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Gold -- Sharefin, 09:00:57 02/04/03 Tue

Researcher nails gold-price forecast

James Turk uses monetary metric to forecast $434 gold

The longtime editor of New Hampshire-based Freemarket Gold & Money Report, Turk instead points to monetary metrics that compare the ascent of gold, or its decline in the 1990s, to government budget spending trends, gold-reserve assets at central banks and the supply of paper money flooding the globe.

On Tuesday, for instance, Russia, joining China and several other countries in a shift toward bullion-linked reserves, said its central bank will boost gold and foreign-currency holdings to $55 billion by year's end, a rise of 17 percent. Many countries in Asia that are running large trade surpluses with the United States, among them Taiwan, Japan and China, have less than 4 percent of their foreign reserves in gold, leaving plenty of room for future gold purchases.

Turk, in following his early January forecast that the gold price would surpass $370 an ounce in the coming weeks, on Tuesday told me he expects the metal's price to reach $434 an ounce by the end of February, less than four weeks' time.
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The researcher's forecasts are bold in their specific timing and price level. Turk's predictions depart from those found at investment banks in London and on Wall Street, where analysts are reluctant to forecast an average gold price higher than $360 an ounce or so for all of 2003. Turk is confident gold, logging inevitable gains as international investors flee the "dollar bubble," will reach $600 this summer and surpass $900 an ounce by February 2004.

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Fiat -- Sharefin, 08:38:41 02/04/03 Tue

THE WILD WORLD OF GOLDBUGS

What do you think of when you think of Goldbugs? Independent sorts, perhaps suspicious of big government? Maybe go it alone Texans? Or the gnomes of Zurich?

Well how about Central Bankers? Still calm enough for you, how about Louis Farrakhan and the Nation of Islam?

The world of goldbugs is a lot larger than generally portrayed. It is known in some circles that Federal Reserve chairman Alan Greenspan was once very close to Ayn Rand, the pro-free market author of The Fountainhead and Atlas Shrugged, and that at the time he did write some pro-gold tracts. Since becoming chairman of the Federal Reserve, he has certainly been quiet about gold. At least up until recently. This is how Greenspan started off a speech a few weeks back though:

“Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, had allowed a persistent overissuance of money. As recently as a decade ago, central bankers, having witnessed more than a half-century of chronic inflation, appeared to confirm that a fiat currency was inherently subject to excess.”

Has Greenspan found Goldbug religion again? Time will tell.

Many in the United States and Europe may not be aware but Muslims are also strong believers in gold. Here is how Cedric Muhammad of blackelectorate.com recently wrote about Louis Farrakhan and gold:

"In February of 1998, Minister Louis Farrakhan, carrying the mantle of his teacher, raised the idea and possibility of an Islamic gold standard--whereby all of the nations of the Islamic world would tie their currencies together in a monetary union establishing one currency backed by gold . . . Minister Farrakhan has been the most prominent and consistent advocate in the Muslim world for a return to a stable unit of account. The Minister has periodically, publicly and very beautifully articulated the benefits of a gold standard that would accrue to the entire world, through either the return to such by the United States of America or through the establishment of a gold-backed currency in the Muslim world. I have one videotape of a younger Minister Farrakhan doing so, relative to the United States Of America, in 1979!"

If this gold run continues for very long, it looks like the goldbug wagon will have a lot more passengers than any one expects and the fuller the wagon the higher the price. That’s basic supply and demand for Christians, Muslims and Central Bankers.

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Fiat -- Sharefin, 08:37:25 02/04/03 Tue

CRITICAL DISSENT: DOLLAR OVERHANG AND THE PROSPECTS FOR INFLATION

Second. Inflation sentiment is clearly biased towards deflation at present, as evidenced by the quote from Dr. Yardeni above. This is the factor that up to this point has changed the least. But our belief is that the fears of climbing inflation, once stoked, will not result in years of incubation that, say, took place in the 1960's . Too many people have very clear memories of the late 1970's- early 1980's. That period, in a sense, was an education period for individuals. It taught them what to do and what to buy when inflation strikes. What took them years to learn back then, they will be able to put into practice in just weeks this time around, once they believe inflation is a threat again.(We believe, for example, it is possible for gold to spike from its current level to $1000 per ounce in just weeks, once inflation fears take hold.)

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Fiat -- Sharefin, 08:34:40 02/04/03 Tue

Musings

The Austrian school of economics tells us that economic imbalances and distortions caused by excessive credit creation will be balanced by economic imbalances and distortions caused by credit contraction. The iron clad rule that growth caused by debt creation will be balanced by economic contraction caused by debt servicing is at the core of our economic situation in my humble opinion. We can continue the foolish process of creating more debt, or we can bite the bullet and begin to deal with the fundamental reality of excessive debt and its implications for our nation and world. Unfortunately, the current political and economic leadership is incapable of telling the people the truth, much less offering a coherent plan to deal with what's coming down the road. So be it. The storm is upon us; the ship is unprepared for it. It will not be pretty, but balance will be restored eventually. I'm just not sure if people understand what that simple sentence implies. People, as well as nations, reap what they sow. In economic terms, we have built a huge edifice based upon the ideals of economic growth fueled by debt and financial hocus pocus. That edifice is now sending chunks of itself crashing all around us with increasing frequency. In my opinion, the officially sanctioned doomer one that is, the entire debt based economy will come crashing down to earth. I take no pleasure in saying this. I fully understand the pain and anguish, the shattered hopes and dreams, this will cause. Still, I tell it like it is as one of my emailers so aptly put it. I call the chips, or in this case chunks, as I see them.

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Fiat -- Sharefin, 05:49:24 02/04/03 Tue



The Austrian school of economics tells us that economic imbalances and distortions caused by excessive credit creation will be balanced by economic imbalances and distortions caused by credit contraction. The iron clad rule that growth caused by debt creation will be balanced by economic contraction caused by debt servicing is at the core of our economic situation in my humble opinion. We can continue the foolish process of creating more debt, or we can bite the bullet and begin to deal with the fundamental reality of excessive debt and its implications for our nation and world. Unfortunately, the current political and economic leadership is incapable of telling the people the truth, much less offering a coherent plan to deal with what's coming down the road. So be it. The storm is upon us; the ship is unprepared for it. It will not be pretty, but balance will be restored eventually. I'm just not sure if people understand what that simple sentence implies. People, as well as nations, reap what they sow. In economic terms, we have built a huge edifice based upon the ideals of economic growth fueled by debt and financial hocus pocus. That edifice is now sending chunks of itself crashing all around us with increasing frequency. In my opinion, the officially sanctioned doomer one that is, the entire debt based economy will come crashing down to earth. I take no pleasure in saying this. I fully understand the pain and anguish, the shattered hopes and dreams, this will cause. Still, I tell it like it is as one of my emailers so aptly put it. I call the chips, or in this case chunks, as I see them.

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Gold -- Sharefin, 05:31:43 02/04/03 Tue

WHY PRECHTERIAN THEORY IS WRONG ON GOLD

The important point for gold in all this is whether Elliott Wave theory shows the 20 year bear market from 1980 to 2000 to be ended, or is gold's bear market merely correcting, and doomed to be resumed eventually finishing at a lower price down the road? If the last two years of price action has formed a solid impulsive wave up, then the bear market is over. If, however, the price action is forming a corrective wave up, then the bear market is to be resumed.

The foremost practitioner of Elliott Wave theory, Robert Prechter, has stated for the past two years now that gold is merely correcting. The wave pattern up throughout 2001 and 2002, he maintains, is not impulsive. It is a corrective wave only, and the 20 year bear market will continue on in the deflationary Kondratieff winter, with gold eventually selling for under $200.

I am not a card carrying expert in Elliott Wave theory, but I do understand its basics, having read most of Prechter's books and having charted countless wave patterns of the Dow, the S&P, the Dollar, Gold, and Silver, etc. in the markets for the past seven years. I have the utmost respect for Robert Prechter. His work over the past 25 years in formulating a cogent exposition of Elliott's theory of price movement is a masterpiece of clarity and understanding. He has integrated it all into the Kondratieff Cycle theory, and has added a vast array of prescient insights to further the body of knowledge that Elliott began. This has enlightened us all in many ways.

But that being said, the primary question is whether gold's bear market is over. The question is whether the wave pattern for 2001 and 2002 is impulsive or corrective. Is Mr. Prechter right, or has he perhaps succumbed to a flawed analysis of what is taking place today? I believe it is the latter, that he has made a wrong call on gold, and that the price action of the past two years is indeed impulsive.



If we consider the above price pattern as a double bottom, then impulse Wave (1) up begins in April of 2001 at $255 and takes us to about $290 during the month of May 2001. Correction Wave (2) then commences and takes prices down to $265 by July of 2001. From there, a subdivided impulse Wave (3) begins and takes prices to $330 in June of 2002. From there, correction Wave (4) commences and takes prices back to $298 in August of 2002. From there, impulse Wave (5) begins and takes prices to the $360-$370 range that we are now in.

This is as clear a 5-wave pattern as any chart technician could ever ask for. It is a perfect 5-minor waves up, which will form major Wave 1. The entirety of major Wave 1 is either ending now (and due for a correction), or it is still unfolding with its fifth segment perhaps due for some more upside movement, maybe even as high as the $400-$410 area before correcting down, and then heading up again for major waves 3, 4 and 5. This is James Sinclair's reading on it, and it makes for a powerfully bullish case in a technical sense.
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Gold's Bullish Fundamentals
This is why gold has such powerful potential at this juncture in history. Its fundamentals are incredibly bullish: 1) There is a deficit every year in production, so the supply and demand ratio is favorable. 2) The Fed has indicated that it will print up paper dollars and drop them out of airplanes if necessary to avoid deflation. 3) Our nation is running the largest trade deficit in history. 4) Congress has embarked upon massive deficit spending. 5) American citizens are in debt up to their eyebrows. 6) Many major banks are involved in highly dangerous derivative trades that could come unwound. 7) Terrorism grows with every year to wreak havoc in the minds of investors and create a world rife with insecurity. 8) Third-world countries are honoring their debts like Hollywood stars honor their marriages. 9) We are no longer a producer nation, but a mass of pampered consumers with a gang of counterfeiters leading us from Washington. 10) The dollar has entered a bear market that should extend for several years. The chain of bullish fundamentals acquires new ominous links with each passing month. It points to $500-$600 gold near-term, and quite possibly much higher long-term.

But still, there has always remained in the back of many investors minds who follow Elliott Wave analysis, a fear of the bearish scenario that deflation portends. With Prechterian newsletters shouting every week for the past two years that "Gold is topping," and maintaining that the upward waves of 2001 and 2002 are "clearly corrective," these investors have remained pulverized on the sidelines, and some of them even short in the market.

In my opinion, this is clearly wrong. The chart above (when combined with all the fundamentals of gold) strongly indicates that the upward waves of 2001 and 2002 are NOT corrective; they are impulsive. The bottom for gold is in. We have a bull market. It will be volatile and messy. It will involve corrections that drive us to despair. And it will climb an endless wall of worry. But we have the beginnings of a classic bull market.

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Gold -- Sharefin, 05:19:46 02/04/03 Tue

Blanchard Commentary

Not long ago, Gold Fields Mineral Services, Ltd. published its Gold Survey 2002--Update 2. The report began with the following: "Dehedging in 2002 added to demand for the third consecutive year with a record 352-tonne decline in net outstanding producer positions."

When producers de-hedge, or close out short positions, they add demand to the market, since they can close out their short positions only by delivering gold in repayment of the borrowed gold. In 2002, global de-hedging, or the net amount of short positions that were closed out by the world's gold producers, added 11.3 million ounces of gold demand. Obviously, in a market in which all of the major gold producing nations combined, on an annual basis, produce less than 65 million ounces, 11 million ounces is a big number.

