes, this is a present condition and shows no fundamental signs of reversing for a significant time. This is the account that measures the amount of US dollars in the hands of non-US entities. It is usually invested primarily in US Federal Debt instruments.

B. An intact negative trend in the US Dollar overall must exist. It should have the characteristics of a bear market. This is in fact true for the US Dollar today. We have a classic long-term top called a Head & Shoulders formation, which was subsequently confirmed by price and volume action. Even dollar bulls now are looking only for the dollar to stabilize at lower levels. This criterion is in place for a long-term bull market in gold.

C. The general commodity market is showing in many ways, both fundamentally and technically, that it is in a base formation from which one can expect higher prices. We shall discuss the technical characteristics further to sustain that this ingredient has begun to support gold long term.

D. Trust in paper assets must be waning for gold to assume an investment role internationally. We see the recent decision against Andersen, the comments on GE & IBM accounting practices and Enron as examples of causative items, which have turned investors away from the absolute belief, in existence from 1980 until now, that paper assets were storehouses of value. We believe this ingredient is in favor of gold's long-term bull market.

E. The momentum in the appreciation of the bond market must be decelerating. We see this ingredient as becoming positive now to a long-term bull market in gold.

These five items, as they gain in strength, will further accelerate the underpinnings of a long-term market in gold. It was the forming of these constituents of a long-term bull market in gold that has given rise to the move of gold from $260 to $330.

Therefore, the Gold Cartel is in Harm's Way. A bankruptcy of the derivative dealers who represent, in part, 72 Trillion Dollars of derivative positions (called by Buffett - "Sewage") of the highest mountain of debt ever created on Earth is the reason why gold could go to $1450 -- $1700. When gold reached $887.50 in March of 1980, $900 was the price that would have balanced the balance sheet of the USA defined as the comparison between Federal asset gold and external debt obligations. If a derivative failure was to happen in the next 5 years, it would -- depending on when it happened -- produce a number between $1450 and $1700 on gold to balance the balance sheet of the US as described above.


Go Top

© 2002 This is an HSL/FMU copyright article. Permission to reproduce is hereby granted, provided phrases are not quoted out of context and provided full by-line credit is given with web addresses: www.hsletter.com and www.tanrange.com
Both Mr. Schultz and Mr. Sinclair may be contacted through their websites.


ChartsRus -- Sharefin, 00:19:30 09/04/02 Wed

New precious metals charts compliments of The Perth Mint

Click here to see the bid/ask spread charts


Gold -- Sharefin, 18:23:28 09/03/02 Tue

Illegal imports ‘from India are paid back in gold’

Gold is a major item from Bangladesh to settle payments for illegal imports from India in a brisk cross-border trade that outplays formal trading, a study shows.


Gold -- Sharefin, 18:21:51 09/03/02 Tue

Solid gold?

WORRIED about stock market turmoil and the looming threat of war with Iraq? You could do as one investor did. He bought an £84,000 gold bar - and used it as a doorstop.

Coin and bullion dealer Lawrence Chard of Blackpool, Lancashire, explains: 'Part of the attraction of investing in gold is that you can have it physically there, sitting in the house. One client used a bar weighing nearly 28 pounds to stop a door slamming.'

Demand is booming for bullion, gold bars and coins because the precious yellow metal has always been seen as a safe investment in troubles times. Sales in the first half of this year were up by a third on the same period last year, according to the World Gold Council. 'Activity picked up the day after the September 11 attacks last year and it has been busy ever since,' Chard says.


Gold -- Sharefin, 18:13:14 09/03/02 Tue

Safe COMEX gold ends firm as U.S. markets clobbered

COMEX gold rose on Tuesday as investors ransacked the stock market upon returning from a three-day weekend, while a tumbling dollar made precious metals look cheaper for overseas investors looking for safe havens.

The Dow Jones industrial average started September by skidding more than 3 percent, following weakness overseas, where Tokyo's benchmark Nikkei index set the tone by falling to its lowest in more than 18 years.

The greenback dropped to a one-month low against the euro at $0.9973, raising the bullion purchasing power of European investors and fabricators. It fell to its cheapest in almost three weeks against the yen.

"Gold is a buck higher, driven by the buck itself, which is on the decline against both the euro and, more importantly, the yen as the U.S. returns from holiday and is smacked across the face by the reality emanating from the Japanese liquidity black hole," wrote analyst Greg Weldon, editor of the Morning Metal Monitor.

Washington's stance on "regime change" in Iraq has also buoyed the yellow metal, which is 13 percent higher than at the start of the year, making it one of the best performing assets.

A constant supportive theme for gold remains producer buy backs. Canadian mining company Placer Dome on Friday said it was reducing its hedge position by 20 percent.

A survey by JP Morgan Chase that gold miners worldwide reduced their hedges by 365 tonnes, or 11.7 million ounces, in the first six months of 2002.

This suggests that more producers are willing to live or die by the market price of gold.


Gold -- Sharefin, 18:11:11 09/03/02 Tue

Sudan denies receiving al Qaida gold

Sudan's
acting ambassador in Washington Tuesday strongly denied a report Tuesday that
Osama bin Laden's supporters had recently shipped substantial quantities of gold
to Sudan in a move to secure Khartoum as a financial center for his al Qaida
network. "This story is nonsense," the Deputy Chief of Mission for Sudan in
Washington, Abdulbagi Kabeir, told United Press International.


Gold -- Sharefin, 18:09:32 09/03/02 Tue

Illegal gold dealings could collapse market

What a bunch of hypocrites we have in Congress. They're going to get "tough" on the Enrons and WorldComs, but they won't do anything about illegal gold manipulation by four major bullion banks, the Fed and the Exchange Stabilization Fund.

As most investors know, gold is a barometer of an economy's health and an inverse correlator to the stock market. A rising gold price is usually a signal to investors that all is not well in the economy and stock markets, and that it might be time to pull money out of the stock market.

So why intervene in gold to keep its price down? To mislead investors and make our stock market and economy appear healthier than it really is. This in turn would encourage both foreign and domestic investment in our stock markets and our dollar. With the dollar stronger in relation to all other currencies, Americans can buy more foreign-made imported goods. This is great for foreign countries that export to us, but hurts American businesses that export, because they can't compete. It has also lead to our biggest trade deficit in history and caused many American businesses to either shut down or move overseas. The price of gold is also tied to the price of oil. Our government and the Fed promise to keep gold down if the Arabs keep the price of oil down. If you see one rise or fall, it's almost inevitable the other will do the same.

All manipulation games eventually end, and when this one does, it will cause a massive rise in the price of gold and possible collapse in our financial system.

An organization by the name of the Gold Anti Trust Action Committee(GATA) has overwhelming evidence of illegal gold manipulation and its implications on our financial markets. Their website is www.gata.org


Gold -- Sharefin, 18:05:05 09/03/02 Tue

Losing battle for Normandy didn't stop AngloGold's organic growth


Gold -- Sharefin, 18:01:17 09/03/02 Tue

'Al-Qaeda moves gold out of Pak. to Sudan'

Al-Qaeda and Taliban financial officers have shipped large quantities of gold out of Pakistan to Sudan in recent weeks through the UAE and Iran, a report has said.

According to European, Pakistani and US investigators, several shipments of boxes of gold were taken by a small boat from the Pakistani port of Karachi to either Iran or Dubai and then flown by chartered airplanes to Khartoum.


Gold -- Sharefin, 17:58:53 09/03/02 Tue

India Gold - Imports seen falling in festival season

High prices and poor rural demand because of a drought are expected to cut India's gold imports over the next few months, traders said on Tuesday.

Imports by India, the world's top gold consumer, is likely to drop by 15 to 20 percent in the September-November festive season from about 125 tonnes in the previous year, they said.


PM's -- Wlavio, 01:05:46 09/03/02 Tue

Dear Sharefin,

These are really good articles, you post, although I am not fully agreed with the last one.
Gold will probably rest for a few days.
Talking about close perspectives- the breakthrough should break down around 9 o'clock today.
But far perspectives- it will not rise higher than 310 “by late-September or early-October” and will not clear any high hurdles this year any more.

The price of Silver is not looking better either- following the calculations of Russian mathematics- mostly bearish during 15 days. Slightly rising by the end of the day today.


Fiat vs Gold -- Sharefin, 21:10:59 09/02/02 Mon

Danger: Sink hole ahead

Individuals seen rejecting Wall Street, the Fed

The Main Street crowd, largely disgusted with the stock market and everything that corporate America represents, is near a turning point. As Elliott Wave theorist Robert Prechter Jr. points out in his new book, "Conquer the Crash," the leanings and opinions of ordinary folks set the directions for the stock market, not the other way around as most of us were taught in Economics 101.

