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Fiat -- Sharefin, 20:22:30 02/27/03 Thu

What the world's ruling class is thinking now

[Laurie Garrett of Newsday -- and author of a great work of contemporary history, The Coming Plagues -- sent this email to a bunch of her friends. It got around. Then it got loose. Reportedly she is quite steamed about it, as well she might be. But it's been circulated to thousands already... -- Roger]

Hi Guys.

OK, hard to believe, but true. Yours truly has been hobnobbing with the
ruling class.

I spent a week in Davos, Switzerland at the World Economic Forum. I was
awarded a special pass which allowed me full access to not only the
entire official meeting, but also private dinners with the likes the
head of the Saudi Secret Police, presidents of various insundry
countries, your Fortune 500 CEOS and the leaders of the most important
NGOs in the world. This was not typical press access. It was full-on,
unfettered, class A hobnobbing.

Davos, I discovered, is a breathtakingly beautiful spot, unlike anything
I'd ever experienced. Nestled high in the Swiss Alps, it's a three hours
train ride from Zurich that finds you climbing steadily through
snow-laden mountains that bring to mind Heidi and Audrey Hepburn (as in
the opening scenes of "Charade"). The EXTREMELY powerful arrive by
helicopter. The moderately powerful take the first class train. The NGOs
and we mere mortals reach heaven via coach train or a conference bus.
Once in Europe's bit of heaven conferees are scattered in hotels that
range from B&B to ultra luxury 5-stars, all of which are located along
one of only three streets that bisect the idyllic village of some 13,000
permanent residents.

Local Davos folks are fanatic about skiing, and the slopes are literally
a 5-15 minute bus ride away, depending on which astounding downhill you
care to try. I don't know how, so rather than come home in a full body
cast I merely watched.

This sweet little chalet village was during the WEF packed with about
3000 delegates and press, some 1000 Swiss police, another 400 Swiss
soldiers, numerous tanks and armored personnel carriers, gigantic rolls
of coiled barbed wire that gracefully cascaded down snow-covered
hillsides, missile launchers and assorted other tools of the national
security trade. The security precautions did not, of course, stop there.
Every single person who planned to enter the conference site had special
electronic badges which, upon being swiped across a reading pad,
produced a computer screen filled color portrait of the attendee, along
with his/her vital statistics. These were swiped and scrutinized by
soldiers and police every few minutes -- any time one passed through a
door, basically. The whole system was connected to handheld wireless
communication devices made by HP, which were issued to all VIPs. I got
one. Very cool, except when they crashed. Which, of course, they did
frequently. These devices supplied every imagineable piece of
information one could want about the conference, your fellow delegates,
Davos, the world news, etc. And they were emailing devices --- all
emails being monitored, of course, by Swiss cops.

Antiglobalization folks didn't stand a chance. Nor did Al Qaeda. After
all, if someone managed to take out Davos during WEF week the world
would basically lose a fair chunk of its ruling and governing class
POOF, just like that. So security was the name of the game. Metal
detectors, X-ray machines, shivering soldiers standing in blizzards,

Overall, here is what I learned about the state of our world:

- I was in a dinner with heads of Saudi and German FBI, plus the
foreign minister of Afghanistan. They all said that at its peak Al Qaeda
had 70,000 members. Only 10% of them were trained in terrorism -- the
rest were military recruits. Of that 7000, they say all but about 200
are dead or in jail.

- But Al Qaeda, they say, is like a brand which has been heavily
franchised. And nobody knows how many unofficial franchises have been
spawned since 9/11.

- The global economy is in very very very very bad shape. Last year
when WEF met here in New York all I heard was, "Yeah, it's bad, but
recovery is right around the corner". This year "recovery" was a word
never uttered. Fear was palpable -- fear of enormous fiscal hysteria.
The watchwords were "deflation", "long term stagnation" and "collapse of
the dollar". All of this is without war.

- If the U.S. unilaterally goes to war, and it is anything short of a
quick surgical strike (lasting less than 30 days), the economists were
all predicting extreme economic gloom: falling dollar value, rising spot
market oil prices, the Fed pushing interest rates down towards zero with
resulting increase in national debt, severe trouble in all countries
whose currency is guaranteed agains the dollar (which is just about
everybody except the EU), a near cessation of all development and
humanitarian programs for poor countries. Very few economists or
ministers of finance predicted the world getting out of that economic
funk for minimally five-10 years, once the downward spiral ensues.

- Not surprisingly, the business community was in no mood to hear about
a war in Iraq. Except for diehard American Republicans, a few Brit
Tories and some Middle East folks the WEF was in a foul, angry
anti-American mood. Last year the WEF was a lovefest for America. This
year the mood was so ugly that it reminded me of what it felt like to be
an American overseas in the Reagan years. The rich -- whether they are
French or Chinese or just about anybody -- are livid about the Iraq
crisis primarily because they believe it will sink their financial

- Plenty are also infuriated because they disagree on policy grounds. I
learned a great deal. It goes FAR beyond the sorts of questions one
hears raised by demonstrators and in UN debates. For example:

- If Al Qaeda is down to merely 200 terrorists cadres and a
handful of wannabe franchises, what's all the fuss?

- The Middle East situation has never been worse. All hope for a
settlement between Israel and Palestine seems to have evaporated. The
energy should be focused on placing painful financial pressure on all
sides in that fight, forcing them to the negotiating table. Otherwise,
the ME may well explode. The war in Iraq is at best a distraction from
that core issue, at worst may aggravate it. Jordan's Queen Rania spoke
of the "desperate search for hope".

- Serious Islamic leaders (e.g. the King of Jordan, the Prime
Minster of Malaysia, the Grand Mufti of Bosnia) believe that the Islamic
world must recapture the glory days of 12-13th C Islam. That means
finding tolerance and building great education institutions and places
of learning. The King was passionate on the subject. It also means
freedom of movement and speech within and among the Islamic nations.
And, most importantly to the WEF, it means flourishing free trade and
support for entrepeneurs with minimal state regulation. (However, there
were also several Middle East respresentatives who argued precisely the
opposite. They believe bringing down Saddam Hussein and then pushing the
Israel/Palestine issue could actually result in a Golden Age for Arab

- US unilateralism is seen as arrogant, bullyish. If the U.S.
cannot behave in partnership with its allies -- especially the Europeans
-- it risks not only political alliance but BUSINESS, as well. Company
leaders argued that they would rather not have to deal with US
government attitudes about all sorts of multilateral treaties (climate
change, intellectual property, rights of children, etc.) -- it's easier
to just do business in countries whose governments agree with yours. And
it's cheaper, in the long run, because the regulatory envornments match.
War against Iraq is seen as just another example of the unilateralism.