Of that 11.3 million ounces, 5 million ounces represented short covering by Barrick that took place in only 6 months (from April through July, 2002). Even in normal circumstances, the size of Barrick's position would have been large enough to have a significant impact on price. That impact is magnified by the fact that "the gold market has suffered massive loss of liquidity, giving up roughly 60% of its trading volume over the past few years. This lowered liquidity has been reflected in more pronounced moves..." (Precious Metals Advisory, CPM Group, January 22, 2003).

However, what we have seen is just the beginning. The expected increase in investment demand that would produce a breakout in the price of gold is predicated both on the granting of the injunction against Barrick and J.P. Morgan and also on the idea that investors find very few attractive places to put their money.

+ The dollar has declined 9.2% since its February 2002 peak and many analysts still consider it to be overvalued, conscious of the fact that it is still 22.8% higher than its 1996 low and that, in this environment, money can be expected to flow out of U.S. dollar-denominated investments and into gold and other tangible assets. None of the analysts show much enthusiasm for the euro, pound sterling, yen or any other currency.

+ Interest rates are very low, but few analysts believe that we will see a major rally in rates over the next 12 months, giving little incentive to investors who would like to park their savings in money market funds.

+ The $7 trillion in losses that stock investors have suffered since 2000, along with the revelations of accounting, legal and ethical improprieties, have made shareholders deeply suspicious that the markets are rigged against them. Investors took more money out of stock mutual funds in 2002 than they moved into them, according to Lipper, the mutual fund analysis firm.

+ This has been the longest bear market since the 1940s and the equal of the 1973-74 cycle as the steepest of the post-WWII period. Threats of war, disappointing earnings and continued worries about the economy suggest that markets may get worse before they get better. Corporate earnings are deteriorating, economists are reducing their growth forecasts, a war with Iraq is on the horizon, and the bottom in the stock market may be quite a way off.

+ The outlook is bleak for most of the major industrial economies and for international financial markets.

+ All of this is being played out against a background of military and political uncertainty and the constant threat of terrorism in the United States and Europe.

During such times as these, Harry Markowitz, a Nobel Laureate in Economics and the "father of modern portfolio theory," said that the function of gold and other tangible assets was to serve as a Defensive Asset Class--one that consisted of assets whose appreciation could be expected to be proportionate to the depreciation in financial assets during periods of economic, financial, political and military turmoil. Based on increases in prices of tangible assets, and the renewal of investment demand for those assets, we appear to be at the very beginning of the stage of the economic cycle for which Dr. Markowitz prescribed gold and other tangible assets as the safe haven of choice for investors.

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Gold -- Sharefin, 22:51:22 02/03/03 Mon

Gold at 7-yr peak in Asia, platinum blasts higher

Gold vaulted to a seven-year high in Asian morning trade on Tuesday as speculators poured money into gold futures on the Tokyo Commodity Exchange ahead of a key speech by U.S. Secretary of State Colin Powell.

Platinum (XPT=) also surged, topping $700 an ounce to forge a new 23-year high as funds and speculators piled into TOCOM, encouraged by supply concerns and forecasts of increased fuel-cell demand.

Gold was bid as high as $374.25 an ounce -- a summit not scaled since December 1996 -- before easing back to $373.75/374.50 by 0200 GMT. That compared with a bid price of $371.10 last quoted in New York.

Koji Suzuki, a commodities analyst at Itochu Futures Corp, said Japanese investors were increasingly nervous at the prospect of a U.S.-led attack on Iraq.

"On top of that, the yen has softened on speculation over a new Bank of Japan governor," he said, referring to talk that a proponent of inflation targeting was likely to take charge of the central bank.
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On Monday, TOCOM logged its busiest day in its half-century history as speculators flocked to precious metals and energy contracts.

Open interest for TOCOM gold soared, jumping to 451,136 lots from 428,996 lots the day before. A lot is one kg.
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PLATINUM ON A ROLL

Speculative and fund buying on TOCOM pushed platinum as high as $705/710 an ounce by 0200 GMT, a level not seen since March 1980 when the white metal hit $1,047.50. It was last quoted in New York at $698/708.

Platinum was fetching $705/710 an ounce at 0200 GMT, up from $698/708 last quoted in New York.

Platinum, used mainly in automobile catalysts and in jewellery, has gained more than 17 percent this year, supported by increasing demand from the auto sector, a global supply deficit and fears of output disruptions in top producing countries.

Last week, the metal got a boost from a call by U.S. President George W. Bush for greater research into fuel-cell technology, which relies on platinum to create electricity without pollution.

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Fiat -- Sharefin, 21:40:00 02/03/03 Mon

Why the lousy market? It’s the Fed, stupid

Iraq is dominating and will dominate the headlines in the days ahead, but Iraq is not the real cause of our economic malaise.

As the Iraq battle looms, the battle of the stock-market bubble lingers. The policies of its founding father, Federal Reserve Chairman Alan Greenspan, continue to inflict widespread pain. But to judge by the headlines in the mainstream financial media, all our troubles fall at the doorstep of Saddam. While news of his "departure" cannot come soon enough, it's high time that Alan Greenspan's pivotal role in our problems made headlines as well.

For those readers new to the Contrarian Chronicles, I'd like to review my thoughts about our chief central banker. The bubble that was fomented under his watch during the 1990s precipitated the wild misallocation of capital and recklessness on the part of individuals who believed that Greenspan would save them. While this illusion held sway, people believed in flights of fancy like Internet stocks, stock splits, "beat the number," etc. The fervor of their belief was ultimately expressed in the Nasdaq reaching its 5,048.62 peak in March 2000.

The unwinding of that wild orgy is still our problem, exacerbated by a Fed and government still determined to fight off the "destructive side of capitalism." Capitalism is the best economic system around, but it does come with bad times that follow good times. Of course, those bad times help set the stage for the next round of good times. Trying to stop the destructive side of capitalism only leads to huge problems. In the 1990s, the Fed believed it was an omnipotent central planning agency, capable of steering us from good times to better times. Regrettably, lots of people checked their thinking caps and common sense at the door, as they willingly suspended disbelief. So, to that extent, they were not blameless.

The butcher of monetary policy
However, more should be expected of Fed officials. Sadly, Alan Greenspan refused to stand up like an adult and, in the words of one of his great predecessors, William McChesney Martin, "Take away the punch bowl." (Martin was Fed chairman from 1951 to 1970 -- the longest tenure ever in the post.) The excess capacity, reckless behavior and accumulation of debt spawned by a bubble that Greenspan fed are still the problems that plague us. Only time will cure those problems. Attempts by Fed heads such as Mr. More-Beer McTeer (aka Robert McTeer, president of the Dallas Federal Reserve Bank) to minimize them, by telling people to continue consuming, will only make the situation worse.

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Fiat -- Sharefin, 21:13:07 02/03/03 Mon

Joy Ride to Global Collapse

Here's a prediction for you. In the next two decades millions of Americans will begin a serious search for an alternative to the gasoline-powered automobile. It is not going to be a happy search. If you think trying to wean gun owners from their passion for firearms is a hornet's nest, try talking to the great majority of us about reining in our passion for the automobile. Lordy! And yet, most of us agree there is a problem, vaguely phrased as, "There are too many other people out there clogging up the highways and slowing me down." Otherwise our attitude is similar to the rabid firearms bumper sticker: "You'll get my car when you pry my cold, dead fingers from around the steering wheel."

No one is talking to us about giving up cars today - even though there is hard scientific evidence that the freewheeling automotive world we know today will have totally vanished within the lifetime of most of us now living. A few idealists are talking about maybe getting us to constrain our use a little bit. None of them are running for any position of political influence in this country. They would be lucky to get their family's vote. We don't want to hear it.

Auto mania is not confined to Americans. The love affair is international and now grows fastest in the nations of the Second and Third World. Humanity burns 70 million barrels of oil a day. At the present rate of increase, it is projected we'll be burning 100 million in 20 years. But we'll never get there. We are close to that peak of global production which was foreseen almost half a century ago by Dr. M. King Hubbert, the foremost petroleum geologist of his day. (See link at the end of this column.) The descent from that peak only takes a few decades. We know that petroleum is a finite resource. But even as gasoline prices begin to creep upward some time in the not-too-distant future we won't curtail our driving until real supply shortages absolutely force the issue.

Take a look at an ugly future scenario: The sudden, agonizing death of the private automobile is a wall that global society will hit full speed, pedal to the metal when a global petroleum crisis finally catches up with us. We will not accept any solutions that will soften the impact until the real shortage hits us at some time (early) in the next century. If we continue to fail to take any reasonable steps to prepare for it, and it comes upon us thus, the constriction of the petroleum base of our global economy is quite likely to begin a plunging, bucking, gasping downward spiral towards a deep and lasting depression-with-inflation that could virtually end modern times as we now know them.

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Gold -- Sharefin, 21:05:26 02/03/03 Mon

The Case for Gold - James Grant

The metal will do well in a time when inflation is heading up and short-term interest rates are negative. Don't be misled by those who say commodity prices will stay low.
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The paradox of gold is that it can be the finest speculation and the poorest investment. Though indestructible and lovely to behold, the barbarous relic earns no interest. And--what is much, much worse--it earns no interest on interest.

Gold was the right thing to bury in A.D. 680 and the wrong thing not to dig up and invest in Microsoft at a split-adjusted price of 18 cents a share in March 1986 A.D. (Today, 17 years later, the price is $51, a 283 bagger, as Peter Lynch might say.) Knowing when danger is advancing and receding is the rarest insight in investing, and it helps to explain the paucity of sextillion-dollar fortunes in The Forbes 400 list.

Now, walking out of the Fed into the bracing winter cold, one is faced with the question: Is risk advancing or receding?

I say it's advancing. Nominal interest rates are low, government bond buyers are complacent and central banks are easy. Much to the dismay of finance ministries in Japan and Europe, the dollar exchange rate is falling against the yen and the euro. This is not because the Fed is objectively tight. For the first time in a decade the "real" federal funds rate is negative (i.e., a 1.25% funds rate minus the 2.4% year-over-year gain in the December consumer price index is a negative 1.15%).

Ben S. Bernanke, one of Alan Greenspan's new hires at the Federal Reserve Board, reminded a Washington audience in November that the Fed has a marvelous invention for fighting deflation. This device is called a "printing press," said Bernanke, one of America's foremost monetary economists. With it the government can "produce as many U.S. dollars as it wishes, at essentially no cost."

On Jan. 9 an auction of ten-year Japanese government bonds was 18.6 times oversubscribed, although their coupon was only 0.9%. For perspective, Haruhiko Kuroda, one of the top contenders to take over the governorship of the Bank of Japan when the job becomes vacant in March, has pledged to print enough yen to push his nation's inflation rate to 3%. And nobody believes him.

I believe him, and I believe Bernanke. And I also believe that the First Eagle SoGen Gold Fund and the Tocqueville Gold Fund (to name only two of the better-performing gold mutual funds) will go on delivering a better return than the interest-bearing securities of the governments that run the printing presses.

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Gold -- Sharefin, 19:50:38 02/03/03 Mon

Silver versus Gold

Gold tends to out-perform silver during those periods when confidence in the US$ is falling and/or the US economy is weak. When the US$ is strengthening and/or the prospects for the US economy look bright, silver tends to out-perform gold. Also, once a trend in the silver/gold ratio has been established it tends to last for a decade.

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Gold -- Sharefin, 06:54:15 02/03/03 Mon

Gold fever thrives on uncertain times: Be wary

War. Crazed dictators. Smallpox. War with crazed dictators who may have smallpox. What more could a gold investor ask for?

Gold prices have soared to a five-year high above $365, propelled by fears of war with Iraq. But gold has been rising since mid-2001. Is this gold rally the real deal, or just war jitters?