Those leanings (Wall Street calls this investor and consumer sentiment) are bordering on lethal. "Not only is the market a ticking time bomb, but so is the global economy," says Jeff Morgan, whose main credentials are an e-mail account, a brain and the eyes to see what others can't. "I'm constantly amazed at how many people are in denial. And we sure don't need to dance with Iraq anytime soon. I don't want a self-fulfilling prophecy, but people had better get their finances in order real soon because the bottom is going to fall out just like a big sink hole."

As we enter the autumn season, America's love affair with stocks shows signs of ending -- after more than 20 years. The light bulbs are starting to burn bright as folks switch off their online brokerage accounts and switch on their common sense. Stock investors -- the ones who have lost half their savings these past 30 months -- are probing Bankrate.com and other services for the safest money-market and cash alternatives.

"Wall Street and the real estate gurus want us to believe that we can all grow cash on trees. I've been out of the market for 1 1/2 years -- never ever bought a tech stock and I'm an engineer. Got tons of cash. Accumulating gold. And waiting. Waiting for point where I can write down all a company's real assets, write down a company's book value, conservatively project earnings and expect a dividend rate of 5 percent. Waiting for property values to actually reflect people's true earnings, not their ability to borrow."

"It will probably be late-September or early-October before we see gold mount a real challenge of the $315 resistance level, and then take on the $325 to $330 hurdle,"


Fiat vs Gold -- Sharefin, 19:26:01 09/02/02 Mon

LaRouche - How To Stop The Chicken Hawks

LaRouche: Well this was a change. But, Roosevelt reversed it, not completely, but in large degree. He did it with, of course, the gold holiday. The British gold standard, which was the curse of the world up to that point, collapsed in '31. But Roosevelt responded with the Bank Holiday and the nationalization of the gold reserve, which became the basis, later, for the post-war Bretton Woods system, where the gold-exchange reserve rate became the margin to control of current account deficits. And that worked. That enabled us to have a fixed parity. We're going to have to go back to that again. But my calculations are, we're talking about $800 to $1,000 a troy ounce for reserve gold--or maybe more, today, in order to have a price which corresponds to the requirements of having a fixed exchange-rate system.

Rense: Okay, a couple of things. One, just as an aside, it amazes me how the mainstream media is so adept at referring to Greenspan (or, as some call him ÎRedspan') and the Fed as being a legitimate government agency...

LaRouche: Hahhh! ...

Rense: They continue to talk about it with that same sanctity that they use for government. And the people buy it. They think it's a federal government... and for me, that just amazes me when I hear that. But beyond that, what I want to ask you about is, how long can the outrageous manipulations, suppression of the price of gold, continue. How long can they play that game, because it ought to be up around 800 or 1,000 dollars, if all things were equal?

LaRouche: Well, what will happen is that you will have a collapse of the system, which could occur-- in the near future; one can't exactly say when, because there's a certain amount of free will and timing, certain maneuvers. But, in the near future, the system is ....

Rense: So this prediction of next Thursday is wrong. Is that what you're telling me?

LaRouche: Well, I don't know. Any date is a good one. But I wouldn't make a prediction. I would say that, in the immediate interval ahead, we're going into a tough time in September, more tough than what has been faced previously.

Rense: Really, all right. Well okay, how long can they keep playing with gold is the big question?

LaRouche: Well, the way they're able to play with gold is a by-product of their ability to control the system politically. When the system goes, then you will have two things. You will have a tendency to run into gold. You've got this thing, what is happening in Malaysia, for example, under Prime Minister Mahathir bin Muhammed, where they're using a gold-denominated currency as a unit of account for trading. That's happening. So you're going to have-- a gold rush will explode as people run away from paper. In other words, actually owning old--owning it, not having a certificate that says you have a right to buy it (an option), but actually owning it, effectively possessing it, if you can hold it. And, probably government bonds, U.S. government bonds ...

Rense: No one here--excuse me Lyndon--no one here has been talking about that gold standard currency you just mentioned. I haven't heard that mentioned once.

LaRouche: Oh, this is very much talked about in all kinds of circles.

Rense: No, not -- It hasn't been on my desk...

LaRouche: You can imagine what's going on in the Arab world right now.

Rense: Oh yeah, well it goes back to, as you remember, it must be close to three, two years ago, now, when the Russians minted that gold coin and told their citizens to divest themselves: dump dollars and buy this gold coin. Now when that happened, I said Îsomething's moving, something's changing.'

LaRouche: Well (chuckles), there are different currents running in Russia. But, a lot of these things, as I say on the question you asked, the basic issue is that the gold, the ability to control, artificially keep the gold price down, will collapse at the point that it is perceived that the system is collapsing. Because people have no other place to run to, except the most secure kind of Treasury, that is, with government accountability, and gold.


Gold -- Sharefin, 11:10:07 09/02/02 Mon

Lease rates for gold are up


Gold -- Sharefin, 10:52:11 09/02/02 Mon

Commodities Heading Toward Biggest Rally Since 1983

Prices of commodities from crude oil to cocoa are having their strongest rally in 19 years in a jump that analysts and investors say shows few signs of ending as supplies tighten.

A three-month drought in the Midwest has dimmed prospects for U.S. crops and sent corn and soybean prices up by almost a third this year. Crude oil is up 46 percent on concern the U.S. will attack Iraq, disrupting Middle East exports. Gold, which languished for years, is up 13 percent as investors sought refuge from tumbling stocks.

Placer Dome Inc., the world's sixth-largest gold producer, plans to reduce by 20 percent the amount of gold it sells before it's mined, a strategy gold companies use to lock in prices. The practice, used to help companies avoid price declines, also keeps them from benefiting from rallies.

Gold will probably rise further this year ``as we go into the holiday seasons in the West and the marriage season in India,'' Wayne Murdy, chairman and chief executive of Newmont Mining Corp., said on Bloomberg TV. Newmont is the world's largest gold producer.


Gold -- Sharefin, 10:49:15 09/02/02 Mon

More comments following on from earlier post:
-----------------------
The aspects I raised in my comments are backed by facts & I don't see why you caste them aside so callously instead of looking into what you disagree with and raising rational points of discussion. Perchance you are employed to paint a rosy picture or is it that you don?t understand the supply/demand aspects of the gold markets.


To whit:
These are facts from the OCC website.
JP Morgan are currently holding gold derivatives with a notional value of $46.04 billion
Their total derivative positions are $23.2 trillion.

JP Morgan currently controls 63% of all the gold derivatives in all American banks.

In 1995 Q1 total US gold derivatives were 34 billion and then they tripled to 99.5 billion in 2000 Q1. Currently they are at 73.5 billion.

These are facts available for all to understand re the growth of gold derivatives.
And kindly supplied by the US Government.

No conspiracy here ? just exponential growth of paper derivatives.

Now to some supply & production numbers.
From 1988 through to 2000 gold production from mine supply has totaled 29,856 tons
From 1988 through to 2000 gold demand has totaled 45,884 tons.

The rate of production to demand is approx 65% with the other 35% or 15,763 tons having been sourced from Central Bank sales, old gold scrap, net hedging or disinvestment.
These are the facts sourced from GMFS data.

Since 1950 gold production from mine supply has totaled 77,676 tons.
If this represents 65% of demand then demand would have been approx 119,500 tons which means that approx 42,000 tons has come been sourced from Central Bank sales, old gold scrap, net hedging or disinvestment.

In 1950 mine production was 827 tons (actual)
In 1960 mine production was 1067 tons (actual)
In 1970 mine production was 1478 tons (actual)
In 1980 mine production was 1219 tons (actual)
In 1990 mine production was 2133 tons (actual)
In 2000 mine production was 2573 tons (actual)

So from the above numbers you can see that production has been expanding through the years.
And hence demand which is mine supply plus approx 35% has been expanding at the same rate of growth.

Using the 65/35 production/stockpiles numbers one can presume that demand was approx:
1272 tons in 1950
1641 tons in 1960
2274 tons in 1970
1875 tons in 1980
3096 tons in 1990 (actual)
3946 tons in 2000 (actual)

Unfortunately I don?t have the statistical data for demand prior to 1988.

Now the stockpile or dishoarding numbers (approx 35%) are:
445 tons in 1950
574 tons in 1960
796 tons in 1970
656 tons in 1980
969 tons in 1990 (actual)
1373 tons in 2000 (actual)

So here it?s quite apparent that demands on the Central Banks, old gold scrap, net hedging or disinvestments is in an accelerating trend.
Now we all know that many Central banks over the last few years have either sold their reserves or leased them to the gold pool to help shore up this ever increasing shortfall number.

Just the other day you posted commentary on the Reserve Bank of Australia which were proud to announce that they received $22 million in return on their $1,500 million in gold which at 1.2 percentage returns is self admission that their total gold pool is out & leased into the markets.

Back in 1996 the Reserve Bank of Australia held 250 odd tons ? now they hold near to none.