- For a minority of the participants there was another layer of
AntiAmericanism that focused on moralisms and religion. I often heard
delegates complain that the US "opposes the rights of children", because
we block all treaties and UN efforts that would support sex education
and condom access for children and teens. They spoke of sex education as
a "right". Similarly, there was a decidedly mixed feeling about
Ashcroft, who addressed the conference. I attended a small lunch with
Ashcroft, and observed Ralph Reed and other prominent Christian
fundamentalists working the room and bowing their heads before eating.
The rest of the world's elite finds this American Christian behavior at
least as uncomfortable as it does Moslem or Hindu fundamentalist
behavior. They find it awkward every time a US representative refers to
"faith-based" programs. It's different from how it makes non-Christian
Americans feel -- these folks experience it as downright embarrassing.

- When Colin Powell gave the speech of his life, trying to win
over the nonAmerican delegates, the sharpest attack on his comments came
not from Amnesty International or some Islamic representative -- it came
from the head of the largest bank in the Netherlands!

I learned that the only economy about which there is much enthusiasm is
China, which was responsible for 77% of the global GDP growth in 2002.
But the honcho of the Bank of China, Zhu Min, said that fantastic growth
could slow to a crawl if China cannot solve its rural/urban problem.
Currently 400 million Chinese are urbanites, and their average income is
16 times that of the 900 million rural residents. Zhu argued China must
urbanize nearly a billion people in ten years!

I learned that the US economy is the primary drag on the global economy,
and only a handful of nations have sufficient internal growth to thrive
when the US is stagnating.

The WEF was overwhelmed by talk of security, with fears of terrorism,
computer and copyright theft, assassination and global instability
dominating almost every discussion.

I learned from American security and military speakers that, "We need
to attack Iraq not to punish it for what it might have, but
preemptively, as part of a global war. Iraq is just one piece of a
campaign that will last years, taking out states, cleansing the planet."

The mood was very grim. Almost no parties, little fun. If it hadn't been
for the South Africans -- party animals every one of them -- I'd never
have danced. Thankfully, the South Africans staged a helluva party, with
Jimmy Dludlu's band rocking until 3am and Stellenbosch wines pouring
freely, glass after glass after glass....

These WEF folks are freaked out. They see very bad economics ahead, war,
and more terrorism. About 10% of the sessions were about terrorism, and
it's heavy stuff. One session costed out what another 9/11-type attack
would do to global markets, predicting a far, far worse impact due to
the "second hit" effect -- a second hit that would prove all the world's
post-9/11 security efforts had failed. Another costed out in detail what
this, or that, war scenario would do to spot oil prices. Russian speakers argued that "failed
nations" were spawning terrorists --- code for saying, "we hate
Chechnya". Entire sessions were devoted to arguing which poses the
greater asymmetric threat: nuclear, chemical or biological weapons.

Finally, who are these guys? I actually enjoyed a lot of my
conversations, and found many of the leaders and rich quite charming and
remarkably candid. Some dressed elegantly, no matter how bitter cold and
snowy it was, but most seemed quite happy in ski clothes or casual
attire. Women wearing pants was perfectly acceptable, and the elite is
sufficiently multicultural that even the suit and tie lacks a sense of dominance.
Watching Bill Clinton address the conference while sitting in the hotel
room of the President of Mozambique -- we were viewing it on closed
circuit TV -- I got juicy blow-by=blow analysis of US foreign policy
from a remarkably candid head of state. A day spent with Bill Gates
turned out to be fascinating and fun. I found the CEO of Heinekin
hilarious, and George Soros proved quite earnest about confronting AIDS.
Vicente Fox -- who I had breakfast with -- proved sexy and smart like a
-- well, a fox. David Stern (Chair of the NBA) ran up and gave me a hug.

The world isn't run by a clever cabal. It's run by about 5,000
bickering, sometimes charming, usually arrogant, mostly male people who
are accustomed to living in either phenomenal wealth, or great personal
power. A few have both. Many of them turn out to be remarkably naive --
especially about science and technology. All of them are financially
wise, though their ranks have thinned due to unwise tech-stock
investing. They pay close heed to politics, though most would be happy
if the global political system behaved far more rationally -- better for
the bottom line. They work very hard, attending sessions from dawn to
nearly midnight, but expect the standards of intelligence and analysis
to be the best available in the entire world. They are impatient. They
have a hard time reconciling long term issues (global wearming, AIDS
pandemic, resource scarcity) with their daily bottomline foci. They are
comfortable working across languages, cultures and gender, though white
caucasian males still outnumber all other categories. They adore hi-tech
gadgets and are glued to their cell phones.

Welcome to Earth: meet the leaders.

On the verge of 1970's type stagflation -- giovanni, 08:07:46 02/27/03 Thu

We are seeing further signs of economic meltdown as it looks like the american real estate market may be the next "shoe to drop". New home sales in america in january dropped 15% month on month. And this has come while interest rates remain at the lowest levels for decades. This is probably the normal fallout from the collapse in the stock market - a similar event happened after the 1987 stock market crash and the resulting housing and economic recession from roughly 1989 to 1992.

What is significant about this recession is that it has happened in face of an extremely loose monetary policy, as has noted economist Dr. Kurt Richebacher. What would happen to the economy and asset prices if interest rates were to rise significantly is that they would sink like a stone.

The 1990's were very much like the 1960's. Low interest rates, huge monetary expansion, enormous govt expenditures on programs like NASA's space exploration, LBJ's new society, and the Vietnam War.

America was allowed to expand its money supply in the 60's without visible inflation because foreign central banks bought up dollars as reserves. America was getting away with this license to print until it all fell apart in the 1970's when the dollar's integrity came into doubt. The result was a stampede out of dollars and into foreign assets, and precious metals which were artificially pegged to a low price. Gold soared from $35 to $800 in around 8 years.