Quite possibly, a mixture of both. Fear has accelerated the rise in gold prices recently. Basic supply and demand imbalances may push gold higher in the long term.

If you're thinking of gold-digging, wait until the Iraqi crisis plays out. If peace breaks out, you'll get the chance to buy at lower prices.

Gold is the currency of last resort. Investors buy gold when faith in the government falters. You can generally trade gold for food or shelter even when the government has collapsed.

Gold also rises when governments print too much money, and inflation rises. But inflation is deader than a dinosaur: The consumer-price index rose just 2.4 percent last year.

What is pushing up gold prices?

Let's start with the stock market. The Standard & Poor's 500-stock index has tumbled more than 40 percent since its March 2000 peak, and some investors don't trust paper profits anymore. "Gold is something you can hold in your hand and peg its value," says Gary Adkins, a gold dealer in Edina, Minn.

Then there's global unrest. Nothing makes investors quite as skittish as war, particularly when nuclear or biological weapons could be used. They buy gold as a hedge against disaster. Some estimates put gold's "war premium" at $24 to $30 an ounce.

If war no longer is a factor, that premium could vanish, and gold prices could fall. "Gold peaked the day the bombing started in the first Gulf War," says Mark Johnson, manager of USAA Precious Metals & Minerals fund.

The dollar's decline on foreign exchange markets helps gold, too. Priced in U.S. dollars, gold has become cheaper for foreign investors to buy.

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Gold -- Sharefin, 06:49:12 02/03/03 Mon

Output Drop, Less Hedging Good For Gold-Newmont

The gold price looks poised for steady gains over the next few years as mining companies reduce output, while stepping up efforts to pay down their hedge books, said Wayne Murdy, chief executive of Newmont Mining Corp. (NEM), the world's largest gold producer.

"Various reports are suggesting that mine production could fall between 2% and 4% annually over the next few years," Murdy told Dow Jones Newswires over the weekend.

Mining companies drastically scaled back their efforts to find new pockets of gold in the late 1990s as the price of bullion tumbled to less than $255 a troy ounce in 1999 from over $400/oz in 1996.

"I believe that the industry spent roughly $4 billion on exploration in 1996, but this amount fell to only $1 billion in 2000," Murdy said.

Because so many picks and shovels were idled in the late 1990s, the supplies now hitting the market are smaller.

"This situation cannot be turned around overnight," said Murdy, explaining that the duration from making a new discovery to actually bringing that metal onto the market can be as long as seven years.

Newmont is expected to have chiseled some 7.5 million ounces of gold out of its mines in 2002. Murdy said output in 2003 is expected to be slightly lower than the 2002 level due mainly to the selling off of some non-core operations.

Big Hedge Reversal
Another factor that has Murdy bullish on the gold price is the growing reluctance within the industry to hedge future production.

During the industry's lean years of the late 1990s, many mining companies locked in prices for huge chunks of their future production by selling forward contracts that obligated them to deliver gold at a set date in the future.

This hedging strategy protected the miners from a further drop in the gold price, but the downside has been that these companies are now unable to fully benefit from the recent surge in the gold price.

Last year Murdy orchestrated a $4 billion deal that allowed Newmont to acquire Australia's Normandy Mining and Canada's Franco-Nevada Mining, and in the process transform his company into the world's largest gold miner.

However, this transaction, which Institutional Investor magazine named its "Deal of the Year", left Newmont saddled with Normandy's bulging hedge book of some 10 million ounces - a somewhat ironic turn of events considering Newmont has always been known for its "zero hedging" policy.

Staying true to its reputation as a non-hedger, Newmont has been working hard to dispose of Normandy's hedge book.

"Our third quarter projections call for this hedge book to be reduced to 5.5 million ounces by the end of this year. We see this hedge book as a liability and I would like nothing better than to be completely done with it," Murdy said.

Newmont has no exact timeframe for completely eliminating this hedge book, but Murdy hopes to have it dow
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Looking ahead, Murdy is very bullish on gold prices. In addition to reduced production and smaller hedge books, he says the sluggish global economy, low interest rates, a weaker U.S. dollar and a possible war with Iraq all point to higher prices.

"My crystal ball is no better than anyone else's," said Murdy, declining to make any specific price predictions. "But the situation for gold over the next several years looks very positive."

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Gold -- Sharefin, 06:46:32 02/03/03 Mon

Why is the Gold price going up - vigorously - and what makes it do so? - pdf file

We were asked the question, " What makes the gold price rise?", and the answers are not difficult to detail, but we realised that we were being asked the wrong question. The wrong question because a list of factors would be like a pile of bricks. One can’t see what the house will look like, unless you see the Architect’s plan of the house, as well. Likewise, it is the interaction and impact of different factors, as well as the timing and the proportion, relative to the rest of the factors, that will decide the shape of the bull market, the price levels achievable as well as the extent of the bull market, and gold’s future.
Most readers have been taught that gold is a commodity, a relic of simple brutish days when, man was too backward to develop a sophisticated monetary system, such as the one we have today. Simply put gold id thought of as a "Barbarous Relic"!
We can only warn those who think that way, to walk carefully, because they don’t understand the road they’re on.
First we will describe the bricks of the gold world, which have contributed to this recent price rise. Later, we will describe these, we hope, in a way that will bring perspective to you and an inkling of where the price is headed.

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Gold -- Sharefin, 06:43:15 02/03/03 Mon

Monthly Mutual Funds: Going For The Gold: Precious-Metal Funds Glow Amid Continued Anxieties; Wrong Step For Latecomers?

GOLD IS ON A ROLL again, and the metal's renewed glitter is proving hard for
some investors to resist.

Beaten up by three years of stock-market declines, these investors have
hunted high and low for something -- anything -- that might win them back some
of their big losses. And gold certainly seems to fit the bill. Gold funds
outpaced every other fund category in 2002 with a gain of more than 63%,
compared with a loss of 22.4% for the average diversified U.S. stock fund and a
drop of 22.1% for the Standard & Poor's 500-stock index.

That stellar 2002 return propelled gold funds to the top of the performance
charts for any fund category in the latest three- and five-year calendar
periods as well. With gold prices pushing still higher in 2003, gold funds have
continued to shine this year, gaining an average of 1.57% through Wednesday.

While gold portfolios remain among the smaller fund groups in terms of
assets, investors added $829 million in new money to their gold-fund holdings
last year, according to fund tracker Lipper Inc. At the same time, investors
were cashing in shares of stock funds in general, withdrawing a net $27.1
billion, according to the Investment Company Institute.

---

Gold -- Sharefin, 06:40:27 02/03/03 Mon

Russian gold, forex reserves could hit $55 bln in 2003

The Central Bank of Russia's gold and foreign-exchange reserves could total approximately $55 billion at the end of 2003.

"I don't think the reserves will grow as fast as they did last year because how much foreign exchange enters Russia depends so much on oil prices," Oleg Vyugin, a CB first deputy chairman, told Interfax. "We'd venture to say that the reserves will be about $55 billion," Vyugin forecast.

He recalled that in 2002, the gold and forex reserves grew $11.17 billion to $47.79 billion.

---

Gold -- Sharefin, 06:39:02 02/03/03 Mon

Gold - Insurance For 2003 And Beyond

There are four basic reasons investors reject gold as an investment. First, as an asset class it is very small relative to other financial instruments. This restricts its ability to function as a store of wealth in modern economies. Second, for the past twenty years gold and most gold equities have underperformed equities and bonds by a wide margin. This factor is very important with the new generation of investors. Third, investing in gold has been associated with manias and stock frauds. This factor is very important with many veteran investors who have had painful gold investing experiences. The fourth reason is a fear that the Central banks having no further use for their gold will dump it onto the market and destroy gold prices.

Against these arguments, there are four basic reasons to own gold. First, a devaluing dollar will cause gold prices to rise. By definition if the dollar is going to fall something must go up. Gold is one of the obvious candidates. Second, the demand supply outlook for gold continues to be very strong. Global demand is approximately 3500 tonnes per year with production at 2500 tonnes. The difference is made up of scrap and Central bank sales. Third, the global level of political and economic turmoil makes gold an attractive store of value. This applies to countries with unstable banking systems including obvious candidates like Argentina and Japan. Fourth, gold is quite likely to play some role in any future realignment of the international reserve currency. Given the pressures on the US monetary authorities to finance deficits, fund a global war on terrorism, fund military campaigns like Iraq and to continue to stimulate consumer spending in the US, it is difficult to imagine that the dollar’s reserve currency status will not be challenged over the next ten years.

In the following discussion, it goes without saying that there is no absolute certainty in my arguments for gold. There are risks on all counts. We could even face a situation in which there is significant deflation that triggers a fall in nominal gold prices. However, I think it is also time for the critics of gold to answer investors concerns about how to protect capital. The oracles and denizens of Wall Street continue to offer platitudes about the long term virtues of equity investing despite the fact that we are now heading into a possible fourth year of negative returns.
~~~~

Conclusion
The case for investing in gold is very strong based strictly on the foregoing discussion. This is particularly true in comparison to the outlook for other financial assets. Equities are for the most part still on high valuations and companies will have difficulty maintaining current earnings given the economic outlook. Bonds are at historically low yields and only offer further capital appreciation in a dire economic scenario. Cash has almost no yield and is subject to currency volatility. On this basis alone, gold is an attractive investment candidate.

Additional Considerations
The foregoing discussion has left untouched a number of potentially explosive controversies in the gold market. The financial press has reported a lawsuit against JP Morgan and Barrick Gold involving their hedging activities. The suit alleges collusion to maintain low prices. Rumours continue to circulate about potentially substantial losses at JP Morgan and Citigroup because of their gold hedging positions. Some sceptics have even questioned whether the Central banks actually still hold all of their gold in bullion form. They are rumoured to have loaned out some gold to short sellers.

We neither intend to enter into this debate nor are we basing our investment recommendation on substance to any of these rumours. We will however make two observations.

First, gold has been in a bear market for 22 years and shorting gold has been a “sure thing.” In such a market it would be very unusual if some market participants did not overplay their hand.

Second, the banks involved in the gold derivatives business have been shown to bend the rules on investment research and tax structures for Enron, Worldcom and other corporations. It would be reasonable to assume that they may also have been aggressive in their gold derivative activities.

---

Gold -- Sharefin, 05:21:58 02/03/03 Mon

NEWMONT: MORE QUESTIONS THAN ANSWERS

Is it possible that a walk out by the International Operating Engineers Union #3 now in Negotiations with Newmont Gold could shut down 1/3 of North America's Gold Production indefinitely?

Has this Union recognized the potential impact of run away gold prices on the financial affairs of Newmont Mining?

Does this Union understand the implications of Newmont’s gold derivative hedge position that Newmont inherited from the acquisition of Normandy?

---

Gold -- Sharefin, 23:44:56 02/02/03 Sun

Gold: Indians get it right

AS world gold prices recently breezed past the $370 (per troy ounce) mark, it is likely to have left behind a trail of unhappy investors. For few investors would have foreseen in January 2002 that gold would be among the best performing investments in the coming year, appreciating by 33 per cent in a single year. In reality, it has taken a potent cocktail of adverse circumstances to rekindle interest in gold.

Potent cocktail: Fears of a conflagration in Iraq alone may not have been enough to spark a gold price rally. The earlier edition of the Gulf War, in 1991, barely caused a ripple in gold prices.

Poor performance of the leading stock markets of the world, too, may not have done it. For if this was the case, gold prices should have begun their uptrend in 2000, when the stock markets abruptly shifted gear, from a 23 per cent positive return (measured by the S&P Global 1200 index) in 1999 to a 12 per cent negative return in 2000. Yet gold prices remained stuck in a narrow band between $270 and $310 for whole of 2000, actually losing value through the year. The prospect of economic recession in several parts of the world too may not have been enough to trigger the gold price rally. Gold prices barely appreciated during the Asian economic crisis of the 1990s.

But this time round, all of these events have occurred at practically the same time. On the one hand, 2002 was the third successive year of decline in the major stock markets of the world. With interest rates plunging to their lowest level in several decades (a 40-year low in the US), investors disappointed with equities could not turn to bonds for better returns.

On the other, the weakening US dollar has waned the attractiveness of the US as a haven for institutional investors and central banks looking to stash their assets. Therefore, it is the drought of attractive investment avenues, topped by war fears, which has persuaded investors to look for a safe haven in gold.

---

Gold -- Sharefin, 23:37:21 02/02/03 Sun

Hedging In Gold Funds Can Bring In Frozen Assets To Markets

As the government of India develops better asset management skills, I would expect that the effective utilisation of our two most valuable assets - people and gold - would improve considerably, pushing economic growth to a permanently higher orbit. Getting the most out of it, our people require a permanent and clear commitment to education. While no finance minister has yet been able to consider this effectively, the good news is that the market is taking charge. Education is set to become the next boom industry.

Equally, there are considerable rumblings in the market of plans to create value out of our second most valuable asset gold. Various estimates put India’s gold holdings at 13,000 to 30,000 tonne. At today’s prices, the value of these gold holdings would be $165 to 375 billion - that is 25 times our celebrated foreign currency reserves.

The vast bulk of this asset is not managed at all - in other words, earns no financial return. To get an estimate of the wastage, let us assume by magic that all of our gold could be sold off and the proceeds invested in US government securities - this would produce an income of 3.5 to $7.5 billion (17,000 to 40,000 crore) a year, sufficient at the high-end to cover the government’s annual budget deficit.

---

Gold -- Sharefin, 23:24:55 02/02/03 Sun

Gold Stocks' Glitter Seen Undimmed

Canadian gold-mining stocks haven't hit the ceiling yet, analysts say, even though surging bullion prices and war fears have already lifted them about 20 percent in the past year.
~~~
"We are only at the beginning of a multiyear bull market for bullion," said John Ing, president of Maison Placements Canada.