Many other Central Banks across the globe have followed the same pattern surrendering their gold reserves to either the US or to London.

The IMF have even rebuked some Central Banks for still holding the physical gold leased out as assets on their books when it really isn?t.
----
So we have now pieced together the facts that gold derivatives within JP Morgan have grossly swollen these last five years and that JP Morgan is a dominant player to the extent that they dwarf all others.

That the gold deficit has been a heavy drain on above ground stocks these last 50 years and is exponentially increasing in an environment where production has topped out and appears to be falling.

That the central banks have already dishoarded much of their hoards and have no reached a point in time where they are unwilling to add more. Many of them have already divested all that they can and cannot contribute any more into a situation where more is needed.
----

Where in the above reasoning backed by facts is any conspiracy?
Cannot you understand what is happening in these markets and is occurring right under your very nose?

You as an investigative reporter should be looking more into the anomalies of the gold markets rather than just printing what you are told to do.

As many have complained ?The Mining Web? does seem to have a biased & jaundiced view of late.

I challenge you to take up my call to find out exactly how much physical is actually changing hands in this supposed closing out of hedges. How much of that 365 tons this last six months has actually been physical being shifted from miner to Bullion Bank to Central Bank & thus closing out the positions.
To find out where mere fiat is changing hands and only one side of the position has been removed, or where physical is actually being closed out & returned to the Central Banks from whom this leasing first came.
I would think that you would be shocked in your naivety.

You can easily fob me off with comments of conspiracy and unwittingly refusing to enter into conversation about these numbers & the state of the gold supply/demand situation but that only shows your ignorance or unwillingness to find out the truth. The truth of the problems are held within the understanding of the numbers above.

Like with the way the sharemarkets & the easy money that they stood for became a bubble that burst so to has the gold market become a bubble and is now seeking to unwind the paper promises that cannot be forfilled.

Many believed that they would get 20% a year and retire rich but the reality is far from the truth.

Gold has been papered over so much in the last five years that it?s going to take far higher prices to squeeze the excesses out.

Like I said earlier there?s enough momentum & disequilibrium already inherent within the gold markets to force the price well higher. The added stimuli of financial meltdowns will only be adding fuel to the fire.

In all the above there?s three basic facts which cannot be refuted.
1/ Paper derivative have exploded these last few years.
2/ The gold supply/demand equation has built up a serious deficit position.
3/ That Central Banks have basically run out of stocks to dishoard.

Show me the conspiracy here or go & do your own homework.
The facts are plain & clear & to dispute them suggests of agenda.

I would hazard a guess that when all the numbers come out & that when the players come clean, the truth will be revealed about demand this last decade.
The gold market has created a huge appetite which can only be fed through growing production rates.

And therein lies the crux of the problem.

As I said in my earlier post too much paper has been sold against the physical & only through far higher prices will this problem be alleviated.

JP Morgan & their derivatives book will only add fuel to the fire.
And your jaw & credibility will drop when the price of gold rises to alleviate this problem.

------
In relation to Producer Dehedging


Gold -- Sharefin, 07:46:49 09/02/02 Mon

Indonesia gives fatal reminder

Indonesia and Papua New Guinea continue to live up to their high risk status after three people were shot dead near the world's largest copper-gold mine in the Indonesian province of Papua (formerly Irian Jaya) at the weekend. Only days after the Porgera gold mine in PNG was disabled for a second time by ongoing vandalism and violence, Freeport-McMoRan Copper & Gold's massive Grasberg operations became the indirect target of about 15 guerillas who ambushed a convoy of minibuses carrying mainly Americans, including school kids.

Freeport forecasts operating cash flow of US$500 million and sales of 1.5 billion pounds of copper and 2.2 million ounces of gold in calendar 2002 from Grasberg, making it the second-largest copper producer and one of the biggest gold producers in the world. It hosts probably one of the biggest gold resources as well, a sometimes overlooked fact in gold equities markets.

Indonesian security troops were understood to have already killed one of the perpetrators of the school bus massacre - in itself a little unsettling.


Gold -- Sharefin, 07:43:12 09/02/02 Mon

Gold unfazed by U.S-Iraq tension, Indonesia attack


Periodic Ponzi Update PPU -- $hifty, 22:57:37 09/01/02 Sun

http://home.columbus.rr.com/rossl/gold.htm


Periodic Ponzi Update PPU

Nasdaq 1,314..85 + Dow 8,663.50 = 9,978.35 divide by 2 = 4,989.175 Ponzi

Down 137.615 from last week.

Thanks for the link RossL !

This should be an interesting week!

May the silver you buy be non-magnetic !

:-)

Go GATA

Go Gold

$hifty





Gold -- Sharefin, 22:44:08 09/01/02 Sun

Producer dehedging slows after banner half year

Global collaboration among JP Morgan's top analysts shows that gold producers lightened their hedge books by 365 tonnes, or 11.7 million ounces in the half year to end June; equivalent to a little under a fifth of all new gold extracted in the period. Total dehedging for this year could exceed 500 tonnes, or 16.1 million ounces, leaving roughly 2,520 tonnes (81.1moz) committed to hedging by the leading producers. Put options protect a further 2,480 tonnes (79.7moz).

------
Sharefin's Comments:
JP Morgan being the derivatives king have at last report (March 2002) $46.04 billion in gold derivatives which equates to 4,619 tons at $310.

I ask; when are they going to reduce their exposure???

Their total derivative exposure is $23,211 billion which equates to 2,328,929 tons of gold at $310.
I realise that the above is purely hypothetical but it does show the levels to which JP Morgan’s derivatives have ballooned. Pop that bubble and gold will be going up $100's of dollars daily.

One aspect that hasn't been discussed at all with all this dehedging is that most of the positions aren't being fully closed out.

The miners are closing out their positions with the bullion banks mainly with cash rather than physical leaving the bullion banks still holding the exposure between them and the central banks which needs to be covered in physical. Unless the Central Banks are willing to accept fiat in lieu of physical then the Bullion Banks are left holding positions that have the ability to burn them when the price rises.

All through the talk of miners covering hedges there has been a basic assumption that this is closing out the full position whereas it's only closing out one side of the position - the side between the miner & the Bullion Bank - the position between the Bullion Bank & the Central Bank still remains open.

When these hedges were first instigated the physical was passed from the Central Banks to the Bullion Banks and then onsold into the marketplace with the miners getting the cash from these sales to utilise with promises to return such borrowings with physical which the Bullion Banks could then return to the Central Banks to close out the full position. The Bullion banks retained the contango & the Central Banks received a pittance instead of nothing at all.

The original physical that was sold into the marketplace has been manufactured, marketed and disseminated out into society and is not available to be returned to cover the original hedges. Therefore new physical coming from production or existing physical stocks must be used to cover these initial hedges

We all know that the gold market supply/demand numbers are in serious deficit and have been for some time. Supply is approx 2,600 tons & demand is approx 4,000 tons with an approx 1,400 ton deficit. Without the Central Banks supplying into this deficit the price of gold would have risen long ago. Many Central Banks across the globe have already proffered what they are willing to fulfill this deficit and are now so stretched that they are unwilling to add more to their already extensive lease positions. Many Central Banks have leased on close to 100% of their holdings. Basically the Central Banks have come to the limit of their ability to lease out what little remains in their coffers.

So we have a tightness in the supply/demand picture with one of the relief values being screwed shut - the leasing from the Central Banks. So additional supply for the miners to cover their hedges with can’t be coming from here. Because we are already in a deficit the additional supply can’t be coming from the miners side because their production is already spoken for. If they are producing 2,600 tons then where will they get an additional 500 tons from and still meet their prior commitments.

So if the physical needed to completely close out the positions can’t come from the Central Banks & the miners, then the positions being closed out can only be one side of the contract - the one between the miners & the Bullion Banks. The positions between the Bullion Banks & the Central Banks still remains the same. And this leaves the Bullion Banks holding an increasing level of exposure.

As an example of reducing exposure one would expect the Bullion Banks to be reducing their exposure at the same rate as the miners if the positions were being fully closed out. With the miners reducing their positions 20% one would presume that the Bullion Banks would be reducing theirs at a similar rate.
That would mean that JP Morgan would need to reduce their positions by close to 925 tons.

I contend that the Bullion Banks are increasing their exposure whilst the miners are decreasing theirs and that the Central banks are basically getting little of their physical back in return.

Why amidst all the chatter on how well this dehedging is going hasn’t the above been discussed and verified? I would love to see The Mining Web do a survey on all this 500 tons that has been dehedged and to find out exactly what percentage of this has actually been fully covered i.e. in that the physical has been returned to the Central Bank and thereby fully closed out the initial position.

Why do the numbers from JP Morgan get touted as valuable information when they are less than half the story and come from a source that has vested interests in not letting the whole story be told?