I expect a similar event to take place over the next 10 years, as what has been going on is too similar to what happened in the 60's and 70's. It appears that precious metals prices have been artificially kept low through manipulation in the futures markets, while at the same time monetary and credit expansion has been obscene. The dollar has been the darling of the currency markets for the past 10 years but america's trade deficit of $300-400 billion per annum over the past 6 years or so is a powderkeg waiting to explode.

Once the dollar stampede starts, and signs are that it has already started, the global economy is screwed. Either foreign central banks abandon the US Dollar, or they continue to manipulate the dollar by buying up US debt and paying for it by printing more of its own currency. If it chooses the second option we will see what some refer to as the export of inflation - all currencies will generally decline relative to tangibles.

The objective for the investor is to preserve wealth. That means to avoid the US Dollar, and to avoid assets that have had big run ups in prices over the past 2 decades - they are likely in bubble stages.

Possible investments could be foreign bonds (short to medium term to avoid devaluation if inflation kicks in), precious metals like gold and silver, foreign real estate (such as in Brazil or Argentina where local currencies have lost over 50% of their value over the past year or two).

Gold -- Sharefin, 05:51:43 02/27/03 Thu

The Gold Vocano - Part Two

Jim Sinclair has taken the courageous stance of openly advocating and predicting an eventual gold-convertible USDollar. Necessarily, the present USDollar must either go through a near-death experience or be formally retired. I believe it will be retired in the face of a magnificent worldwide monetary crisis, with our declining abused bloated indebted currency at the epicenter, around which a strained global system revolves, saturated with dollars. I have elaborated in my first article upon the monumental forces and dynamics behind the USDollar Decline Vicious Circle. As the dollar declines in value, the many unchained powerful feedback effects will systemically show the way to further declines. Review the article (see ref#1) for a more detailed discussion of complexities. The key to the phenomenon lies in the dynamics of change. Many naïve observers of the economy and financial markets hail the onset of a lower dollar. But to their peril, they overlook how devastating the declining effect is on every facet of our economy and markets, as well as the world economy. The stock market, Trez bonds, corporate bonds, inflation rate, mortgage rate, supplier costs, import prices, energy costs, corporate profits, consumer spending, refinance cash outs, economic growth -- all these are detrimentally affected by a declining dollar. The vicious circle works like a revolving weapon, issuing blows to each listed economic factor with each repeated cycle. We simply depend too much on foreign capital, to the tune of almost $3 billion per day. I believe the destructive cycle will not end until a crisis develops and mushrooms. Each cycle ratchets up the destructive force, ensuring the next cycle's inevitable arrival, leading to a crescendo in the near future. The dollar declines act much like a debt downgrade, reducing the required cash flow in the debt-based economy for financing the debts themselves. Each round intensifies, putting greater pressure and strain on each debt component, setting up the next round of declines.

The crisis will center on the USDollar decline, which I believe will enter a slow-motion freefall. As the Fed enforces a ceiling on long-term interest rates, forestalling damage to corporate balance sheets and homeowners, they will dismantle the very mechanism to limit the extent of the dollar decline. Naïve observers again do not anticipate such an outcome. They make faulty assumptions on foreign willingness to stand pat and absorb continued and growing losses. They will not. Making matters worse, rising rates together with a falling dollar can deal a double loss to foreigners. High dollar valuation and low foreign labor costs have dispatched manufacturing capacity abroad for a wide range of sectors. Mfg operations have actively shipped to Asia, and assembly plants to Mexico, where labor and plant cost offer big cost advantages. When the market process shifts the strong dollar policy into reverse, all hell breaks loose. The internal mechanisms are absent on the monetary side, with a rate ceiling. They are also absent on the economic side; the apparatus has been exported for 20 years. The United States has neither the monetary nor the economic mechanisms necessary to effectively stem the upcoming uncontrollable USDollar Decline. We have witnessed evidence in a trade gap that continues to yawn wider. Only a gold monetary role will halt the decline.

Sinclair expertly articulates a gold-backed dollar, a new dollar, which would (will) enjoy the support of a partial cover clause. Alan Greenspan himself has spoken in less than his usually cryptic style on the possible return of gold to a monetary role. As Jim Turk reports, each ounce of gold in the US Reserve matches up with over $32,000 of US money supply ($8500 billion versus 260 million oz gold.) If a 5% cover clause were enacted, the USGovt purchases would find balance near $1600 per ounce of gold. Furthermore, official govt sources would be required to continue purchasing gold in order to keep pace with additions to the money supply expansion. A new $400 billion in annual monetary expansion would necessitate the purchase of $20 billion in new gold reserves, which amounts to more than 50 million oz. While this revolutionary step would certainly send the gold price to new heights, it would issue a much stronger signal. We would immediately see rampant competition for scarce gold resources, sending the price above the eventual point of equilibrium. Pressures on the relatively tiny annual gold supply would be utterly overwhelmed. The gold price would far surpass estimates of equilibrium, then settle back.

Given the history of gold tied in ratio to silver, I expect both precious metals to soar in value. Silver was once valued at a 16:1 ratio with gold in the Bimetallic Standard. The current ratio of 78:1 heaps disrespect on this unique metal with astounding technological properties. Convergence in time toward the historical 16:1 ratio will surely come about.

Other major currencies would (will) not necessarily follow suit to create a gold-backed euro or yen. Deeply troubled and endangered currencies would be forced to react in this extreme manner. Other nations such as China will choose instead to back their currency with gold, when positioned advantageously. One can see that only the best and worst positioned nations will back their currency with hard asset reserves !!! Private investors worldwide would enter into competition with the USGovt for that gold. The price of gold would enter the stratosphere. Again, naïve observers actually claim that gold would stabilize in price, since the USGovt would need it to stabilize. What utter shallow baseless nonsense drivel ! I expect gold will rise 10-fold, just like in the 1970 decade, when govt intervention failed to curb the market reaction to widespread currency debasement. Investors worldwide would force official govt buyers to pay up. Once more they overlook the dynamics of change. The USGovt would purchase massive amounts first to stabilize the dollar. It would continue buying every single year as monetary expansion continues its longstanding patterned model. The end result would be a magnificent transformation of the gold (and also silver) market, announcing sustained and regular gold demand, reversing 30 years of the official policy to put gold under foot. The USGovt might talk about legally capping the gold price, but we are talking about world markets, where US Law cannot apply. The impact on Asian Central Banks replenished with gold would change the face of the geopolitical and economic structures.