Improving supply-demand fundamentals, a weakening U.S. dollar and growing world political tensions allowed medium-sized Canadian gold companies Nevsun Resources Ltd. and Goldcorp Inc. to offer investors some of the best returns in 2002, while heavyweights failed to rack up the same gains because they rely more on hedge positions.

Hedging lets companies bet on changing prices, but a rising gold price can make it tough to fulfill hedging contracts.
~~~
Lingering worries over corporate outlooks and a possible U.S.-led war with Iraq have been dogging the market and keeping equities in a tight trading range.

Gold stocks could get a lift on Wednesday when Secretary of State Colin Powell is expected to unveil "information and intelligence" about Iraq's alleged attempts to hide its weapons of mass destruction.

"I think the war issue is a nuisance because it just puts noise into what is a fundamentally strong rationale for higher gold prices," said George Topping, an analyst with Sprott Securities Inc, who estimates a $10 to $15 an ounce war premium being factored into the price of gold.
~~~
Analysts remain excited about the outlook for gold stocks as general economic and market conditions point to further strengthen the sector,

"The weak U.S. dollar, the low interest rates and the sort of choppy, sloppy equity market backdrop are all still intact," said Robert Spector, senior economist and strategist with Merrill Lynch Canada.

"Tack on the geopolitical concerns and the very favorable supply conditions out of the mining area and that all bodes very well for gold."

---

Gold -- Sharefin, 23:20:52 02/02/03 Sun

FED-Musings on the Eve of the Gold Suppression

The meeting of the Federal Reserve's Open Market Committee took place on July 6-7, 1993, just a few weeks before the gold price suppression began on August 5, 1993. The transcript refers to the market situation after a very recent twenty percent increase in the price of gold. In addition, it mentions the desire for a low gold price and how it can be achieved.
~~~~
We should not draw too far reaching conclusions based on the FED-transcripts. They do not tell us who is organizing the gold price suppression and how. The first of the meetings took place before the suppression began, and the FED-meetings are not the place where the gold price suppression is being organized. Furthermore, the ultimate cause to start the suppression is not mentioned, presumably problems of short-sellers after the most recent rise of the gold price. Apparently it was the initial goal to keep the price of gold under the psychologically important round decimal number 400.

---

Gold -- Sharefin, 22:29:39 02/02/03 Sun

Prospecting with Gold Mutual Funds - Using The K-Ratio

Barron's Gold Mining Index - Handy & Harmon Gold Price - K-Ratio Charts

---

Periodic Ponzi Update PPU -- $hifty, 22:27:09 02/02/03 Sun

Preiodic Ponzi
Update PPU

Periodic Ponzi Update PPU

Nasdaq 1,320.91 + Dow 8,053.81 = 9,374.72 divide by 2 = 4,687.36 Ponzi

Down 49.21 from last week.

Thanks for the link RossL !

Go GATA !
Go GOLD !

$hifty

---

Gold -- Sharefin, 22:03:42 02/02/03 Sun

Japan surprises with intervention admission

Japan's Ministry of Finance intervened in the foreign exchange market this month to weaken the yen, but did not tell investors until monthly data on Friday uncovered the transactions.

The Bank of Japan used some Y678bn ($5.6bn) in a series of actions to buy dollars for yen to stem the Japanese currency's appreciation. An official on Friday said the move was designed to stabilise the yen rather than actively weaken it.

Despite the weakness of Japan's economy, the dollar's renewed slide has led the yen to strengthen in spite of officials' attempts to talk it lower. The Japanese currency has gained some 6 per cent in the past two months, prompting concerns about the damage a stronger currency will do to exporters' balance sheets and its possible impact on Japan's struggle against deflation.
~~~
Analysts said the covert nature of the BoJ's actions was a surprise. The bank, which holds massive reserves, has frequently intervened publicly in the market to limit yen strength and last acted in a series of moves between May and June last year.

---

Gold -- Sharefin, 21:50:30 02/02/03 Sun

Investors on a Gold Rush

Bill Bowler, a 77-year-old Baptist pastor in Tucson, has been listening to the alarming news from Iraq and North Korea and watching the stock markets swoon. And every time another headline screams war and another certificate of deposit comes due, he adds to the hoard of gold in his safe-deposit box. Most of his and his wife's retirement savings are now in gold.

Such a big bet on gold is risky, financial advisers say. But Bowler is unmoved by the warnings. "I feel safer with my investment in gold," he said. "I can take it out and look at it and see it."

Gold is the pessimist's investment of choice: It rises when the dollars slides, the stock market sinks, the economy slumps and the world descends into war.
~~~
"Gold has been around for 5,000 years as a store of value, and during times of crisis people tend to move toward gold as a golden anchor," said Michael Checkan, president of Asset Strategies International Inc., a Rockville firm that sells precious metals and foreign currency to individual investors.

---

Gold -- Sharefin, 21:35:09 02/02/03 Sun

Has every cloud got a gold lining?

The precious metal might seem a cure for share gloom but all that glitters ...

In times of uncertainty, one thing is virtually guaranteed - that the price of gold will rise. And as war with Iraq threatens and share prices continue to fall, this is exactly what is happening.

---
What a bearish article....

---

Gold -- Sharefin, 00:10:43 02/02/03 Sun

MEDIA RELEASE
New gold investment product

Gold Corporation, a statutory authority of the Government of Western Australia and operator of The Perth Mint, today announced its intention to issue a new gold investment product.

The Perth Mint Gold Quoted Product ("PMG") would be a gold bullion product tradeable on the Australian Stock Exchange (“ASX”) and aimed at Australians seeking a convenient way to invest in physical gold, the Corporation said.

The PMG would be structured as a call warrant under ASX Business Rules.

Gold Corporation said it would make an application to the ASX to have the product quoted so investors could purchase PMGs through brokers.

The non-leveraged PMG would be fully backed by gold owned by Gold Corporation, and its ASX price is intended to track closely the international spot gold price.

The Corporation said a PMG holder would have the right to exercise the PMG and call for physical delivery of the underlying gold at any time before the PMG’s expiry.

A Product Disclosure Statement will be made available to investors on release of the PMG. Gold Corporation expects The Product Disclosure Statement to be released by 28 February 2003. Interested investors should read the Product Disclosure Statement, which will be available at www.perthmint.com.au on the release date.

The Corporation said it would continue to offer The Perth Mint’s existing precious metal depository investment products in addition to the new PMG.

Further information:
Michael Kile, Manager, Business Development, Tel.(08) 9421 7401.

The Perth Mint Buildings, 310 Hay Street, East Perth, Western Australia 6004
Postal Address: GPO Box M924, Perth, Western Australia 6001
---

This new trading vechile looks to be a boon to Australian Goldbugs - not only will you be able to trade this vechile via bids on the buy/sell (narrow spreads) but you can also use it for taking delivery.

Imagine buying gold as easy as buying a share & you don't have to take delivery but can on-trade it if you wish.

You'll also be able to preplace buy/sell bids in the expectation that if the price moves tou your price then you'll get filled.

Seems like the ease of fiat with the backing & ownership of physical when desired.
And backed by the integrity of the Perth Mint.
What more could a goldbug want.

---

Gold -- Sharefin, 23:04:52 02/01/03 Sat

Kinross, TVX, Echo Bay Gold Merger Approved

Kinross Gold Corp said on Friday that shareholders of TVX Gold Inc. and Echo Bay Mines had approved the three-way merger of the Canadian miners, which will create the world's seventh-largest gold producer with output of 2 million ounces annually.

The new entity, which will operate under the Kinross name, will begin trading on both the Toronto Stock Exchange (TSX) and New York Stock Exchange on Monday and will reflect the three-for-one common share consolidation approved this week by Kinross shareholders.

---

Gold -- Sharefin, 23:02:37 02/01/03 Sat

War talk proves profitable for AngloGold

ANGLOGOLD expects towering gold prices to continue through 2003 as the United States dollar continues to sag and international tensions rise.
~~~~
"We can mark gold price movements almost directly in relation to public statements by (US) President (George) Bush," Mr Williams said.

"We can track the gold price almost equally tightly over the three-month period against movements in the US dollar."