Currently there is a rumour circulating the internet, that brokers who are on the inside, are discussing that JP Morgan’s gold derivatives are at risk of exploding if gold goes above $340. Looking at the overall gold markets and their being the “King Lynchpin” in the gold derivatives world this is not surprising at all and it appears that JP Morgan is another Enron waiting in hiding. They also have used paper subterfuge to create bogus positions channeling greater profits into the hands of a few.

To my mind the real story behind gold is that a massive amount of paper gold has been sold to create a global marketing machine that consumes far more than is available. Stocks have been drawn down to cover the shortfalls in supply for this ever growing demand and they have finally reached a level where little more is available to cover the shortfall. Due to the paper excesses & the drying up of needed supply, positions in paper delivery are being threatened and are being covered.

The real problem lies in that there is not enough physical available to cover the massive paper positions that have been created. The physical has been brought, & sold many times over and all that’s left is an inadequate supply & a hungry market that can only be satisfied with paper gold.

With declining production, increasing demand & the inability to supply the shortfall, all the ingredients necessary for a serious firming in the price of gold are in place. These factors alone are enough to send prices higher and start off the derivatives fire. Add in the major stimuli of uncertainty or meltdown of financial markets, war, terrorism et al and all the ingredients are set to propel gold much, much higher.
The ingredients are all set for a major bonfire.

Someone is likely to be left high, dry & burnt & it’s likely to be JP Morgan due to their being the number one Bullion Bank & paper gold marketer.

When JP Morgan’s gold position goes under there’s only one direction that gold’s price will go & that’s up as all the market players realise the ruse is up and that the free for all in paper gold at the expense of the Central Banks is all but over.

There is every likelihood that JP Morgan’s gold derivative book will deliver fatal blows to many companies & that many paper gold contracts will become worthless. Many miners, as well as Central Banks will miss out & end up in the same fire as JP Morgan.

There is also the probability that a fire in JP Morgan’s gold department will transfer across to their whole derivatives book & that will lead onto a global financial conflagration.

Already we are seeing the global currencies start to move in lockstep with gold’s price and there’s a noticeable seachange in the markets that has occurred and yet few can see the coming outcome.

If you are a believer in gold & it’s recently embarked upon bull run, then make sure you are holding more than just burnable paper positions. Some gold stocks may survive but many will not.

I believe that there is 100% chance that the price of physical will disassociate itself from paper promises of the same in the bull run ahead.


Gold -- Sharefin, 06:31:27 09/01/02 Sun

HOW TO IDENTIFY A GOOD BUY

Top 10 Criteria on Selecting Juniors


Gold -- Sharefin, 06:29:32 09/01/02 Sun

What is a Correct Hedge?

The Problem with Producers & Gold Derivatives


Gold -- Sharefin, 06:26:29 09/01/02 Sun

SPECIAL REPORT ON GOLD


Gold -- Sharefin, 06:19:38 09/01/02 Sun

A Review of Gold

Since mid-June, we have been in a reaction in the gold and silver price. Today, gold moved slightly above the $312 resistance level. The question in everyone's mind is "Are we out of this reactionary phase and in a new leg in the gold bull market?" Since, I know as a trader myself, you want clear and precise answers, allow me to respond:


Gold -- Sharefin, 06:18:07 09/01/02 Sun

Gold in Transition to Currency

Assuming that the dollar goes into free fall sometime in the next 21 months, an effective attempt to stave off further dollar decline would be to control the creation of money which without the Gold Cover Clause active is totally uncontrolled. The action, to expect, would be to reapply the Gold Cover Clause at say a 5% cover. That would mean that the US would have to have in the US Treasury gold whose value was equal to 5% of the total amount of paper currency outstanding (monetary aggregates) before it could expand them. If 5% gold cover of money outstanding did not steady the currency, then step to 6% or 7% or whatever was required to reverse the downtrend.

Gold can reenter the system because it is already there, but at 0%. The Gold Cover Clause is still law, but only adjusted to 0% sterility. The move to steady the equities markets was to require the CEOs to lay their personal freedom and total personal assets on the line of good auditing. In a similar sense of CONTROL, the Gold Cover Clause will be used to control the uncontrolled creation of paper money at the whim of quasi economic political elite.

Assuming, and I do, that the US dollar will go into free fall at some time in the next 21 months, the only method of stopping the problem will be to contain by law the amount of dollars outstanding. You reverse a situation of oversupply by limiting the supply. Dollar weakness stems from too many dollars outstanding (supply) and a loss of psychological (loss of demand) commitment to those dollars. Reapplication of the Gold Cover Clause will limit dollar supply and therefore resuscitate dollar psychology.


Gold -- Sharefin, 05:58:05 09/01/02 Sun

Analyst Sees Gold At $350 By Year-End

Analyst of precious metals with Japanese trading house sees "good chance" gold will rise to $350 by year-end due to host of bullion-friendly factors such as weaker equities, struggling USD, rising crude prices and possible U.S.-Iraqi war.


Gold -- Sharefin, 05:55:19 09/01/02 Sun

No fairy tale: Researchers spin straw into gold

The two University of Texas researchers have developed a way to draw gold from wheat, alfalfa, or - best of all - oats.

No spinning wheel required. In this day and age, a simple solvent will suffice to turn homely vegetation into a source of precious metals.

But if you're thinking of quitting the day job and buying an alfalfa farm, don't be too hasty. The quantities of gold at stake won't quickly cover the cost of a harvesting combine.

The yields, in fact, are microscopic. The gold appears as particles mere billionths of a meter wide.


Gold -- Sharefin, 05:52:21 09/01/02 Sun

Bye bye, bull - Gold funds regain their luster

The bulls went underground in the latest week, as the average stock mutual fund plunged nearly 4 percent and mining stocks soared.

Over the five days ended Thursday, diversified mutual funds investing in the U.S. stock market fell by 4.3 percent and sector funds by 4.7 percent. Equity funds investing overseas declined 2.6 percent.

Gold funds, by contrast, sparkled, flying 9.1 percent higher.


Gold -- Sharefin, 05:50:58 09/01/02 Sun

Gold issues, futures prices ease

Analyst: gold poised to move higher in long-term

Todd Hultman, president of Dailyfutures.com provided an upbeat picture on gold Friday. "Gold is emerging from the depths of a 22-year bear market and the worst is over."

He attributed the recent strength in gold prices to the consolidation that has taken place in the mining industry. "As this new industry learns to discipline its output, I expect prices to chop higher for several years taking prices to at least $400 per ounce," he said.