Gold would (will) stabilize only after the abuse of the currency ceases, only if stability is achieved, and not until it is achieved. Until the dollar currency stabilizes, one should expect gold to rise. If the Fed printing press can issue new dollars in limitless fashion, as Bernanke boasted, then gold also has corresponding limitless upside potential. Newton's Third Law of Motion dictates it - "within an equilibrium, every action invokes an equal and opposite reaction." Transition from old fiat dollar to new convertible dollar will be replete with risks and accidents and jolts from air-pockets, probably with high levels of resentment and distrust. This is the world reserve currency, the monetary standard, standing in denomination of 75% of world banks reserve assets.

The Gold Vocano - Part One

@sherwin - platinum coins -- giovanni dioro, 19:56:19 02/26/03 Wed

The perth mint in australia mints platinum coins. You can check out their website at
The Perth Mint

I also got the following information from their website about distributors in HK. Gold Corp runs the perth mint:

GoldCorp Australia(HK) Ltd
Room 405, St Georges Building
No 2 Ice House Street
Phone: 852 2525 1130
Fax: 852 2810 6809

Gold -- Sharefin, 02:43:09 02/26/03 Wed

Yellow brick crossroads

I love gold (or as they say in the gold camps of northwestern Quebec, "J'adore l'or"). It is really the most marvelous metal. It's the most ductile of all metals, capable of being drawn into wires finer than frog's hair. It is singularly malleable, and can be hammered into sheets so thin they're translucent. It is impervious to rust or corrosion, and immune to most acids. It is among the best conductors of electricity. It is a truly rare element; the amount of gold in the earth's crust being only two parts per billion. It has been a medium of exchange and a recognized store of value since the dawn of civilization.

And, perhaps most importantly, gold has the power to cloud men's minds. Oh, the northern lights have seen queer sights, indeed, among the men who moil for gold, as the poet Robert W. Service might have said.

For a mining promoter or a geologist, there's no easier way to convince a skeptical investor than to show him how to pan a handful of fines, swirling it around to reveal that siren smile of gold dust at the bottom of the pan. Suddenly the punter's eyes are afire with the flame that launched hundreds of gold rushes, and many an armada, too.

Anyway, before I get swept away on that tide, too, let me tell you, I'm trying to keep this whole gold bull market in perspective. It's been a long time since anyone has been so excited about gold. I remember walking through the main banking hall of one of the big banks on Bay Street back in 1980. There were hundreds of people lined up at the counter: I'd never seen the place so busy. What's this, I thought, a run on the bank? So I asked a security guard what was happening. He told me that all these people were lined up to buy gold. I found it a little odd that so many people wanted to buy gold when it was trading at its all-time high, when so few of them had been interested only a few years earlier when it could have been had for $65 (all prices in U.S. dollars) an ounce. I immediately went and sold all my gold. Of course, it wasn't that long before the golden balloon burst.

Through the rest of the 1980s and into the 1990s, gold languished, while every gold analyst at every dealer I ever worked for, year in and year out, predicted that gold prices would average $450 an once next year. We used to call them Godot Analysts, since they were always waiting for something that never came.

But gold is back. Geopolitical tensions, a weakening U.S. greenback, the debt bomb, stocks already trashed-and still expensive-gee, maybe it's time for a little of that old-time hard currency in the old portfolio. Why, unless I was hallucinating at the time, I was sure I even heard Federal Reserve Chairman Alan Greenspan waxing somewhat wistfully on the subject of gold-backed currencies the other day. Ok, sure, maybe he was having an irrationally exuberant moment-gold can do that to a person.

Gold has been enjoying a nice upward run, and the gold bugs have all, and I mean all, come out of their bunkers. Maybe some of them were running out of freeze-dried food, but many of them had seen the signs in the charts, and the golden goose was on the loose.

Gold -- Sharefin, 02:37:25 02/26/03 Wed

Hedged In

Not that long ago, Barrick Gold Corp. was in the top tier of global gold companies. In fact, it was probably the most respected producer in the industry, and its shares received a premium valuation as a result. Has that situation now reversed itself, to the point where Barrick is being unfairly penalized? A case could be made that it has.

The key to Barrick's reversal of fortune, not surprisingly, is the price of gold. When the price of bullion was low, as it was for much of the 1980s and 1990s, Barrick's aggressive hedging program-which was pioneered by current Chief Executive Randall Oliphant-made it far more profitable than most of its peers, who were exposed to the spot price.

Barrick, however, managed to negotiate forward contracts that locked in relatively high prices for its production, and the use of this hedge "book" helped produce billions more in profits than the company would otherwise have had. The dependability of this strategy was the main reason for the premium on Barrick shares.

Gold -- Sharefin, 02:32:12 02/26/03 Wed

There's more to this rally than just investor gold fever

For three months now, serious investors have watched in horrified fascination as the price of gold soared to heights unseen since the mid-1990s. They're fascinated because gold is, well, fascinating. They're horrified because, for the most part, they've missed the rally.

Gold, we all know, is one of the worst investments in the world. It is fickle, treacherous and wholly reliant on the whims of the mob for its daily ups and downs. Worst of all, gold never gets consumed. Almost all of the gold that has ever been pulled out of the ground since antiquity is still around. Central banks own most of it, and have an irritating habit of dumping big blocks into the market whenever the price starts to rise. Thus, none of the normal rules that apply to investments seem to apply. Gold is a universe unto itself. And it has done nothing but disappoint for most of the past 20 years.

And yet, there's this rally. Admittedly, it has taken a bit of a breather in February. But who's counting? Even given the selloff that began in early February, when the spot price briefly surged above $380 (U.S.) an ounce, bullion is still up more than 10 per cent since the beginning of December. The TSX gold sector, as represented by Barclays Global's iGold exchange-traded fund (XGD--TSX), is up about 8 per cent. Not bad considering that, over the same period, the Standard & Poor's 500 index, the broadest measure of the U.S. market, is down more than 10 per cent.