---

Gold -- Sharefin, 22:56:07 02/01/03 Sat

Newmont CEO Murdy to Tell Colorado Mining Conference - Gold's Future Tied To Corporate Social Responsibility

Gold has regained much of its luster during the past year, with gold prices rising from near record lows to more than $350 per ounce. Following a lengthy period of consolidation, falling gold prices, and mine closures, the gold industry and gold stocks in particular have performed well in the post 9-11 economy. But will gold continue to glitter in the years ahead? Only if companies practice corporate social responsibility in the communities in which they operate, according to Wayne Murdy, Chairman and CEO of Newmont Mining Corporation, the world's largest gold producer. Murdy is expected to tell a gathering of hundreds of mining professionals about the necessity of obtaining a social license to conduct operations within local communities, in addition to obtaining the required permits and governmental authorizations. Principles of sustainable development must govern future operations.
~~~
The conference will feature sessions on mining in Colorado, with speakers discussing the future of traditional industries such as coal, limestone and metals. A Mine Operations forum will also include a progress report on the effort to develop cost-effective technologies for oil shale development on Colorado's western slope. A Public Perceptions Forum will include presentations by industry leaders, environmental groups, and the news media on how current opinion shapes policies that impact mining. The International Session will include the latest ranking by mining industry experts of countries for new mineral development. Mining in America includes Mining in the Americas; experts on trade will discuss the prospect for new mineral development in Latin America. Finally, the environmental/reclamation session will discuss the current bonding crisis that could potentially impede new mineral development, and other challenges that may cloud mining's future.

---

Gold -- Sharefin, 22:49:12 02/01/03 Sat

Gold Bugs Look To History

This is a chart to cheer gold bugs and confirm their sister deflationists in their convictions. It shows the relationship between the prices of gold and equities. Note, the pessimists say, the decades of the two previous descents of that ratio from a peak: the 1930s and the 1970s.



Christopher Wood, emerging markets analyst for CLSA, a unit of Credit Lyonnais, who supplied us with the numbers, believes strongly that "gold is at the very beginning of a multiyear bull market that will take the yellow metal many times higher than its present level." The reason Wood gives: "Gold is the only real hedge against the massive financial excesses that still prevail in the western world."

---

Fiat -- Sharefin, 22:45:31 02/01/03 Sat

Party's over, says pioneer analyst

A pioneering market technician says a fresh bout of intense stock market selling is on its way.

Lowry's Reports' Paul F. Desmond is revered for his examinations of supply and demand forces that shape stock market activity. His work on identifying bear-market bottoms and new bull markets coined the term "90-90 downside days" and won the prestigious Charles Dow award.

Desmond's work demonstrates that severe downside days, in which 90 percent of all volume and total points gained and lost on the New York Stock Exchange are in the red, must precede a bear-market bottom.

Essentially, Desmond says the three-month party is almost certainly over for stock-market optimists.

---

Gold -- Sharefin, 22:42:43 02/01/03 Sat

INDIA'S GOLD IMPORTS FALLING BY OVER 60 TONNES A MONTH

A London-based metal consultancy is optimistic of a good recovery in the gold sector in the first half of 2003 if gold prices ease back below US$310 per ounce.

Gold Fields Mineral Services (GFMS) director Paul Walker told a seminar here that "imports to India have fallen from 600 tonnes recorded during 2001 to 400 tonnes recorded last year."

Attributing the current gold price rise to tensions between the US and Iraq, he said there was a decline of up to 60 tonnes of gold per month in imports to India.

---

Gold -- Sharefin, 22:40:41 02/01/03 Sat

Imports fall 50% as gold turns dearer

With gold prices touching new lifetime highs last week, gold imports have fallen by almost 50%. Bankers say that over the past month-and-a-half, India has imported just about 75 tonne of gold, which is half of what it imported during the same period last year, reports CNBC India.

Soaring prices of the yellow metal have slowed demand, despite the wedding season in North India. In fact, people are queuing up to sell their gold. In South India, where people are known to hold on to their gold, people are offloading their gold stocks.

The falling imports and increasing retail selling indicates a change in the Indian mindset, where people are using the yellow metal to store value and use it to make profits.

Scotia Mocatta MD Sunil Kashyap said, "In the South, there have been continuous years of drought. So, a lot of farmers who during the periods of bountiful harvests have bought gold to store up their wealth, have now come into the market to sell gold to tide over this time of drought. It's just an indication that people who do store value can use it to sell and get value back."

---

Gold -- Sharefin, 22:34:00 02/01/03 Sat

States to impose uniform 1% sales tax on gold

Diversion of bullion trade to select centres of the country could be a thing of the past with states deciding to impose a uniform sales tax rate of 1 per cent on gold from Friday.

These include major gold trading centres, like Gujarat, Rajasthan, Delhi, Haryana, Uttar Pradesh, Tamil Nadu and Maharashtra, which were hitherto levying sales tax below the 1 per cent floor rate.

Gold demand in the country, the worlds largest consumer, is pegged at 855 tonne annually.

Official imports account for about 535 tonne. The rest of the supplies come from illegal channels and its huge household and religious institutional reserves estimated at 10,000 tonnes.

---

Gold -- Sharefin, 22:30:08 02/01/03 Sat

Gold on the rise again

Falling stock markets and increasing worries about a war with Iraq have once again given gold prices a lift.

And leading African gold firm, AngloGold - the world's second largest producer of gold - has said it expects prices to rise still further this year.



Investors have been buying gold largely because the main alternative, the US dollar, remains weak and global stock markets have been in the doldrums for quite some time now.
~~~
"Gold will always have a historical intrinsic value. If the world goes into global meltdown people will trade as they did many hundreds of years ago," Thebulliondesk.com analyst James Moore said.

After years at the margins of the modern financial system, gold has made a strong comeback as a safe investment in times of international tension.

"People have moved back to it because of its traditional, safe-haven value. We have seen an influx of ordinary people and bigger investors who have been absent from the market for about 10-15 years," Mr Moore said.

---

Gold -- Sharefin, 22:24:45 02/01/03 Sat

AngloGold sees higher gold price in year ahead

South Africa's top gold producer AngloGold (ANGJ.J) said on Friday it saw a higher gold price in the year ahead, and a revival in the physical market once volatility subsides.

"All of the factors that have been positive for gold in 2002 remain firmly in play and there is good reason to expect higher gold prices in the year ahead," AngloGold Marketing Director Kelvin Williams said in a statement.

Although the physical market had shown weakness in 2002, the company expected a revival in the year ahead.

"As is the case in all periods of rising gold prices and gold price volatility, the physical market should revive once the price returns to a stable trading range for a period of time," Williams said.

"However, with further volatility expected in 2003, a resurgence of physical demand should not be expected immediately."

---

Fiat vs Gold -- Sharefin, 22:12:40 02/01/03 Sat

Greenspan Comes Home to Gold

The chastened man is again grasping his golden compass.

Gold traded above $370 per ounce this week, for the first time in six years. Anxiety about war with Iraq has no doubt contributed to gold's surge - but a look at history suggests that gold may be telling us as much about Alan Greenspan as it is about Saddam Hussein

The last time that gold was above $370 was December 6, 1996. Students of military history won't find that date significant, but Fed-watchers will. That was the day following Alan Greenspan's speech in which he first warned of "irrational exuberance" in the stock market. And it was the day that Alan Greenspan took America off the gold standard.


What? Didn’t Franklin Roosevelt abrogate gold convertibility in 1933? And didn’t Richard Nixon close the Treasury's gold window for good in 1971? All true - but nevertheless, from the time he took the chair of the Board of Governors of the Federal Reserve System in 1987 to that speech in 1996, Alan Greenspan had implicitly returned America to a gold standard.

The chart below proves it. From 1987 to 1996, the Fed funds rate very closely tracked the 2-year moving average of the gold price. We may never know the exact thought process, but this much is clear: For that decade, when the gold price was rising, Greenspan was raising the federal funds interest rate, just as though he regarded gold as a leading indicator of inflationary risk. Conversely, when the gold price was falling, Greenspan eased.



~~~
Today Alan Greenspan is huddling in a foxhole, and he's almost out of ammunition. The man who had been lauded for slaying inflation is now under pressure to stave off continued deflation. And even after an historic fusillade of rate-cuts that have left the Fed's gun nearly empty, unemployment is over 6% and still rising, investors are worrying about a double-dip recession, and asset markets are in shambles.

So what does a man do when he is running out of bullets? He picks his targets very carefully - and that means focusing on fighting deflation. And what does a man do when he's huddling in a foxhole? He gets religion - and for Greenspan that means coming home to gold.

That was the message of a remarkable speech by Alan Greenspan last month, missing by only two weeks the sixth anniversary of his "irrational exuberance" speech. The press didn't really pick up on the importance of this speech, because we've all become accustomed to thinking of gold as a "barbarous relic," to use Keynes' famous phrase. But the fact is that from the very first sentence of the speech, we can see that Greenspan has rediscovered his golden compass - a compass he admits pointed true even in the speculative "bubble" of 1929:


Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800.

Later in the same speech Greenspan acknowledged, for literally the first time, the urgent danger of deflation. That's the very thing that the falling price of gold was warning Greenspan about in 1997 - now he knows he was wrong not to listen.

---

Fiat -- Sharefin, 19:02:48 02/01/03 Sat

What's a Few Zeroes Among Friends?

So you support the impending war against Iraq, eh? Ok. That will be $2,500, please. Don't worry about sending a check just yet. We will payroll deduct.

Oh, and that's just for this year. Then we have to rebuild Iraq, of course. Though we will need another $15,000 from you for that effort, the good news is that it will be spread out over the next decade or so. For now, we'll just add it to your share of the national debt, which is - let's see now - about $387,500 as of today.

And then there will be interest on the debt, of course. That totals $19,375 per year on your share of the current balance, assuming 5% interest. As usual, we won't be bothering you to pay off any of the principal for the foreseeable future.

---

Iraq War in Late February/Early March -- Joe, 13:22:44 02/01/03 Sat

One rumor is the first two days of the war will see a massive air campaign which includes the use of countless cruise missles that will take out power/water/many other targets and leave the Iraqis dazed and in awe of us.
Joe F. Rocks! Growth Stock Investor & Market Strategist

---

Gold -- Sharefin, 19:43:54 01/31/03 Fri

Arch Crawford "Heads UP"

Arch Crawford has been ranked as one of the very top market timers for years now. In spite of the fact that he uses astrology, among other technical analysis tools, he has a large readership on Wall Street because of his track record, and often appears on the financial shows such as CNBC (as recently as this month).

Here is his statement about February 16th:

"Our sensibilities are
tweaked to call this one of the worst
days EVER (16th) in international
relations, and a good day to be short
stocks, long gold, oil & commodities.
If you still have friends or relatives
with bomb shelters left over from the
1960's (or Y2K), it may be time to
restock the dried foods and oil the
automatic weapons!"

---

War -- Sharefin, 19:33:20 01/31/03 Fri

Iraq Turns Spotlight on Israel at U.N. Arms Body

Iraq accused Israel on Thursday of harboring biological, chemical and nuclear weapons -- turning the spotlight on the Jewish state at the main United Nations arms control body.

Iraqi ambassador Samir Al-Nima and Israel's Yaakov Levy also traded insults over their countries' leaders during speeches to the Geneva-based U.N. Conference on Disarmament.

Syria and Algeria joined in the heated debate at the 66-member forum, while the U.S. delegation kept quiet during attacks on Israel, its close ally.

---
The insanity grows....

---

War -- Sharefin, 19:24:00 01/31/03 Fri

The Biggest Threat To Peace

Which country really poses the greatest danger to world peace in 2003? TIME asks for readers' views

Who really poses the greatest danger to world peace? Iraq and North Korea are certainly high on President Bush's list though Iraq is still working hard to deny him a reason to attack. A 12,000-page report on its nuclear, chemical and biological programs has been given to the United Nations but Bush and his dependable friend Tony Blair say they have "solid evidence" that Saddam is lying and have called for weapons inspection teams to step up their work.

Meanwhile, as the fuel rods go in and UN inspectors go away, the specter of a nuclear-armed North Korea is keeping the reclusive regime on everybody's radar. Washington and Pyongyang are talking tough but is the biggest danger to peace closer to home? European antagonism towards Bush's robust stance is now being mirrored in the U.S., with even those he might normally consider his allies now urging caution.

So TIME asks you: which country poses the greatest danger to world peace in 2003?

-----
Current results have the USA winning by a clear streak at 84%.

---

War -- Sharefin, 18:45:53 01/31/03 Fri

North Korea says nuclear war possible at 'any moment'

North Korea said on Thursday that US military threats made nuclear war possible at any moment, and blamed Washington for an acute electricity shortage stemming from a freeze on the communist state's atomic energy programme.

---

Gold -- Sharefin, 18:09:05 01/31/03 Fri

Daytraders forum for the US Markets, gold & goldstocks.

Investors Exchange

---

Fiat -- Sharefin, 22:51:36 01/30/03 Thu

Chartists say eurostocks face abyss as levels breached

The number of European stock indices breaching October's multi-year lows piled up on Wednesday as shares sank, leaving technical analysts in no doubt that more pain is in store for the region's war-weary investors.

"The fact we've dropped below these levels pretty much means that the market is re-establishing the downtrend that began when the dotcom bubble burst in 2000," said Steven Wesiak, a pan-European technical analyst at ABN Amro in Amsterdam.

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Gold -- Sharefin, 22:20:02 01/30/03 Thu

Telfer funding yet to be secured

Newcrest reported that its received gold price for the December period eased to A$596/oz (A$600/oz), which translated to a nauseous cash price of A$484/oz when removing accounting provisions raised at 30 June for surplus hedging contracts. Spot gold is currently trading at around A$620/oz, and averaged A$570/oz in the December quarter and A$576/oz in the first half of the 2002/03 financial year as against Newcrest’s pre-provisioned received prices of A$484/oz and A$503/oz, respectively.

With the group’s total production costs rising to A$390/oz (A$376/oz), that latest achieved gold price on sales won’t do cashflows any favours. “Free cashflows will be limited,” said Perth-based Brierley. “Because of the A$106 million provision made in the final 2001/02 accounts, this will have a limited effect on reported profits.”

All gold production from the December period was delivered into hedge contracts, leaving about 5.53 million ounces still hedged and giving the company a position equating to about 20 percent of current reserves and 11 percent of resources. The mark-to-market value of the hedge book didn’t look pretty, blowing out to negative A$939 million as at 31 December (consisting of minus A$633 million for gold, minus A$247 million for currency and minus A$59 million for copper).

---
Newcrest have a current market cap of A$2,127 million with a hedge book under A$947 million.

Wonder how they'll feel at US$500 gold.

Oops!!!

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Gold -- Sharefin, 21:34:35 01/30/03 Thu

Four Ways to Play New Gold Rush

Gold has become the color of hope for paralyzed investors in the past year. Since the start of 2002, shares of the public companies that dig the stuff out of the earth have marched forward 50% to 300% to the drumbeat of war as all the major equity indexes have plunged.


It has become the investment of choice, not just for wizened old men on park benches and 'fraidy cats in the Adirondacks, but for everyday professionals saving for retirement, daytrading speculators and sober fund managers seeking a hedge against uncertainty. Whether in the form of 100-ounce bars, futures, stocks or coins, the metal has come to be seen as the antistock of the post-dot-com world. It's a combination of security blanket, insurance policy and Lotto ticket. The metal with moxie.

A Prebubble Buying Opportunity
But the market for gold around the world is looking ever more like the market for technology stocks, circa 1997. Though not quite there, it seems on the verge of becoming the topic of soccer mom conversation, like stock tips at cocktail parties back in the day.

Gold is not at all in a bubble stage. The physical material has gone from $250 an ounce to $360 an ounce in the past few years, hardly a massive move for a commodity priced at $800 in 1980. But it is certainly heading in that direction, and at $368.40 an ounce, it hit a six-year high last Friday. All 10 of the top-performing mutual funds in 2002 were gold or precious-metals sector funds, and they're doing well again so far this year.
~~~~