For now, though, "the gold market is suffering from investor disbelief, but the low interest rate environment and weak performance in the stock market will eventually cure this malaise," Hultman said.

~~~~~
Late Thursday, Placer Dome said it's cutting its level of committed ounces of gold, the amount yet unmined but sold forward at fixed prices, by 20 percent from the 8.5 million ounces it reported June 30.

"The flurry of activity after Placer Dome's hedging announcement seems unjustified considering that we think that most of the hedge-book reduction has already taken place," UBS Warburg's John Reade said in a report. However, "further evidence that producers are prepared to buy gold serves to reinforce the view that the metal will be supported by opportunistic producer buying."

Gold rallied overnight on the news, but barring Placer Dome's announcement, there is little moving the gold price at the moment "apart from the usual suspects of the U.S. dollar and equity markets," said Reade.


Gold -- Sharefin, 05:48:54 09/01/02 Sun

Hong Kong Hing Fung Group Enter Domestic Gold Market

Hing Fund Group, one of the biggest gold processing and sales enterprises in Hong Kong, announced its plan to enter into mainland market in Shanghai on August 26.

Chen Fazhu, chairman of Hing Fung Group told reporter, Hing Fung Group has sign cooperation agreement with Hualian Group, one of the biggest commercial group in China. It plans to open 100 gold and jewelry chain stores in China within 2 years and to open 300 subsidiaries in middle-small cities afterwards.

According to international experience, the reasonable gold store distribution should be one store for every 7000 persons.According to this, China's existing number of about 8000 goldstores is far from market need.

Chen Fazhu revealed, Hing Fung Group will focus on goldprocessing, wholesale, and retailing in China mainland, which isdifferent from its role in Hong Kong as a provider of raw material.


Fiat -- Sharefin, 05:45:57 09/01/02 Sun

A Bull Market in Hubris

Since Enron - the 'beginning of the end' in the eyes of the mainstream financial media - Congress, the president, analysts, newsletter editors, soccer moms, even dipsomaniacal soothsayers on the streets of Paris, have been largely focusing on - and blaming - CEOs and accounting fraud for market woes. But "the true commanding problem of the US economy and the stock market," suggests Dr. Kurt Richebacher, "is not the accounting fraud but an effectively miserable profit performance that aroused the fraud [in the first place]."

An incredulous DR reader wrote to us recently to ask: "Given the fact that the markets have plummeted... now that [even USAToday] is bearish... shouldn't the Daily Reckoning turn 'bullish'?" The question suggests that bullishness would now be the truly 'contrarian' position to take.

But the fact is, even after two years... we here at the Daily Reckoning HQ are inclined to believe that we haven't even begun to see the bearishness that is yet to come. All things get corrected, we're wont to say. Nature has a way of seeing to it.

As the Austrian economists - people like Dr.Richebacher and Sean Corrigan, our man-on-the-scene in London - are so fond of reminding us... following the '29 crash there was a 17-year bear market, followed by a 20-year bull market, followed by a 17-year bear market, followed by our most recent 18-year bull market. Dave Skarica, editor of a newsletter called Addicted to Profits, recently traced the cycles all the way back to 1815. With the exception of a few shorter cycles of 8 and 5 years for both bull and bear markets, the cycles generally last in the 17-20 year range.


ChartsRus -- Sharefin, 05:39:08 09/01/02 Sun

Charts updated

And the bull run continues.
Gold P&F

Global Gold Indices

Many other charts are pointing to gold picking up.


Gold -- Sharefin, 23:11:49 08/29/02 Thu

Asia Central Banks Will Up Gold Holdings As Economies Grow

Asian central banks will buy more gold as their economies expand post-Asian crisis and their foreign exchange reserves see a rapid buildup, an academic told OsterDowJones in an interview Wednesday.

Asian central banks' gold holdings in absolute amount will increase even as Asian central banks maintain a fixed percentage of gold in reserves, said Tan Khee Giap, an associate professor with Singapore's Nanyang Technological University, or NTU.

"Just the fact that the (reserve) base has gone up, even if they maintain the (gold) ratio, it would mean higher purchases of gold," Tan said.

"Should there be a shift in policy to say increase (gold) reserves because of uncertainties (in financial markets), of course the potential demand will be even higher," Tan said.

Tan heads the NTU's Central Banking Policies Research Unit and the ASEAN Economies Monitoring Unit.

Tan said he sees foreign exchange reserves of many of Asia's central banks to continue to build up quickly after the Asian crisis, and these countries will certainly buy more gold.


Gold -- Sharefin, 17:49:43 08/29/02 Thu

Shame on the Reserve Bank

The Federal Government's Reserve Bank of Australia (RBA), which turned its back on the Aussie gold industry five years ago, has boasted of double-digit earnings on its remnant gold reserves.
The nation's central bank currently holds about 80 tonnes of gold, after having dumped a whopping 167 tonnes onto the market in 1997, which sparked a gold price dive at the time. This act, together with other global factors, consigned the Aussie gold sector to the doldrums for years and was something it has only recently started to recover from. In addition, the RBA bullion sale clearly signalled the government's contempt for the precious metal in its monetary policy framework.

As at 30 June 2002 the RBA's holdings were valued at about A$1.5 billion, but what the bank was really proud of was that it realised total revenue of A$22 million from gold loans in 2001/02

--------
Hmmmmm, now how much have they leased out/onsold with promises of return......


Gold -- Sharefin, 17:33:38 08/29/02 Thu

Placer Dome reducing gold hedge position by 20%

Placer Dome Inc. announced today that it is reducing the level of its committed ounces by 20% from the 8.5 million ounces of gold reported as at June 30, 2002.

The recent volatility in the gold price has afforded Placer Dome the opportunity to reduce its call option commitments for the years 2003 and 2004 at an anticipated net cost of about $2/oz, or approximately $2 million. By December 31, 2002 Placer Dome expects its committed ounces to total 6.8 million at an expected realized gold price in excess of $400/oz. This level of committed ounces would represent less than 40% of Placer Dome's average expected production over the next five years, or 15% of currently published reserves. For 2003, Placer Dome expects to have in excess of 90% of its production uncommitted.

According to Placer Dome Executive Vice-President and CFO Rex McLennan: "Through our pro-active management we will continue to maintain the most effective forward sales program in the industry. We are positive in our outlook for gold and reducing our committed ounces will increase the already significant upside for our shareholders."

Placer Dome's forward sales program contributed $54 million to earnings in the first half of 2002 and as of June 30, 2002 had a positive mark-to- market value of $223 million.


Gold -- Sharefin, 17:26:47 08/29/02 Thu

Is gold safe-haven reputation secure after 9/11?

On Sept. 10, 2001, the price of gold was around $270 a Troy ounce, mired near 20-year lows and dismissed as a relic by many investors clinging to 1990s notions that portfolios should be stuffed with stocks.

Then suicide hijackers flew two fully fueled airliners into the World Trade Center and Wall Street awoke to a nightmarish new era of global risk in which gold, with its age-old reputation as a store of value, looked like insurance.

As the Dow Jones industrial average plunged 1,400 points in the aftermath of the attacks, gold's knee-jerk spike to $300 an ounce was the opening salvo from panicky individuals and fund managers.

The gold market, spread between bullion and equities, represents a tiny fraction of global financial markets. Nonetheless, it is viewed as a sanctuary for investors worldwide who favor hard assets in times of turmoil.

John Hathaway, equity fund manager at Tocqueville Asset Management, said at recent gold conference that if just 1/2 of 1 percent of the $35 trillion invested in global financial assets were diverted to gold, it would equal 3,500 tonnes of new physical demand.

That is almost 1,000 tonnes more than the world's gold mines produce annually and would likely propel gold prices sharply higher.


Gold -- Sharefin, 17:17:40 08/29/02 Thu

Japanese fears still key for gold

Japanese investors have begun flocking back to the sanctuary of gold as signals of a much-vaunted economic recovery continue to fade. But despite impressive demand figures for July, offtake by skittish investors has been insufficient to give bullion the impetus it needs to break out of its current low-teen trading range.
According to a note published earlier today by UBS Warburg gold analyst John Reade, Japanese gold imports in July came in at 6.7 tons, an increase of 50 percent on the previous month and more than double the figure of July last year. Year on year the figures are even more impressive, with imports of 60.5t more than three times higher than in the first seven months of 2001, notwithstanding the fact that appetite for bullion among Japanese investors has tailed off appreciably from its peak in the first quarter.


Gold -- Sharefin, 03:00:00 08/29/02 Thu

Gold shows designed to woo Main St.

Bullion industry pits 'us. vs. them' amid stock turmoil

The heirs apparent in a new age of hard assets and old-line companies are those gatherings devoted to precious metals and alternative investment strategies. Organizers say they expect standing-room-only turnouts for a number of gold-related conferences this autumn.
~~~~
Thompson, the embattled World Gold Council's chairman, and the trade group's new chief executive, former California Public Employees Retirement System head James Burton, are developing a security that -- if it clears numerous regulatory and market-making hurdles -- could act as a real-time proxy for gold.
~~~~
"More and more investors seem to be buying into the arguments that the markets are managed," says Day, reflecting growing reports that New York City banks are using derivatives to deflate gold prices. "Whereas two years ago, this was very much a fringe argument, it is now more widely acknowledged as a valid possibility."
~~~~
Sinclair, the grizzled head of Tan Range, says Joe Q. Public will sit up and take notice when gold prices make their next move higher. "I would tell Joe Public that if he sees gold close above $330 and then above $354, he should do everything to set his financial houses in order," Sinclair says. "It means there are serious problems on the horizon well beyond the decline in the stock market and gas costing more. Volatility in the equity markets means Stay Away."


Gold -- Sharefin, 02:43:02 08/29/02 Thu

Gold production drop unlikely - analyst

Investors in gold who are counting on a sharp fall in mined bullion supplies to raise prices may be disillusioned, metals analyst Kamal Naqvi said on Tuesday.

Several industry studies have forecast a substantial decline in gold mine production over the coming decade, fuelling hopes that prices would reach further heights after this year's rally, which was based on safe-haven investment.

But Naqvi, of Macquarie Research, said the profit margin for miners on gold was attractive enough compared with the margin on other metals to ensure that gold extraction would not drop drastically.


Gold -- Sharefin, 02:27:04 08/29/02 Thu

Gold shareholders win one, lose one

Two gold companies, but two vastly different results.

That was the story of Newcrest Mining and Sons of Gwalia yesterday, when the two companies revealed their results for the year to June 30.

While Sons of Gwalia's net profit before significant items of $69 million came in right on target, Newcrest surprised the market with a worse than expected net loss of $53 million.

Newcrest's result compared with a profit of $38.2 million in the previous year.

The bottom-line number was affected by a surprise $25 million provision for the restructure of currency hedging positions.


Fiat -- Sharefin, 02:24:35 08/29/02 Thu

WHY THE MARKETS CAN'T FIX THEMSELVES. - Busted by George Soros

The whole country is up in arms about corporate abuse and financial wrongdoing. Our outrage is coupled with amazement: How could it have happened? Yet we shouldn't be amazed. The excesses of the 1990s boom and the clamor for reform that has accompanied the current bust are in fact a recurring feature of financial markets. What is truly amazing is that after so many boom/bust cycles we still do not properly understand how financial markets operate.