The obvious question: Where to now?

Gold -- Sharefin, 02:27:14 02/26/03 Wed

Gold surges on international trend

The buying was mainly triggered on international trend on brisk buying by market players and general investors after reports of North Korea launching an anti-ship missile added to the anxiety over geopolitical hot-spots.

Marketmen said trading sentiments were already bullish on heavy purchases by market players amid reports of heightening tension between US-led allies and Iraq.

how can i buy pl coin -- sherwin, 02:25:13 02/26/03 Wed

i want to knwo how can i buy pl coin? Maple leaf / US Eagel. 100 new. & ship to HK?
about 30 pcs 1 oz.?

Gold -- Sharefin, 02:23:32 02/26/03 Wed

Gold surges on international trend

New Delhi
Gold regained its glitter following a sharp upsurge on the bullion markets across the country.

This was due to heavy purchases by stockists triggered by a firm trend in the international markets and registered gain ranging between Rs 95 and Rs 50 per 10 gram.

Gold -- Sharefin, 02:21:19 02/26/03 Wed

Placer sees gold production climbing

Mining firm Placer Dome Inc. said Tuesday it expects gold production to climb this year by about 25 per cent this year while exploration spending will climb to about $60-million (U.S.).

In 2003, Vancouver-based Placer said it expects gold production to reach 3.5 million ounces up from 2.8 million ounces in 2002, which saw record production in the fourth quarter.

Cash and total costs are are expected to be about $194 an ounce and $256 an ounce respectively.

Gold -- Sharefin, 02:20:09 02/26/03 Wed

Lihir's cuts to gold hedging pay off

Lihir Gold, the gold producer part-owned by Rio Tinto, said it had overhauled parts of its Papua New Guinea mine and was selling more gold at spot prices as it moved to take advantage of a 23 per cent surge in price in the past year.

"We rolled our hedge book out last year to give ourselves more year-by-year spot exposure, so we're certainly pleased with the increase in the gold price," managing director Neil Swan said.

Gold -- Sharefin, 02:15:08 02/26/03 Wed

John Hathaway Talks About Investing In Gold - video interview

Fiat vs Gold -- Sharefin, 02:13:32 02/26/03 Wed

China's Gold Output Expected to Reach 190 Tons in 2002

China's gold output is estimated to top 190 tons in 2002, sources of the Gold Administration of the State Economic and Trade Commission disclosed.

China produced 163.37 tons of gold in the first 11 months of 2002, up 0.69 per cent year-on-year and 105.4 per cent of the annual production plan. Smelting enterprises produced 63.39 tons, up 6.77 per cent. To be specific, Zhaoyuan produced 8,944.1 kg, up 18.8 per cent; Dongfang, 2,113.1 kg, up 50.8 per cent; Liaoning Xindu, 38 per cent; Daye, 3,669 kg, up 42.5 per cent.

Generally speaking, China's gold production is in a spiral rising trend.

Fiat vs Gold -- Sharefin, 02:12:11 02/26/03 Wed

Gold traded lower after news on bank sale

Asian stock markets tumbled and both gold and oil prices soared higher on news that North Korea had fired a missile into the sea near the Korean peninsula in a provocative move ahead of the inauguration on Tuesday of South Korean President Roh Moo-hyun, in addition to renewed tensions over Iraq.

On Commodity Exchange (COMEX), April gold started at around $356.70 an ounce and then climbed higher on $358 ~ $359 region as tensions from Iraq to North Korea took centre stage for jittery investors.

Gold prices reversed and lost some of its recent gains after the reports that the European Central Bank's receivables are down 326 million euro following a 30 tonne bullion sale by an unnamed national central bank. Although the bank sales were wholly in compliance with the September 1999 Washington Gold Agreement, the extent of the sales had dented the resolve of weak-handed speculators and triggered a round of uniform long liquidation.

Fiat vs Gold -- Sharefin, 02:09:26 02/26/03 Wed

ECB Sold Gold Worth 326 Million Euros; Currency Reserves Fell

The European Central Bank said one of its member banks sold 30 tons of gold worth 326 million euros ($351.1 million) last week, in line with a central bank agreement of 1999. The seller wasn't identified.

Foreign currency reserves in the euro area fell 400 million euros to 224.2 billion euros in the week ended Feb. 21. Banknotes in circulation dropped 1.3 billion euros to 341.6 billion euros.

The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, Ireland, Finland, Austria, the Netherlands, Belgium, Luxembourg and Greece, the 12 countries that share the euro as their common currency.

Who was the buyer???
And where does the next lot come from???

Gold -- Sharefin, 02:07:39 02/26/03 Wed

Gold down on ECB sale, Iraq disclosure

COMEX Gold tumbled in choppy trade Tuesday, reversing from a 13-day high after the European Central Bank said one of its members sold an unusually large chunk of bullion last week.
But support cracked after the ECB said gold reserves fell by 326 million euros because of a 30-tonne sale by a national central bank last week.

"That's what gave the price back from where we were last night," said a floor broker.

Dealers declined to speculate on which central bank dumped bullion. But they said selling into strength was the best way to take advantage of gold's rally and stabilize the market.

"It was certainly larger than normal. But of course what the market is telling us is it's taking on the central bank sales very easily now. Very efficiently," said MacDonald.

Gold -- Sharefin, 02:00:25 02/26/03 Wed

Gold hedging brinkmanship is here

Newmont [NEM] has provided unusually fulsome disclosure - as far as gold producers go - on a troublesome portion of its hedge book. The revelations are important because they potentially recast the definition of hedging margin calls, as well as provide an unusual view of hedging counter party risk management.

Newmont revealed that its hedge counter parties for the Yandal operations - understood from Australian sources to be JP Morgan Chase and Credit Suisse First Boston - have exercised “right-to-break” clauses prior to the scheduled maturities of Yandal's forward sale contracts. This means that the counterparties can demand cash settlement rather than wait to take delivery of promised ounces of gold. (See table at end of story)

The counterparties demanded early cash settlement in December and January, with the right to do so again in June 2004.