Gold's Value? The Price of Fear
Indeed, what I find fascinating about gold is that even after a solid two-year run, it is still embraced by some of the most bearish and skeptical of professional equity investors and observers, such as James Grant, Bill Fleckenstein and Jean-Marie Eveillard. These are the sort of folks who demand high levels of intrinsic value when they buy shares of public companies, but are willing to embrace ownership of a clod of yellowish ore that has no real intrinsic value at all.

What is the value of gold? Its price is said to be the single most widely disseminated bit of information in the world, and yet it is worth only whatever market participants say it's worth at any given time. Its pricing is a psychological event, untethered to perceived scarcity or its tremendous usefulness as a conductor of electricity. Think of it, instead, as the price of fear.

As Eveillard put it in an interview last week, the value of gold depends in large part on the ebb and flow of distrust that people have for paper currency, not for its worth as a commodity. Consider that new Federal Reserve Board Governor Ben Bernanke in November openly backed the wholesale printing of money as a way to stave off potential deflation.

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Gold -- Sharefin, 21:23:09 01/30/03 Thu

Gold prices soar, people sell yellow metal

Rising gold prices may have forced people to put off their buying for now.

But it has certainly brought a stream of sellers back to the shops in Mumbai. People in the city are lining up at jewellery stores, not to look at latest designs, but to make money out of rising gold prices.

Last November, 10 gms of gold was worth Rs 5,000 in Mumbai, which at the beginning of January, shot up to Rs 5,250 and now it is almost Rs 6,000.

"We needed some money for our son's education, so we thought this is the best time to sell gold," said Anant Desai, a person who sold gold.

"This is not the time to buy gold, this is the time sell gold," remarked Mahesh Pandya, a person who sold gold.

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Gold -- Sharefin, 21:21:52 01/30/03 Thu

Gold surge not over - Gold Fields

“It is the opinion of your management team that the gold market holds significant promise to the upside, underpinned by the continued structural weakness of the United States Dollar and global equity markets,” said Ian Cockerill, Gold Fields chief executive in the company’s address to shareholders. He added that , to “a lesser extent”, the political troubles regarding Iraq were also helping the gold price.

“It is also quite clear that gold appears to have retained its age old reputation as a viable alternative investment during periods of economic uncertainty. This is a trend we see continuing for some time,” Cockerill added.

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Gold -- Sharefin, 21:20:38 01/30/03 Thu

Gold surge not over - Gold Fields

“It is the opinion of your management team that the gold market holds significant promise to the upside, underpinned by the continued structural weakness of the United States Dollar and global equity markets,” said Ian Cockerill, Gold Fields chief executive in the company’s address to shareholders. He added that , to “a lesser extent”, the political troubles regarding Iraq were also helping the gold price.

“It is also quite clear that gold appears to have retained its age old reputation as a viable alternative investment during periods of economic uncertainty. This is a trend we see continuing for some time,” Cockerill added.

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Gold -- Sharefin, 20:59:43 01/30/03 Thu

Sinclair Strikes Back

Jim Sinclair, 'Mr Gold' to hard core followers of the gold market everywhere, has lashed out at critic John Clemmow, resource specialist at Investec London. In response to an essay filed by Sinclair on a number of gold sites on Monday, Clemmow said Sinclair's explanation of the disparity between bullion moves and the resultant leverage in gold shares was due to speculative short selling of equities by funds was way off the mark. "Mr Sinclair has his view, but I’m afraid once again he is completely wrong," said Clemmow.
Here is Jim Sinclair’s response:

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Gold -- Sharefin, 20:56:29 01/30/03 Thu

Goldcorp's McEwen eyes gold price of US$800

Long-term growth cycle

Gold is on its way to US$800, predicts Rod McEwen chief executive of Goldcorp Inc.

Yes, you just read that correctly: US$800, or well over double the current price.

Of course, he's not trying to say that gold will hit US$800 sometime soon. He's thinking gold might hit that price at some point in the next decade or so.

And he's not alone. Mr. McEwen's bullish views on gold reflects a common belief among gold bugs. Gold hit a historical high of about US$850 back in January, 1980. Since then, gold has fallen as low as US$252 in August, 1999 and US$255 in April, 2001.

Gold has been trending upwards since hitting that 2001 low, and gold bugs are wondering if we're witnessing a growth phase that will chug along for another decade or so.

Indeed, Mr. McEwen, who yesterday was in New York conducting road-show presentations, explained in a telephone interview that he believes gold is about three years into a long-term growth cycle.

Gold closed yesterday at US$366.30, down US$3.70 though earlier this week it hit its highest price in six years. Gold has already 7% this year after jumping almost 25% in 2002.

Expectations of war in Iraq, weak equity markets and a U.S. dollar dropping against the euro has been fuelling gold's recent gains. Rising oil prices have also triggered fears of inflation, and gold's intrinsic value is often seen as a way to preserve wealth.

Mr. McEwen believes gold is on an upward trend to test the historical high of US$850 achieved in January, 1980. "We seem to be in the early stages of a bull market for gold which probably has a duration of 10 to 12 years. We're already three years into it," he said.

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Gold -- Sharefin, 20:34:06 01/30/03 Thu

SILVER: A SMALL OR TINY MARKET?

This editorial focuses on five measures of the silver market size. They are

"Physical Silver Demand"
"Physical Silver Bullion Stocks"
"Silver Stock Market Capitalization"
"Mutual Funds Focusing on Silver"
"Physical Ounces of Silver per Population"

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Gold -- Sharefin, 20:28:28 01/30/03 Thu

Indian gold imports fall by 30%

Even if gold imports to India sharply declined by over 30 per cent last year following soaring international prices, a London-based metal consultancy is optimistic of a good recovery in the first half of 2003 if the gold prices ease back below $ 310 per ounce.

Gold Fields Mineral Services (GFMS) Director, Paul Walker, told a seminar here "imports to India have fallen from 600 tonnes recorded during 2001 to 400 tonnes recorded last year."

Viewing the current gold price rise situation due to US-Iraq conflict, he said there was a decline of up to 60 tonnes of gold per month in imports to India.

He said, however, the demand was likely to go up within the first half of this year if international prices stabilize.

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Gold -- Sharefin, 20:15:28 01/30/03 Thu

World's most successful fund manager endorses GATA

The most successful mutual fund manager in the world,
John Embry, vice president of equities for RBC Global
Investment Management and manager of Royal Bank
of Canada's precious metals fund, sounded exactly
like GATA Chairman Bill Murphy in a long interview on
national television in Canada this week.

Embry was interviewed on ROB-TV's "Market Call"
program, and made these comments:

-- Gold Fields Mineral Service is an agent of the
bullion banks, and he doesn't believe half of what
they say.

-- The central banks' gold short position is certainly
at least 10,000 tonnes, and GATA's assertion of 15,000
tonnes is defensible. The recent disclosure of the loss
of gold by Portugal's central bank was very significant.

-- GATA has done "outstanding research" in exposing
the gold short position of the central banks, and the
people of GATA are "not lunatics" but "smart, diligent
guys." (We happily would have settled for "not ALL
lunatics.")

-- By virtue of its derivative position in gold, J.P.
Morgan Chase has been at the center of a manipulation
of the gold price, though Embry added that he wasn't
sure of Barrick Gold's role in that manipulation.
Barrick, Embry said, might have been doing no more
than aggressively hedging its product.

-- The gold price also has been manipulated by the
U.S. government. This manipulation doesn't bother
Embry so much in principle, since he considers gold
more of a currency than a commodity and currencies
are commonly manipulated by governments. But in
suppressing the gold price for so long, the U.S.
government allowed speculators to pile on and
"created a monster," driving the gold price down
below the cost of production and giving the gold
price an explosive potential few people realize.

-- Gold should easily rise above $400 per ounce,
given the "toxic derivatives" around it.

-- Embry also expects an explosion in the price of
silver.

-- The junior gold producers are most promising for
price appreciation, the hedged major producers least
promising.

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Gold -- Sharefin, 20:01:06 01/30/03 Thu

Gold trade needs ombudsman: Tarapore

Consumers in India are losing as much as upto Rs 8,000 crore annually due to the questionable quality of gold and there is an urgent need for consumer protection in this area, said former RBI deputy governor, SS Tarapore, in his keynote speech at the London Bullion Market Association-Indian Bullion Market Development Forum.

The poor quality of gold sold in India throws up need for a gold Ombudsman for consumer complaints.

Customs levy of Rs 250 per gram needs to be removed. Gold needs to be treated like dollar, yen or sterling, not like other metals.

Total freeing of gold import-export trade and abolition of import duty on gold was a pre-condition for meaningful capital account convertibility, he added.

Tarapore said the government should allow banks to trade on bullion exchanges to create the right environment.

Also, facility of imports by individual non resident Indians (NRI) should end. This would help curb money laundering. Gold should be part of baggage of returning to India and subject to customs duty.