Gold -- Sharefin, 23:58:08 08/28/02 Wed

Production theory load of bull

One of the widely-held beliefs of gold bulls is that a major decline in mine production this decade will eventually result in higher gold prices. But, according to a leading global gold analyst, the evidence may not support this view.

The popular gold bulls theory was predicated on a sound enough assertion. Depressed gold prices of the late 1990s/early 2000s led to a significant drop-off in gold exploration expenditure, and therefore new discoveries (future projects) were not being generated and mine output should deteriorate over the next 5-10 years.

-----
What a load of bunk!!!


Gold -- Sharefin, 23:47:22 08/28/02 Wed

Strife forces suspension of mining

In the aftermath of the recent national elections, continued unrest in the Southern Highlands of Papua New Guinea is threatening the future of the Porgera gold mine. Closure of the mine would be an absolute disaster, especially for stakeholder AurionGold and PNG's political risk profile.


Gold -- Sharefin, 19:54:12 08/26/02 Mon

For a world balanced between disaster and hope, gold's value is in the eye of the beholder

With the world economy closer to deflation than it has been in some time, what's a person to do? Buy gold of course.

Twisted logic, perhaps, but that's exactly what the good folks at the World Gold Council think Asia's central banks should do.

In a sense central banks that load up on gold, or sell it, are making a bet on global pessimism or optimism.

If monetary authorities think we are heading towards a repeat of the 1929 crash all over again, they will sell their dollars for gold. If they think the world's governments and central banks are capable of averting disaster, they will leave their reserves put.

There are exceptions: France and Italy, the third- and fourth-largest gold-holding nations, between them added almost 860 tons in the past five years. The People's Bank of China, according to reports, has boosted its gold reserves.

Of course, gold could turn out to be a winning investment. If the dollar plunged, say, because of attacks on the US, gold prices could rally. A war against Iraq could send precious metals higher. One cannot rule out more accounting scandals.

Many investors see great value in gold as a hedge against turmoil. Others even see it as a means of ending the dollar's supremacy as a global means of payment. Malaysia is leading a push among Islamic nations to use a "gold dinar" to pay for external trade, reducing reliance on the dollar. The new currency would be defined in terms of an equivalent value of gold.

Still, in a world economy that is neither booming nor unravelling at the seams, gold may not be the most obvious choice for investors.


Gold -- Sharefin, 21:02:01 08/25/02 Sun

Dubai Gold Market: 'City of Gold' retains its glitter

For ages Dubai has been known as the 'City of Gold', where people from all corners of the globe could buy a wide variety of jewellery with confidence and trust. Has this consumer confidence been shaken following reports that 56 retailers were fined for violating carat specifications?


Gold -- Sharefin, 20:59:15 08/25/02 Sun

For pessimists, gold hasn't lost its lustre

Investment experts used to recommend putting 5 to 10 per cent of your assets into gold stocks or precious metals funds.

The reasoning was simple: Gold moves in the opposite direction to stock markets and the U.S. dollar. It helps stabilize a portfolio and protect it against disasters.

But gold's role as disaster insurance came under question in the 1990s, when the price of bullion barely moved.

Market timers may want to stay out of gold. But it's a good time to invest if you're a pessimist by nature and you're looking for a store of value in uncertain times.

A fragile economy, weak earnings, sputtering stock market rally and a potential war in Iraq that may put pressure on the U.S. dollar - these are the unpredictable forces that could send gold prices flying again.


Platinum -- Sharefin, 20:29:00 08/25/02 Sun

Placer Dome dispels Impala bid rumour

Placer Dome Inc. yesterday dismissed a South African report suggesting the Vancouver-based miner could emerge as a bidder for Johannesburg-based Impala Platinum Holdings Ltd.

Impala, the world's second largest platinum producer, could be ripe for a takeover because its 46% shareholder, Gencor Ltd., wants to sell its stake.


Gold -- Sharefin, 20:25:58 08/25/02 Sun

Gold Fields and Goldcorp claim top honours

Of 82 public companies that have reported production so far, only a handful have managed to increase annualised production. Ounces produced for the 2002 and 2001 half years fell 8% to 26.2 million ounces, or 817 tonnes. Trailing twelve months production is relatively steady at 54.3 million ounces, a 1% decline on a year ago, but calendar 2002 is expected to show a net loss of between 2-4%. This was entirely expected, although the overall decline taking all sources into account is expected to be 1% or less. However, it is clear that 2001 was the peak year after a surge in production in the mid to late 90s.


Periodic Ponzi Update PPU -- $hifty, 20:23:25 08/25/02 Sun

http://home.columbus.rr.com/rossl/gold.htm

Periodic Ponzi Update PPU

Nasdaq 1380.62 + Dow 8872.96 = 10,253.58 divide by 2 = 5,126.79 Ponzi

Up 65.79 from last week.

This is the 5th consecutive week the Ponzi is up! 457.59 points total!
Its a LONG way back down to reality.
I think that started last Friday!

Thanks RossL for the link!

I like the new excavation on the chart Ross. I think it will soon be needed !

Go GATA
Go Gold

$hifty




Gold -- Sharefin, 20:10:43 08/25/02 Sun

Gold miners cut back hedge book

AMID falling mine output, Australia's gold miners have made a concerted effort to sustain bullion prices above the crucial $US300 an ounce barrier, closing out $1 billion in hedging contracts during the June quarter.

According to Australian Gold Council data released at the weekend, hedging by Australian gold miners fell by 1.75 million ounces to 22.6 million ounces in the quarter, a fall of nearly 8 per cent over the March period, representing the sixth consecutive quarterly reduction in hedging.

"Hedge reduction . . . has helped fuel investor interest in the gold industry and is tipped to continue on the back of industry consolidation and reduced exploration expenditure," she said.

According to Surbiton, several of Australia's biggest and longest running mines closed during the year, including Boddington in WA, while a number of older medium-size operations were also at the end of their life, including the Bounty mine near Kalgoorlie which closed last week after pouring 1.4 million ounces over 13 years.

Heightening fears that closed mines were not being replaced with sufficient new capacity to maintain gold exports in the longer term,


What da ‘Sisters’ say… -- SilverDragon, 09:13:28 08/24/02 Sat



Aden Sisters:
“…you'll want to be on board…

”http://www.gold-eagle.com/editorials_02/aden082602.html

SilverDragon


Gold -- Sharefin, 08:28:10 08/22/02 Thu

Gold reserves could finance catastrophe fund: Bundesbank

Bundesbank President Ernst Welteke suggested in a newspaper interview on Wednesday that parts of the central bank's gold reserves could be used in future to set up a fund to help victims of natural catastrophes.

At the same time, the German central bank chief said he approved of the government's proposals to postpone by one year some 6.9 billion euros (6.8 billion dollars) in planned tax cuts as a way of freeing up additional funding to cover the cost of the current flood catastrophe in Germany.

In an interview published in the local daily Frankfurter Neue Presse, Welteke noted it was too late for such a fund to be set up to help pay for the damage wreaked by the flooding in eastern Germany.

The Bundesbank law would have, to changed if the central bank's profits were not to be paid into the government budget.

"But in the long term hidden reserves from gold sales could be used to set up a fund where interest payments were made available to victims of natural catastrophes," Welteke said.

The Bundesbank has around 3,500 tonnes of gold with current value of around 40 billion euros.


Gold -- Sharefin, 08:23:32 08/22/02 Thu

Deutsche chief economist not for gold investment

Deutsche Bank chief economist Nobert Walter said on Thursday he would not recommend investing in gold despite uncertainties in stock markets, as there was no risk of global inflation next year.

"It's not a good time for gold," the visiting economist told a group of businessmen.

"Gold would be an easy bet if we would were moving towards the situation of inflation. Now and next year, there's no risk that the world is heading towards inflation."

Walter noted China and Japan were still in deflation, the U.S. inflation rate was less than one percent, and Europe's inflation rate was would fall below two percent.

On other hand, he said, central banks were likely to sell more of their bullion, which would outweigh a small group of Japanese accumulating gold because they lost confidence in the yen.

"I believe, for the next two years, those guys in the money market sitting with money market paper and bonds will have a decent return and sleep well."

"Others who believe stock markets have reached their perforated bottom, they may have more fun to think of re-investing their money in stocks," he said.


Gold -- Sharefin, 18:16:44 08/21/02 Wed

For the love of gold


Gold -- Sharefin, 18:13:18 08/21/02 Wed

Canadian company's gold mining plans divide Romanian town

Most others in Rosia Montana, a town earmarked by a Canadian company for Europe's biggest gold mining project, say they will be happy to take the money and run.

Gabriel Resources plans to relocate about 300 households as part of the US$420-million project aimed at extracting 300 tons of gold and 1,700 tons of silver over the next 15 years or so.