The right-to-break amounts to a type of margin call since it creates a distinct liability that is solely determined by the counterparty and is vastly different in character and impact from hypothetical mark-to-market losses conventionally reported.

Yandal is the festering sore on Newmont's overall hedge book, comprising two thirds of its unrealised negative value of $433 million. Alarmingly for American investors, but commonplace for their Australian counterparts, is Yandal's paucity of reserves relative to its hedged commitment - 2.1 million ounces and 3.4 million ounces respectively. The 1.3 million ounce deficit is equivalent to nearly two years of production and can only be offset by a large exploration discovery or by buying metal in the market.

The problem is all risk - what else could have triggered the cash calls. Yandal's impecunious balance sheet and sharply higher gold price has clearly caused turbulence in the counterparties' own offsetting contracts.

So Bullion banks willingness to stay their cash calls may be a function only of their leverage over players further along the chain. In the case of the Australian banks, it seems, from anecdotal evidence that they are under some pressure to deliver on their portion of the hedge agreements with the country's Central Bank no source of help given its gold reserve sales and heavy lending.

That has some experts convinced Newmont's brinkmanship could have much broader ramifications for bullion banking across the globe.

It is another timely reminder of how bullion banks held the upper hand when providing financing for new projects through gold forward sales, protecting themselves in several ways whilst leaving shareholders vulnerable. More so for companies with feeble balance sheets to begin with - companies investors should not have been encouraging to bring marginal deposits to account anyway.

Gold -- Sharefin, 01:52:55 02/26/03 Wed

Gold cartel and hedge funds attack

Riding the gold market bucking bronco
By Harry Schultz

Both the AMEX Gold Bugs Index and the Philadelphia Gold Silver Index slid more than 4 percent over the one week period.

What happened? Two groups attacked the shares:

Hedge funds
Certain hedge funds are long bullion and have been shorting shares as a hedge -- not a quaint action for a hedge fund!

Some hedge fund managers saw that gold at $380 was 15 percent over its 200 day moving average -- the highest premium in 15 years -- so it was prudent to hedge.

If they¹re lucky, they'll profit on both positions -- if they cover before the turn appears obvious.

Gold cartel
The gold cartel put their boot in, shorting shares in the hopes of creating a negative climate so bullion would also fall.

Bullion finally caved in by day's end, falling back from its $360 Tuesday high.

In all this to and fro action, the gold indices formed small, toppy chart patterns and fell below a kind of neckline, targeting a lower price.

Not deep in price but deep in nervous-making for weak holders.
What to do?
Where is the gold price going? In my opinion, it will shoot past $400 in the months just ahead, probably by August. Later it will move to even higher numbers.

Gold -- Sharefin, 01:49:32 02/26/03 Wed

TOCOM gold falls as news of ECB sale reaches Asia

Tokyo gold futures posted double-digit losses on Wednesday after news that a European Central Bank member bank had sold a big chunk of bullion sent the metal reeling overnight.

But even as copy-cat selling pushed yen-based futures to five-day lows, brokers said gold's safe-haven shine remained as bright as ever in an uncertain world.

"It's really just following New York lower after the ECB sale," a brokerage analyst said.
COMEX gold tumbled overnight after the ECB said gold reserves fell by 326 million euros ($351 million) because of a 30-tonne sale by a national central bank last week.

That sale came despite fears of war in the Gulf and the spectre of rising oil prices, suggesting that one central bank at least remained unconvinced of gold's safe-haven role.

Fiat -- Sharefin, 22:57:35 02/25/03 Tue

Re-thinking Alan Greenspan

Alan Greenspan, like the US dollar, was for a long time believed to be almighty. But CFC's chief strategist argues his actions and inactions have had huge implications for the global financial system, some very negative.

The Fed Chairman has made several critical miscalculations and missteps since 1999 that have exacerbated, if not actually triggered, many of the woes the United States and global economy are currently experiencing.

Not that fiscal policy has helped, but the Fed's lack of coordination and inappropriate actions have buffeted the US economy to the precipice of depression. One could argue that many of the mistakes attributed to Chairman Greenspan are not within the purview of the Federal Reserve or the banking industry. However, unlike his unceremonious predecessors, Chairman Greenspan by the virtue of a nearly deified public persona - he has shaped public opinion and affected public policy on a myriad economic issues.

If he is going to keep interest rates artificially low for an extended time, Greenspan needs to tighten bank lending standards for consumer loans, especially home loans, where he has now created a second bubble.

It's time to replace the irrational reverence granted to Chairman Greenspan with sober objectivity and examine the fragility of the world economy and vulnerability of the US dollar. History teaches us that the Federal Reserve and monetary policy can either be the market's very best friend or its most perverse enemy.

Fiat -- Sharefin, 21:14:18 02/24/03 Mon

China learns the currency game

One of the more interesting developments at this weekend's G7 summit meeting in Paris is Japan criticizing China for using its currency to boost its exports at the expense of its global rivals.

It's ironic as Tokyo has used -- and still uses -- the same weak-currency strategy to incredible success over the years. Ask the United States, which adopted "managed trade" and other protectionist measures to fend off the Japanese export machine.

In Paris, Japanese Finance Minister Masajuro Shiokawa urged the world's richest nations to pressure China to drop its currency peg to the dollar -- which has been locked at around 8 yuan to the greenback since 1994. To the chagrin of the Chinese, the rival Japanese are attracting listeners as the U.S. and Europe indicated support for such a move.

Gold -- Sharefin, 20:34:51 02/24/03 Mon

Gold jumps in Asian trade on Iraq, Korea missile

Gold prices steadied at midday
in Asia on Tuesday, after a US$3.00 leap at the opening on news
of North Korea's test firing of a land-to-ship missile, which
added to renewed tensions over Iraq as the U.S. and Britain
tabled a new resolution at the United Nations.
Spot gold leaped to US$360 an ounce bid in early morning
trade on Tuesday with confirmation that North Korea had test
fired a cruise missile into the Sea of Japan.
But the market dropped back after comments from a North
Korean official attending the Non-Aligned Nations Summit in Kuala
Lumpur that the test firing was for "security" or defensive
purposes and not an act of aggression.
"I think the way the market has reacted is pretty
reasonably," said Gordon Cheung, director of Precious Metals at
Mitsui Bussan in Hong Kong.
"Once the market has really thought about it and once the
officials came out to say this is for security reasons, it is not
aggression... the market took it pretty well," Cheung said.