“The October 2002 RBI measure to merge forex and gold open positions is a step in the right direction. There is an urgent need to bring bullion banks and non-bank entities trading in gold on a level playing field,” said Tarapore.

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Gold -- Sharefin, 19:37:12 01/30/03 Thu

THE DOW IN SILVER OUNCES: STOCKS VERSUS SILVER

For several years I have been harping about the Dow in Gold Dollars (DiG$). Why? Because valuing stocks in terms of gold gives us a superbly reliable indicator of the trends in both stocks and gold. When we spot extreme highs or lows in the DiG$, it tells us that we can safely switch from one to the other and ride a trend for a long time.

DOW IN GOLD DOLLARS

The DiG$ is simply the amount of gold, expressed in statutory "dollars of gold"1, needed to buy the entire Dow Jones Industrial Average. (A gold dollar equals about 1/20 troy ounce.) For the past 100+ years the DiG$ has ranged from a value of G$20.86 (equals 1.01 troy ounce of gold) at bottoms to G$925.88 (equals 44.79 ounces) at the extreme top in 1999. The DiG$ also gives us one unchanging measure of the Dow back over that century. Look at these numbers

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Gold -- Sharefin, 19:31:36 01/30/03 Thu

The Classical Economists on Gold

With the dollar down and gold up, both trends obviously related to growing fear of economic troubles ahead, the question again arises: why shouldn't the dollar itself be defined as a fixed quantity of gold? It would be if the views of the classical liberal tradition held sway. This tradition stands solidly behind a commodity money standard, like silver or gold, as the very embodiment of sound money.
~~~
The case for commodity money in general, and for silver and gold in particular, was established, authoritatively, long ago. It is true that the subtleness and some errors of the classical economists’ thought are partially responsible for the present-day ideological reversal in quasi-total support of paper money. However, there is no excuse, even not the sheer ignorance, for completely erasing what the classicals said in defense of gold from contemporary textbooks in monetary theory.

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Gold -- Sharefin, 19:28:45 01/30/03 Thu

GOLDBUGS AND GREEDBUGS

What to do? There is the goldbug approach and the greedbug approach.

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Bullion vs leveraged paper....

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Fiat -- Sharefin, 19:00:17 01/30/03 Thu

U.S. M-2 money supply up $27.0 billion - Jan 20 week

M1 up 18.7b
M2 up 27.0b
M3 up 31.7b

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Gold -- Sharefin, 18:57:15 01/30/03 Thu

The Restructure of the Monetary System


JES says: Right now there is no tie between gold's market value, treasury gold and the US dollar other than as another asset of reserve status. That means just another asset held by the US Treasury on behalf of the United States. In order to answer your question, we need to review a few concepts and a little history.

~~~
I look for this to happen when and if the US dollar trades at .76 as measured by the USDX. If it is not applied, then I believe we will have two head and shoulder formations in the USDX and two necklines breaks which duplicate the charts of both Enron and GE. The price objective then for the dollar will be .62 USDX. If gold rises above the key level of $529, the opportunity to act in a positive mode utilizing gold in a dollar relationship is lost.

Assuming a pre-emptive remonetization of gold as it pertains to the US dollar, the effect on the free market for gold will be to cause it to halt is price appreciation or price depreciation at the point when the Federal Reserve Gold Certificate ratio is reintroduced in its modernized form. Gold then will trade above and below that point as a measure of the five fundamental elements that have always been causal to bull or bear market in the metal. Assuming that this method is adopted before gold trades above $529, then I would envision gold trading above or below by $50.

If this method is not adopted before gold trades above $529, subsequent market developments will prevent its use. The world will break down into three currency blocks, The US Dollar block, The Dinar and Gold block, and the Euro. Economic power and political influence will shift away from the Dollar Block towards the Gold, the Gold Dinar, the Arab big six Euro/Gold Dinar and the Euro in that order of percentage gain.

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Sharefin says.....
JES is a smart man & knows the gold markets like the back of his hands. Maybe better than anyone else.
But this does not relegate his words as gospel nor does it mean that they & only they shall be right.
No offence Jim but opinions are opinions.

If 0.76 equates with $529
Where does this relate with the Dow et al? - maybe Dow 6000
Ok then what happens when the Dow falls to 4000-3000
And what if debts & derivatives take the Dow down to under 1000 al la Prechter?

To use Jim's words "The horse is too far out of the barn".

It's not just M3 growth but derivatives & debt & not only American but across the whole globe.

Methinks gold has a far bigger race to be run & that we're just out of the starting box.
That this race will become a bigger game than the Nasdaq where the whole world gets to play.

Let the games begin........

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Gold -- Sharefin, 18:42:55 01/30/03 Thu

Why gold is gaining in a world awash with dollars

THE largest collection of warplanes ever assembled is airborne. Their bomb bays are burgeoning. Each flight is approaching its target for a co-ordinated strike. Their targets are not Baghdad or Basra, but the major metropolitan areas of the United States.

But wait. These are US air force planes. So why are they flying a mission that has US cities and citizens as targets?

Have scientists working for Saddam Hussein developed a drug and rendered America’s air force insane? Or has George Dubya finally flipped and ordered the extermination of all potential Democratic presidential candidates and voters?

Inspection of the bomb bays shows they are not filled with conventional weapons or weapons of mass destruction: No, the planes are crammed with bundles of greyish-green paper carrying the portrait of a dead president on one side and the words "In God We Trust" on the obverse. These are dollar bills.

Why, you may well ask, is the US being threatened with a massive bombardment with its own currency? Is it a Marxist plot? Karl Marx said that the way to overthrow capitalism was first to destroy its money.

On the contrary, these planes are in the sky 24/7 on "Deflation Watch" and their purpose is to save American capitalism.

A terrible fear-provoking thought is gaining ground among the guardians of the US economy. It is that the man in the street, who for decades has enabled the economy to remain on a long, upward path by consuming more than he produces, may be reaching the limit of his capacity for excess consumption and its corollary debt.
~~~
The dollar has been able to remain fundamentally and seriously overvalued for years because the rest of the world was gullible enough to believe that the US economy would always outperform and thus its bonds and shares deserved a premium rating. Some 75 per cent of central bank reserves, plus a great deal of non-US private wealth, is held in US dollar assets.

Now that the Fed has declared it will "print" as many dollars as it takes to combat deflation, holders of US dollar assets would have to be extraordinarily naïve not to realise that an unlimited increase in the supply of US dollars means dollars will inevitably be worth less.

Thus, far from attracting the 80 per cent of world savings required to maintain the dollar’s value, fear of the bomb bays being opened and the world being showered in paper dollars is likely to cause liquidation of dollar investments.

In a deflationary world every country thinks its currency overvalued and, although the demise of fixed exchange rates has removed "beggar-thy-neighbour" competitive devaluations, if countries resort to the printing press to try and avert deflation all of their currencies become debased.

There is one standard against which this debasement of currencies can be measured and one asset which investors can own to protect themselves: That standard and that asset is gold.

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Gold -- Sharefin, 18:18:26 01/30/03 Thu

Gold Could Turn Out to Be Hero of the Day

HEARING that the US may attack Iraq has become an everyday episode, and recent surges in the gold price are playing victim to this explanation.

In the past three months gold has risen 17,58%. However can the sudden rush in the yellow metal be simply explained as a function of war? I think not.

The Bank of Japan has once again announced that it will sell off its currency to protect an export-led recovery. The Japanese finance minister is aware of the implications of an appreciating yen, and if he wasn't Sony, Toyota, Toshiba and Fujitsu would make sure that he was.

A further appreciation of the yen would be negative for the Japanese economy. Finance Minister Masajuro Shiokwa, who is comfortable to see a weakening yen, was quoted as saying it is favourable to see the foreign exchange rate reflect the state of the economy.

The last time the Bank of Japan intervened was on June 28, when more than $30bn was put up for sale in seven days. While scholars of economics will lecture on the demerits of intervention because it does not work the Bank of Japan has made it a stated policy.

It has refined its intervention to an art form, taking advantage of US holidays when trading volumes are low so that it can maximise its effect on the market.
~~~~~~

With a ridiculously bulging US trade deficit estimated at about $300bn it makes no sense to remain on this path as it will only create problems for the US down the road. With the US running a current account deficit at record levels, about $1bn a day is needed to fund such a gap.

This is feeding concern that capital inflows are potentially at risk. In its current state the dollar could further depreciate, and yet abandonment of the strong dollar policy could lead to free fall out of the pan into the fire.

In order for the dollar to weaken, the euro or the yen need to strengthen, although both have indicated that they are opposed to this.

Something needs to give. Ask yourself: what is the alternative?

Enter gold. There is a strong inverse correlation between the dollar and gold. As gold is priced in dollars, the weakness of the dollar against the euro and the yen makes it cheaper for investors who hold those currencies to buy gold.

Such demand increases the price of gold. And no I don't hear any objections. As the pressure builds among the largest currencies, it is likely that gold which could be become the fourth currency could be hailed the hero of the day.

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Fiat -- Sharefin, 15:59:51 01/30/03 Thu

Top 25 annual corporate losses

The following is a list of the 25 largest corporate losses for completed fiscal years over the past 50 years.
The list shows the $98.696 billion fiscal 2002 loss announced on Wednesday by AOL Time Warner Inc. was the largest in the past 50 years.

***AOL Time Warner - 98.69
JDS Uniphase - 56.12
General Motors - 23.5
Lucent Technologies - 16.2
NTL Inc - 14.24
Verisign - 13.36
AT&T Corp - 13.08
Tyco International - 9.41
Intl Business Machines - 8.1
I2 Technologies - 7.75
At Home - 7.44
Ford Motor - 7.39
Raytech - 7.06
CIT Group - 6.69
Webmd Corp - 6.68
Liberty Media - 6.2
Corning - 5.49
CMGI Inc - 5.49
Level 3 Commun - 4.79
PSINET - 4.96
***AOL Time Warner 4.92
Agere Systems - 4.62
UnitedGlobalCom - 4.49
TEXACO - 4.41
Redback Networks - 4.12
Qwest Communication - 4.02

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Amazing to think that AOL Time Warner in just one year lost more money than the value of all gold mining companies in the world.

Cretins....

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Gold -- Sharefin, 15:48:44 01/30/03 Thu

"State of the Gold Market"

Many of these "experts" are talking about the bull run in gold as if it's transient, overdone and unsustainable. Anyone who says that has immediately disqualified themselves from being taken seriously by myself for one simple reason. Look at what's happening to the US dollar (As I have predicted). If you look at the price of gold when the US dollar index was 120 and now the price of gold when the US Dollar index is now below 100, you will find that gold has done only a few percentage points more than maintain a perfect inverse correlation.