Gold -- Sharefin, 17:50:48 08/21/02 Wed

Political risk hammers gold operations

The issue of sovereign risk has raised its ugly head in Papua New Guinea again following recent election-fuelled violence. One of the mines to get caught up in the strife was the Porgera operation, which suffered power supply disruptions that halted production for more than a month.
Now unconfirmed reports of continued threats of damage to the electricity supply lines servicing Porgera as well as hostility towards the mine's workforce could force the owners to consider shutting down the strategically important asset. Strategically important to both the PNG Government and, particularly, to two joint venture partners in the operation, AurionGold and Placer Dome, which have 25 and 50 per cent holdings in the mine, respectively. It would be a devastating blow to all stakeholders, including local communities, and for the future of foreign investment in a country that seemed to be slowly shaking its tag as a basket case.


Gold -- Sharefin, 17:48:58 08/21/02 Wed

Asian Central Bankers Increase Their Gold Ratios

Asian central banks have traditionally held only 1 to 5 percent of their foreign exchange reserves in gold. European central banks hold about 30 to 40 percent and the U.S. more than 55 percent, DPA reported.
With so little yield now from U.S. treasury bills, it is time for Asian central bankers to increase their gold ratios.


Gold -- Sharefin, 17:46:09 08/21/02 Wed

Gold could soothe pension fund fears

Gold has a pivotal role to play in soothing the pension industry's painful experience with slumping stock markets, an investment specialist at the body promoting use of the precious metal has said.

Rob Weinberg, managing director of institutional investment at the industry-backed World Gold Council WGC.L , sees gold as the way forward for pension funds to protect their assets in uncertain times when even returns on bonds are not enough.

"The diversification that managers looked for from U.S. blue chips to emerging markets to bonds is not working anymore... Investors aren't getting the returns they expected," Weinberg told Reuters in an interview.

Gold, which was largely ignored by the investment community over the last 20 years as stock markets stormed ahead, is returning as an alternative asset class in troubled times.

Its attraction lies in its tendency to go up when stock markets and bonds fall and when the dollar slips up.

"Gold is a prime diversifier," Weinberg said.

By adding gold to a portfolio, managers could reduce the risk status of the entire fund or maintain the risk level of the fund while allowing some higher risk assets -- including stocks -- to be placed in the portfolio, Weinberg said.

The pensions industry, uncomfortable in dealing with an over-the-counter product which has to be stored safely, has until now largely steered clear of the gold market.

This reluctance has limited investment use of gold to hundreds of tonnes of the metal and this needed to become thousands of tonnes for pension funds to benefit from gold's advantages, Weinberg said.

Against this background, the WGC is playing up to the inherent conservatism of gold as an investment asset.

"We're not suggesting gold will double overnight but it won't plummet either," said Weinberg.


Gold -- Sharefin, 17:40:16 08/21/02 Wed

Germany rules out gold sale for flood relief

German Finance Minister Hans Eichel ruled out on Tuesday selling Bundesbank gold reserves to finance government help for victims of floods in the country.

"This would violate international agreements and moreover it would lead to a fall of gold prices which is not in the interests of the government," Eichel told reporters in Berlin.

Germany is facing a major financial burden due to devastating floods that hit its eastern region in the last week.

The Bundesbank has about 3,500 tonnes of gold worth about 39 billion euros and it is the world's second-largest official holder of bullion after the United States.

Bundesbank President Ernst Welteke said last month that it was considering selling some of its gold reserves under a new agreement between central banks on gold sales, once the current pact expired in 2004.

News that Germany was not considering selling its reserves was also supportive.


Gold -- Sharefin, 19:44:07 08/20/02 Tue

Gold Is Regaining Its Luster for Asian Central Banks

A weak U.S. economy and dollar has prompted Asian central banks and regulatory authorities to take a greater interest in gold, a Singapore seminar was told on Tuesday.

"Central bankers in Asia have become far more receptive to talking about gold than they were a couple of years ago," said Ralston Thiedeman, head of the Asia-Pacific and Indian subcontinent sector of the World Gold Council (WGC).

Interest in gold reserves has risen among central banks because of the uncertain environment created by the slowdown in the U.S. economy and the weakening U.S. dollar, volatile equity markets and geo- political instability, he noted.

The five-day seminar on the management of foreign exchange reserves is being attended by delegates from 29 central banks, government agencies or regulatory authorities from 13 Asian countries.

"Gold is back on their radar screens," Thiedeman said.

Asian central banks have traditionally held only 1 to 5 percent of their foreign exchange reserves in gold, he added. European central banks hold about 30 to 40 percent and the U.S. more than 55 percent, DPA reported.

"With so little yield now from U.S. treasury bills, I am asking whether it is time for Asian central bankers to increase their gold ratios," Thiedeman said.


Gold -- Sharefin, 19:36:03 08/20/02 Tue

Eichel rules out gold sales to finance flood relief

German Finance Minister Hans Eichel said on Tuesday he was ruling out any suggestion of selling Bundesbank gold reserves to help finance government efforts to help the victims of devastating floods.

Eichel also reiterated to journalists after a budget committee meeting in Berlin that Germany would fulfill the European Union budget deficit criteria despite the financial burdens from the worst-ever floods that hit have the eastern region in the last week.

"This would violate international agreements and moreover it would lead to a fall of gold prices which is not in the interests of the government," Eichel said.

The Bundesbank has about 3,500 tonnes of gold worth about 39 billion euros. The Bundesbank is the world's second-largest official holder of bullion after the United States.

Bundesbank President Ernst Welteke said last month the central bank was considering selling some of its gold reserves under a new central bank gold agreement once the current pact expired in 2004.


Repeal The "Patriot" Act! {Petition} -- auspec, 18:26:02 08/20/02 Tue

At first glance this petition might not seem to be related to GOLD, but guess what? It most certainly is:

Immediate and Total Repeal of the USA/Patriot ACT Petition http://www.petitiononline.com/sabene/petition.html


Fiat vs Gold -- Sharefin, 18:05:41 08/20/02 Tue

A COLOSSAL DECEPTION

A COLOSSAL DECEPTION
By Dr. Mark Faber

I have discussed elsewhere the role of propaganda in the manipulation of crowds and their beliefs. But I would like to discuss here what two dictators of the 20th century, Hitler and Mussolini, wrote about how to move masses. According to them, the masses had to be relentlessly bombarded with propaganda. With their primitive minds, the masses were far more likely to fall prey to a "big lie" than a "small lie." It was quite common for people to lie on a small scale, whereas the average person would shy away from big lies.

Therefore, the crowd would never even contemplate that anyone might be reckless enough to twist the truth to such an extreme degree. Even if the truth was uncovered later, doubts would remain.

Thus I am not surprised that while investors are increasingly questioning the integrity of corporate America and its cronies (the auditors, the investment banks, etc.), they have, so far, totally failed to question the integrity of the entire financial system that has been created by our governments and central banks! It puzzles me that people can believe that the private sector is lying, cheating, and cooking the books, and yet at the same time assume that the government is behaving ethically and responsibly, and not cooking its books and statistics!

In most countries the government makes up 20-30% of the economy. Therefore, it seems to me that investors are assuming that the 70-80% of the economy that is accounted for by the private sector is, to a larger or lesser extent, dishonest, but that the 20-30% of the economy that is in the hands of the government is clean and ethical. How could the colossal deception of investors in the late 1990s by corporate America, which continues to this very day, have been possible had it not been sanctioned or even encouraged by the government and its agencies?

Don't forget that the Nasdaq bubble of 1999/2000 was only made possible by the easy monetary policies of the U.S. Federal Reserve Board. And why has the U.S. administration now allocated additional funds in order to expand the number of SEC investigators, more than two years after the bear market began, when it did nothing to even question corporate governance in the late 1990s? It is evident that, in any country, the regulators, who seem to have failed so badly in the United States in the 1990s, are part of the administration. Clearly, we have to distrust the government, including the Fed and all other government agencies, the IMF, the World Bank, and so on, as much as the corporate sector, since large corporations have so much to do with who is elected and who gets what position within the administration.

Charles Allmon, the editor of the excellent New Issue Digest, recently commented on "The Great Accounting Charade," in which he takes corporate America and the government to task for not protecting individual investors. He writes: "Can anyone please tell me who today looks out for the individual investors? Who?? As this is written, it appears that the U.S.A. has the best government that money can buy. Money pours into Washington to keep the accounting charade flying intact."

This, incidentally, is particularly true of the Bush administration, whose vice president, Dick Cheney, was formerly in charge of Halliburton - a company that is now under a federal probe because of its aggressive accounting at the time when he was its CEO! In fact, my main concern today centers on the possibility of systematic risks that continue to be concealed by the administration. Witness people like Paul O'Neill, the Treasury secretary, trying to convince the public of the underlying strength and strong fundamentals of the U.S. economy. On June 16, 2002, he said that he didn't know why the markets are where they are today and that, "eventually it will go back up, perhaps sooner rather than later. There is an unbelievable movement in the market without what I believe to be substantive information."