Gold -- Sharefin, 20:30:21 02/24/03 Mon

Value of gold India consumed in 2002 grows by 8 pct

Despite a sharp fall in gold imports, India's consumption of the metal rose by 8 percent in 2002, giving a boost to the traditional deep faith in the yellow metal as a "safe haven" investment during crisis.

The value-wise rise in gold import was an indication that India, the largest gold consuming nation in the world, had reaffirmed faith in the metal as an asset of safety as well as an item of adornment, according to Hiroo Mirchanda, associated director- Jewellery (India) World Gold Council said in a statement Friday.

"Gold's inherent value as an adornment and secure savings option was clearly evident in 2002. Despite high and fluctuating gold prices, the Indian consumer's loyalty to gold continued," she said.

Meanwhile, India's gold import fell to 797 tons in 2002 as against the previous year's import of 843 tons mainly due to the sharp rise and volatile gold prices during 2002.

War -- Sharefin, 20:26:31 02/24/03 Mon

Oil, gold up on Iraq fears, N.Korea missile test

Oil and gold rose on Tuesday, Asian stocks fell and the yen wobbled as the United States and Britain circulated a U.N. resolution setting the stage for war with Iraq and North Korea test-fired a land-to-ship missile.

The U.N. resolution opened a fresh period of intense diplomacy among split Security Council members as France and Germany issued a rival proposal extending U.N. inspections for at least four months. No vote is expected on the new resolution for another two weeks.

Japanese and Korean stocks fell after a tumble on Wall Street and on news that North Korea had fired a missile into the sea near the Korean peninsula in a provocative move ahead of the inauguration on Tuesday of South Korean President Roh Moo-hyun.

Japanese shares <.N225> lost over two percent at one point and Korean stocks <.KS11> crumbled over 2.5 percent.

NYMEX oil futures gained 29 cents in electronic trading to $36.77 a barrel, approaching recent 29-month highs, after a rise of nearly a dollar in New York as the United States and Britain prepared to present their resolution.

Gold rose around $3 to $358.50/9.50 in Asian markets on concerns U.S.-led military action against Iraq was getting closer and on jitters over the North Korean missile test.

The yen was under pressure on the missile firing but the dollar still looked vulnerable to further selling on mounting fears over possible war in Iraq. Worries about Japanese intervention provided underlying support for the greenback.

Lenny's Corner -- Sharefin, 20:01:09 02/24/03 Mon


It was a mixed week for the precious metals, with gold beginning to consolidate in the low $350's after its tumultuous decline from $390 to $345 in the previous week. It would appear that much of the "war premium" has now disappeared and the gold price seems stable and durable at or near these prices. Historically, rallies due to fear and geopolitical tension tend to fade primarily due to the speculative excesses seen, but price advances in gold based upon bullish macroeconomic fundamentals are far more desirable. And, last week, economic news underpinned the gold market with the release of the PPI, showing the highest rate of inflation in 13 years. Factor in the burgeoning trade deficit, the growing governmental deficits in the USA, and the continuing death spiral of the USD, the probability (or should we call it certainty?) of higher inflation and investors will continue to seek the historic solution of buying gold not only for its prospects for continued appreciation but as a means of capital preservation in an economic environment where almost all other investment venues continue to look quite unfavorable.

While this commentary recently warned of the dangers inherent in the market when gold was rocketing skyward solely based upon speculative fever, the current gold price demonstrates a much more favorable risk/reward profile, and both investors and speculators should be looking to establish long positions. I would estimate that downside in gold will probably be limited to $10 to $15 from current levels, even if global geopolitical tensions completely subside, which seems incredibly unlikely. The low $340's should contain any decline in price, as strong physical buying by commercial/industrial concerns should be seen. The risks are now decidedly on the upside, and short positions in gold should be avoided like the plague. Gold was down 40 cents for the week.

I thought the silver market quite interesting last week, up 13 cents, as rumors abounded, and as one major Bullion Bank was extremely active on the exchange. In a recent press release, a major gold producer who currently has a rather large hedge position in silver, announced that they will be repurchasing their previously sold forward position in this market. In their words, "for a group of contracts, totaling 21 million ounces, we intend to "financially settle" (emphasis added) these contracts." This was enough to embolden the speculators and frighten the shorts in the market and prices rallied to contest the 200-day moving average at about $4.65.

One major Bullion Bank was extremely active last week in "selling the spread," meaning that they were buying the front months of silver as they simultaneously sold the back months. This trade is also termed a "cash and carry" trade, as the trader sometimes PAYS for the silver coming due in the short term only to deliver it in the future months. This strategy also has two intended or unintended responses from the internals of the marketplace. One, as the contango (the difference between the spot and the future price) is pressured, lease rates rise. Silver lease rates went from about .4% to well over 1% last week. To the untrained eye in the market, such a rise is seen as very bullish and encourages speculative buying. Secondly, speculative interest is also rekindled in the hope that the Bullion Bank will indeed take delivery of millions of ounces of silver in the coming delivery month, applying upward pressure to the market.

The World Gold Council recently released the news that India, the world's largest demand center for gold, imported 31% less gold in 2002 over 2001. Total imports were on the order of 410 tons, about half of what was demanded from world markets just several years ago. The decline in demand is blamed upon the high price of gold and its accompanying volatility. While such statistics are, on their face, quite negative, there is some reason for optimism. Please note that total sales of gold in India remained rather constant at about 700+ tons/annum in 2002 BUT that internal sales of gold of an estimated 322 tons (a natural occurrence when prices rise and investors book profits) filled in the deficit between external supply and internal demand. Now, please understand that it is a market truism that such large amounts of gold sold into the market only occurs as prices enter new highs, and tend to fall back in size if the market consolidates. All in all, I find this fundamental news somewhat encouraging, rather than the bleak, bearish tone that a cursory examination would entail. After all, even with sharply higher gold prices last year, Indian consumers bought just about as much as they did the year before, just less was from the outside world.