What does this say? It says a couple of things. First of all it tells me that gold is indeed again being viewed as a currency. It also tells me that it still appears to be managed under a "stealth gold standard." A lot of people talk about the market being ready to soar. While I think that's certainly possible given the certainty of war in IRAQ, I think the most likely case is that gold will continue to be a proxy for a short position in the US dollar.
~~~
You cannot understand the gold market today if you do not understand the currency markets and the geopolitical environment, Period. Throw out your charts and books full of data and start reading global international news if you want to understand the gold market today. Gold is trading as the alternative to fiat currencies and an inverse proxy for the US dollar index. It's just that simple in my opinion. Before I finish up here... I have a couple of thoughts to consider going forward.

The first thought is that from all the reading I do... I'm concerned that at some point gold is going to get mixed up with the T word. In other words, The government wants to know what everyone is doing with their money and physical gold is not traceable, or not easy to trace. That combined with the fact that the government is going to have a big problem if the price of gold goes through the roof gives very strong motivations for restricting ownership and calling it a terrorist tool. I've read a lot that is pointing my opinion in that direction... be forewarned.

The second thought is that I've been saying for years that if China was smart they would be exchanging their huge hoards of US dollars for gold and doing it quietly. I think that may be in process. I'm here to tell you that if China dumped its US dollar reserves en masse for gold, it would have a worse effect than a thermonuclear warhead on the US economy. We would experience stagflation the likes of which the US has never seen... be forewarned on that as well.

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Fiat vs Gold -- Sharefin, 23:47:47 01/29/03 Wed

Gold: Cover or Cover-up?

No sooner had gold hit the first in its recent series of new six-year highs than Canada's Financial Post quoted a Toronto gold analyst: "Gold...has a huge image problem. ... It's time to stop talking about central banks and hedging strategies, and start focusing on supply, demand and the flow of capital." S. Maich, Hot, but still not respectable - Gold's image problem, December 20, 2002. Huh? The central banks are the swing suppliers, often through leasing rather than outright sales. Does anyone suggest talking about oil prices without mentioning OPEC?

A recent article in Mineweb (T. Wood, Challenges mount for Gata as gold price rises, December 16, 2002) struck the same theme, describing a segment of the Toronto gold community as distressed by GATA's sometimes aggressive tactics. Ironically, the article shed its largest tears for John Embry, the Toronto gold guru most closely identified with support for GATA's views, much to the alleged chagrin of his employer, Royal Bank of Canada. But as manager of the Royal Precious Metals Fund, Mr. Embry -- like many GATA supporters -- posted some pretty impressive investment results in 2002.
~~~
More on Gold Derivatives. Criticism of my December 4 commentary in The Gartman Letter produced at least one beneficial result: online publication of an updated analysis by Frank Veneroso et al., Gold Derivatives, Gold Lending, Official Management of the Gold Price and the Current State of the Gold Market, May 17, 2002 (www.gata.org/Veneroso1202.html; also www.financialsense.com/editorials/veneroso.htm). While this new piece makes no fundamental change in his methodology or estimate of total gold lending by the central banks (i.e., the total short physical position), it does contain three new points worthy of mention.

First, as the title suggests, Mr. Veneroso publicly opines for the first time that the central banks have been deliberately manipulating gold prices. Heretofore, he has confined his analysis to objective estimates of the size of the total short physical position.

Second, he suggests that while aggregate short positions -- particularly those of gold producers -- in the futures and forward markets may have been substantially reduced, aggregate gold loans by central banks have not. Indeed, they have continued to grow, and cannot be reduced as long as physical demand for fabrication and bar hoarding exceeds new mine supply, scrap recovery and official sales. Accordingly, any reduction in aggregate short positions in the futures and forward markets has resulted from intervention by the official sector, which, as he puts it, "has quietly taken the gold shorts from private speculators and producers and transferred them to their books. In other words, the official sector has intervened to prevent an explosive gold derivative crisis."

Third, he reports from contacts in the hedge fund industry, "a growing belief that the gold market is being managed by the official sector and that this management will at some point fail." This perception in itself constitutes a "challenge" to the central banks, and citing recent comments from the Bundesbank about its willingness to consider selling more gold, Mr. Veneroso foresees the possibility of "further official statements or actions that might be construed as part of an attempt to manage the gold price." He adds: "One or more of these statements or actions may be so extreme as to shock the market."

As promised in my December 4 commentary, the chart summarizing the semi-annual statistics on gold derivatives from the Bank for International Settlements has been updated by Mike Bolser to include the separate figures for forwards and swaps and for options as of June 30, 2002, as reported in table 22A of the BIS Quarterly Review released December 9, 2002. As noted previously, total gold derivatives rose 21% in the first half of 2002, from a notional $231 billion at the end of December 2001 to $279 billion at the end of June 2002. Of this $48 billion increase, forwards and swaps accounted for $17 billion and options for $31 billion. While the increase in options was almost twice that in forwards and swaps, the latter increase is particularly noteworthy in light of the reported reductions in producer hedgebooks.

Nor can these increases be readily explained as just more gilding of producer hedgebooks. For example, with respect to reducing the Normandy hedgebook which it acquired in early 2002, Newmont appears to have taken a rather different approach than it used in 2001 to reduce its own. According to its third quarter 2002 Form 10-Q, the Normandy hedgebook is being reduced as aggressively as possible through a combination of scheduled and accelerated deliveries together with "opportunistic" buy-backs whenever possible. These practices, especially if other producers are taking the same route, should reduce total forwards and swaps. Indeed, if gold producers account for most of this category, scheduled deliveries alone in the absence of new forward sales should bring down the total, and to the extent there is any systemic double counting or other overlap, total forwards and swaps should decline even faster.

According to a recent piece from Mitsui gold analyst Andy Smith, figures from several recent surveys indicate that total producer hedgebooks of over 3000 tonnes at the start of 2002 declined to under 2700 tonnes by the end of the third quarter. The failure of these reductions to make even a dent in total reported derivatives suggests that producer hedging is a relatively small portion of total forwards and swaps reported by the BIS, which at a notional $118 billion as of mid-year 2002 exceeded 12,000 tonnes when converted at the average gold price for the preceding six months. In other words, the bulk of this business appears attributable to neither producers nor fabricators but rather to the gold carry trade, primarily banks funding other activities.

In these circumstances, the continued growth of forwards and swaps and the large increase in options are consistent with: (1) leasing of additional gold by the central banks to meet physical demand that exceeds available supply at current prices; and (2) transferring risk from the bullion banks to the central banks through derivatives of all types as appropriate in particular cases, bearing in mind that some of the largest bullion banks are parts of banks generally considered too large to fail. Among these is J.P. Morgan Chase (JPM), with gold derivatives amounting to a notional $41 billion (or approximately 4000 tonnes at $320/oz.) as of September 30, 2002, according to figures from the Office of the Comptroller of the Currency. See GOLD MARKET REGRESSION CHARTS.

While failing to shrink total gold derivatives or even total forwards and swaps, ongoing reductions in producer hedgebooks have deprived the central banks of the principal fig leaf they used to cover their suppression of gold prices through the gold carry trade. Still, it appears that the central banks are continuing to hemorrhage gold. Basic principles of triage would suggest that at this point the central banks should try to manage gold prices higher so as to reduce and eventually stop unwanted outflows from their vaults while at the same time trying to prevent any explosion in gold prices that could cause a gold derivatives crisis.

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Gold -- Sharefin, 23:21:58 01/29/03 Wed

Barrick Files Libel Notice Against Blanchard

Barrick Gold Corp , the world's No. 2 gold producer, launched libel proceedings in Canada on Wednesday, seeking "substantial damages" against U.S. bullion dealer Blanchard & Co. for published remarks that Barrick says harmed its reputation and business interests.

Toronto-based Barrick said it served a libel notice on Blanchard, which bills itself as America's biggest physical gold dealer, and its chief executive, Donald Doyle Jr., on Wednesday for a series of statements published since mid-December.

Barrick's decision to go after Blanchard for defamation follows an anti-trust lawsuit filed by New Orleans-based Blanchard that alleges Barrick and investment banker J.P Morgan Chase made $2 billion in short-selling profits by suppressing the gold price at the expense of investors.

Barrick has dismissed the allegations in the lawsuit as ludicious and without merit.

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Gold -- Sharefin, 23:14:49 01/29/03 Wed

Rising gold price fuels dubious product offers

All that glitters
Dubious precious-metal offers proliferate as price rises

The commercial airing on CNBC offers an amazing deal - a gold-coin replica of the rare 1933 $20 Double Eagle, marked down from $39.95 to just $19.95.

Call the 800-number and ask about the coin's gold content, and the call-center rep will fast refer you to the National Collector's Mint's own toll-free number.

Call that number and you'll recall why all that glitters isn't. The company rep said the coin is plated with 10 millionths of an inch of 24-carat gold -- for a total of two-thirds of a gram.

Yet that claimed total weight is as much a fabrication as the coins themselves, gold dealers said. The true content of such microscopic plating, they said, would be nearer to one one-hundredth of a gram - or about 13 cents worth at Tuesday's closing spot-gold price.

"A prime motivator is greed,"Gold Newsletter publisher Brien Lundin said of the allure of such ads. "That's one of the buttons they're trying to push,"

The dubious advertising campaign that the nation's leading investing TV channel accepted is but a harbinger of the misleading offers that are bound to proliferate should gold continue its rise beyond a six-year high of $368 an ounce.
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That gold mania occurred during a period of hyperinflation and the worst recession since the Great Depression. Another now appears to be building due solely to the greatest loss of national self-confidence since the Russians beat the U.S. into space with Sputnik in 1957.

Knowledgeable precious-metal investors have fared well during gold's recent run-up. Yet the steadfast insistence of many that gold will hit $1,000 an ounce because the global economy is collapsing illustrates what an emotionally charged investment gold actually is.

It's gold's emotional appeal - a seductiveness dating to the dawn of civilization - that threatens to financially sap a whole new generation enthralled by its glimmer should the world sleep a little easier anytime soon.

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Gold -- Sharefin, 22:55:16 01/29/03 Wed

Gold stocks versus gold

Profiting from an intermarket spread

Right now, gold bulls are feeling really good about things. Which means that most everyone else is feeling quite bad about things.

That said, gold is on a tear. Not for any fundamental reason, but because investors are concerned about world affairs, and apparently as a defence mechanism, prefer to hold gold than US dollars or euros.

December gold futures are up from US$315 to US$360 in the last month or so. At the same time, the gold and silver index (symbol XAU) is up from 62 to 74. On a relative basis, the XAU is outperforming -- a 19% gain versus a 14% gain -- which is interesting, because the XAU represents a basket of gold stocks rather than the metal itself. And many investors believe that over the last while, gold stocks have actually been lagging the performance of gold.

The reality lies somewhere in between. For one thing, says Lawrence McMillan, president of www.optionsstrategist.com, the XAU's stronger numbers are illusory. "If we measure the moves in standard deviations, which is the proper way to measure such things, then we incorporate volatility -- the facet of performance that is often ignored."

Looking at it from that perspective, the 20-day historical volatility of December gold futures is 15%, versus a 20-day historical volatility of 40% for the XAU. According to McMillan, given the volatility number, the XAU would be expected to advance further, percentage-wise, than the gold futures when both are trending in the same direction. When you incorporate volatility into the equation, "gold futures have risen about three standard deviations, while XAU is up only about 1.5." That explains the discrepancy and why there have been so many articles about how gold stocks are lagging.

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Gold -- Sharefin, 22:50:40 01/29/03 Wed

Gold Up On Currency, Bush's Speech

London gold edged higher Wednesday
morning in response to renewed concerns over a potential war against Iraq and
a slide in the dollar against the euro.
President Bush's State-Of-Nation address confirmed the U.S.'s commitment
to disarming Iraq, by peaceful or forceful means, and in doing so reaffirmed
gold's safe haven stature.
Dealers said the gold market now seems to have largely priced in the onset
of war with only the timing of military action left as an unknown.
"Talk of war, especially if supported by fresh intelligence on weapons of
mass destruction will keep the gold price supported although the uncertainty
of the timetable for military action may delay any move higher for now," said
John Reade, analyst at UBS Warburg.
But the burden of the threat of war has has been difficult to avoid by the
dollar and again it is currency that is helping to drive spot prices higher
Wednesday morning.
At 1057 GMT the euro stood at $1.0877, up $0.0046 on the day.
Dealers in London said that fresh interest in bullion in the wake of
greater recognition for the metal in the national press and concerns over
waning stock markets by private investors has also spurred the recent gains
for gold and another push higher can be expected short term.
Rory McVeigh, London-based dealer with Mistubishi Corp, said he expected
to see another wave of buying from the open of the Comex market in New York,
which should help the spot price hold above $370/oz.
He felt the performance of the stock market would also have a bearing on
gold once again as investors bail out of falling stock in search of more
sturdy assets.