O'Neill ought to be concerned about the continuous rapid credit expansion. In 2001, U.S. national income increased by $179 billion, non-financial credit by $1.1 trillion, and debts of the financial sector by US$916 billion. In other words, debts grew ten times faster than GDP. He might also want to take a look at the deterioration in the quality of credit. Ford's shareholder equity is down to $7.4 billion from $28 billion in 1999, while its debts are up to $165 billion. And while he's at it, he could look at the failure to correct the imbalances in the U.S. external accounts and the gargantuan derivatives exposure of financial institutions, where some accounting time bombs are certain to be set off sooner or later. If the auditors couldn't even identify some relatively unsophisticated accounting tricks, how can we possibly expect them to understand the complexity of proper accounting in the derivatives market?

It's obvious that the U.S. government, with its lackey the Fed, is desperately trying to keep the system from collapsing by printing money. Whereas GDP increased in 2001 by $179 billion, broad money supply soared by $883 billion. The Fed is also keeping short-term interest rates artificially low by subsidizing the housing market and consumption through government-sponsored enterprises such as Fannie Mae.

And there is a high probability that the "Plunge Protection Team" is intervening from time to time to support the stock market and depress the gold market. While the government is trumpeting that companies become more transparent, its own transparency and that of its agencies is rapidly heading for the twilight zone.

The problem with this present set of conditions is that it makes forecasting even more difficult. One is no longer dealing only with economics, the capitalist system, and the market mechanism, which - while not entirely predictable - are at least understandable. The current situation is one of continuous statistical revisions, hedonic adjustments, and repeated interventions in and whitewashing of the true problems of the international capital market and the global economy by governments around the world. But as Friedrich Hayek remarked, "The more the state plans, the more difficult planning becomes for the individual."

It is in this spirit that I want to warn our readers once again not to consider our forecasts as being engraved in stone. The markets are likely to become rather unpredictable in the short term and even more volatile than they have been in the past few years. Undoubtedly, the huge monetary injections by central banks around the world - not only in the United States but more recently in Japan - over the last 18 months, and which can be expected to continue ad infinitum given the central bankers' monetarist economic ideologies, will produce from time to time very sharp short-term stock market rallies, but in the long term we can expect more economic maladjustments. Therefore, economic hardship on an unprecedented scale will eventually follow in the Western industrialized countries.

My concerns for the long-term center on several issues that are likely to put additional pressure on U.S. equities or, at the very least, contain a sustainable secular advance. I am concerned about another deeper recession in the United States due to sluggish or declining consumption and housing activity, the health of the U.S. and international credit markets (Japan, Turkey, Brazil, Argentina, etc.), and the still high valuation of U.S. equities.

The first concern we must address is the continued rapid appreciation of house prices and the consumer's ability to continue to consume in the wake of the stock market having eroded at least some of his wealth. As Gary Shilling notes, the "conviction that money has no place else to go is a sure sign of a bubble in any investment." The only question is: what will trigger the downturn in housing? In my opinion, there are several factors that could act as a catalyst for the housing bubble to burst.

Affordability will inevitably become a problem at some point. Especially if housing prices continue to appreciate by around 10% per annum amidst weak nominal income gains. Rising interest rates could also be a factor. But the weakest links in the bull market for houses are the financial intermediaries, including banks, insurance companies, sub-prime lenders, the asset-backed securities market, and, especially, the government-sponsored enterprises such as Fannie Mae and Freddie Mac. If any of these markets or institutions should encounter any financial difficulties, housing credit could dry up and lead to a collapse in the property market. The U.S. housing market now depends more than ever before on a further expansion of the present credit bubble. The average down payment for a new homebuyer in 1999 was only 3%, compared to 10% a decade earlier.

Signs of the possibility of impending weaker housing activity are already evident from the recent poor performance of home improvement retailers such as Home Depot and Lowe's, as well as home builders such as Toll Brothers (TOL), Ryland Group (RYL), KB Home (KBH), and Lennar (LEN). Over the last two years, the S&P Homebuilding Index has outperformed the S&P 500 by such a wide margin that investors should become increasingly concerned about home builders. The present housing boom, which is financed by very "easy money," will certainly not last forever. Homebuilding has and will always remain a highly cyclical industry. Also, closely related to the health of the U.S. housing industry is the health of U.S. financial institutions. Again, the recent pronounced weakness in consumer finance companies, banks, and other financial stocks, which have also so far outperformed the S&P 500, is another warning flag.

I have been accused in the past of being too bearish. But compared to a Global Equity Strategy report, which I received from Dresdner Kleinwort Wasserstein, written by James Montier, I almost seem to be a moderate heretic. According to Montier, investors should "not be fooled by those pointing to bond equity earnings yield (BEER) charts, and shouting BUY! Such cheerleading strategists are committing financial idolatry. Absolute valuation is the only way to deal with these markets. If you want 7% total return then you shouldn't be buying the S&P 500 until 476 - 574 - 40 - 50% downside."

According to Montier, the expectation of a 7% total return from equities implies a P/E of 14 based on the assumption that the earnings yield is an approximation to total returns. The next problem, writes Montier, relates to earnings, which, according to Graham and Dodd's, should be looked at over five or 10 years.

If one examines the P/E of the S&P 500 based on the five and ten-year moving average of earnings, commonly called normalized earnings (which in my opinion are far more relevant than recently reported earnings, which are still doctored by the corporate sector and were artificially boosted by several unusual factors in the late 1990s), valuations remain very high by historical standards. Concerning the health of the financial system, I came across a comment by Len Williams about the hedging techniques of Barrick Gold. Len is the head of fixed-income and commodity research at Durlacher. His work highlights the risk inherent in the derivatives market.

According to Williams, trouble may arise in the gold market if gold prices rise to $400 and above. Such a rise could prove very bad for any big-name banks caught on the wrong side of this price move. He writes that the phenomenon revolves around a highly unusual form of gold derivatives, a market in which Citibank, Goldman Sachs, and JP Morgan are the major players. The particular form of derivative is a type of hedging pioneered by Barrick, one of the world's largest gold producers and a leader in innovative hedges.

Ordinarily, a hedge protects a producer or investor from the downside. Other things being equal, it does so by limiting their upside. Barrick, whose hedge book had assets of $5.5 billion at the end of 2001, however, has managed to construct a hedge that allows it considerable upside if gold rises. And one big bank could be caught very short. Apparently, Barrick has hedged part of its production through a spot deferred forward sale contract. Barrick makes a forward contract with a bank to deliver (unmined) gold at a certain price at a certain date. But what makes these contracts different, and also dangerous, for counter-parties is that Barrick has the right to defer the delivery of the gold for periods ranging from five to 10 years.

More recently, Barrick seems to have entered into contracts that allow it to defer delivery for 15 years. We don't know this for sure, but we do know that the total U.S. notional derivatives position of U.S. banks and trusts exceeds a staggering $44 trillion (GDP is $10.2 trillion) and that JP Morgan Chase controls over $26 trillion, or close to 60%, of that market with assets that only amount to 13% of total U.S. banking assets!

Somewhere, sometime, an accident in the financial system is bound to happen. It is unlikely that such huge positions can be constantly rebalanced without anyone taking a huge hit. Financial stocks have continued to outperform the S&P 500 this year. But given the rising risk of bad loans, losses on trading positions, and the exposure to derivatives, we reiterate our recommendation to sell the shares of banking and consumer finance companies.

Avoid financial stocks and housing companies. Both have continued to outperform the market so far in 2002. Any rally may prove to be sharp but short lived, as economic and financial fundamentals remain murky at best.

Sentiment towards stocks from a longer-term perspective remains too optimistic; cash positions today are nowhere near where they were at major market lows such as in 1974, 1982, and 1990; and insider selling remains at an uncomfortably high level.

The de-leveraging of the U.S. corporate sector has just begun. In the late 1990s, companies repurchased shares and issued bonds to finance these share repurchases. I envision an environment where, on each market rally, companies will issue shares in order to improve their leveraged balance sheets. Thus, the supply of equities will remain high at a time when the demand will likely be more moderate, as households still hold 57.1% of their assets in equities, which is just 0.6% below the all-time high of 57.8% in November 2000.

A sharp market rally aside in the near future, the very best we might expect from U.S. equities is a trading range for the S&P 500 from about 950 to 1,200. Moreover, if the dollar and bonds should experience a more pronounced bear market in the next 12 months - as we expect - then stocks will be pressured by reduced foreign buying and rising interest rates.


Regards,
Marc Faber


Gold -- Sharefin, 04:01:13 08/20/02 Tue