It was also announced that sales of jewelry and watches in Germany fell by 7% in 2002 over the previous year. Perhaps this has more to do with the general economic trend in that country rather than a secular decline in demand. After all, these products are still luxuries, and their public demand is naturally curtailed in a poor economic environment. I really don't think that this means very much at all.

Of much greater long-term benefit to the gold market is the continuing liberalization in many countries, allowing investors and speculators greater access to the marketplace and new venues for trading and hedging. We have recently seen China begin to deregulate its gold market, allowing industrial buyers and sellers to deal directly on a new exchange. And, some bullion products are now beginning to be sold to individual investors. Demand in that nation has been in the 200 tons/annum range and some analysts are hopeful that it may reach 500 tons/annum in the near future. Now, news has emerged that after years of years of petitioning the government, India has finally changed their laws and has now allowed futures trading in the precious metals. This alteration will most certainly beneficially raise the demand for gold as jewelry manufacturers and retailers can now hedge their inventories, and perhaps even lock in future purchases of gold. Investors will also benefit as they can now buy gold directly, as an investment vehicle, without the associated higher costs of buying jewelry. Its really quite simple, kids always want to play in the new sandbox and investors/speculators are not at all different. Just remember the famous quip in the movie, Field of Dreams.."If you build it, they will come."

There is also news that the South African government will soon legalize the ownership of gold, in all of its forms, for the public. Heretofore, I believe that citizens of South Africa were restricted to only owning gold in coin form, and these coins were rather expensive and somewhat unavailable easily. With gold firmly entrenched in the mind of the average South African, it is likely that gold demand in that country will greatly increase. All such market liberalizations are very beneficial to the market long-term as they "legitimize" and expand the investment market for gold. History has shown us that jewelry demand can NEVER effectively raise the gold price as such demand is highly elastic, meaning that demand tails off as prices rise. We need the global investor to force gold prices higher and the more countries that allow such activities, the better the market can be.

Richard Russell -- Sharefin, 19:59:49 02/24/03 Mon

I'd put those odds at 80/20 that the correction is over

Gold -- The rationale for buying and holding gold becomes clearer by the day. The US is faced with the "inflate or die" choice, and as the deficits continue to surge, the reasons for protecting ourselves with gold become overwhelming. Even the gold manipulators and gold hedgers will be pressed to the wall as the primary trend of gold breaks down all barriers.

Gold -- Sharefin, 19:51:18 02/24/03 Mon

Newmont downsizes gold hedges in 2002

Newmont Mining Corp. the world's largest gold miner, on Monday said it had slashed by more than 40 percent the gold hedge book it inherited last year in a three-way international merger.

In a press release, Denver-based Newmont also said it would release its financial results for 2002 after the U.S. Securities and Exchange Commission (News - Websites) concured with its accounting for recent acquisitions.

Many gold companies use hedging to lock in prices for nuggets that have not yet been mined.

A committed non-hedger, Newmont acquired a large hedge book from Australia's Normandy Mining in the tie-up with Normandy and Canada's Franco Nevada Mining early last year.

Newmont said total ounces hedged through forward sales and options on a pro-forma basis fell to 6.6 million at the end of 2002 from 11.5 million a year earlier.

The company produced 7.6 million ounces of gold last year at a total cash cost of $189 an ounce. It said fourth-quarter output was 2.2 million ounces at a cash cost of $178 per ounce.

Committed ounces hedged through forward sales fell to 5.23 million at the end of 2002 from 9 million a year earlier.

"This represents approximately nine months of equity gold production, or 6 percent of reserves," Newmont Chief Financial Officer Bruce Hansen said in a press release.

"A minimum of 1.1 million committed ounces will mature or are scheduled to be delivered into (contracts) during 2003, and we will continue to look for opportunities to eliminate additional positions," Hansen said.

Hedging worked well for gold producers when gold prices were falling in recent years, but the practice backfired as the metal's fortunes improved, creating an investor backlash.

Gold companies that had relatively small hedges or did not hedge at all were able to enjoy the full benefit of the rally in gold prices in 2002 and this year.

Newmont said it had total gold reserves of 86.9 million ounces at the end of 2002.

switching to -- Cyclist, 12:35:49 02/24/03 Mon

MDG.Sub 20.00 cad the stock is a steal.
Unbelievable but similar thing happened last year with Rangy.They were giving it away as well.

ChartsRus -- Sharefin, 07:38:26 02/24/03 Mon

Hedged vs Unhedged Gold Stock Indices

Also MineWeb Gold Indice Comparisons
See which sector is outperforming/underperforming.

Gold -- Sharefin, 03:01:17 02/24/03 Mon

Spending plans from gold sales given short shrift

The Swiss have thrown out a government plan to use proceeds from the sale of excess gold reserves for humanitarian projects.

Voters rejected two proposals on how to spend the money - a clear signal that the government needs to come up with new ideas about what to do with the cash.

Gold -- Sharefin, 03:00:01 02/24/03 Mon

Turning to gold

The gold rush is on.

With the stock market clawed by a relentless bear market that shows no sign of letting up, the precious metal has regained luster as an investment.

Gold, long valued by investors as a refuge from war and other international crises, hit a six-year high of $370 an ounce on Feb. 4 before prices slipped a bit. Gold pegged for March delivery went for $354.50 an ounce late last week during trading on the New York Mercantile Exchange.

Gold's growing appeal to investors isn't really surprising since Wall Street has been in the dumps and people are searching for a safe haven, said Stewart Welch, founder of the Welch Group financial planning firm.

"Anytime you've got a market down three years running, people will say `Give me something else besides stocks,'" he said.

Institutional investors and wealthy individuals seeking refuge from war have traditionally been the main purchasers of gold. But recently gold has gotten a much broader following, Welch said.

"We're in a three-year bear market and investors have mainly sought three alternatives U.S. treasuries, real estate and gold," he said.

While gold prices rose about 60 percent last year, gold remains a risky investment, Welch said.

"The problem with gold is, it isn't a consistent performer," he said. "Whereas people can count on stocks most of the time, gold only works in times of crisis."

Gold -- Sharefin, 02:56:36 02/24/03 Mon

Brown's gold sell-off leads to £850m loss

Gordon Brown's gamble in selling off part of Britain's gold reserve has cost the country almost £1bn, according to the latest figures.

Ruth Kelly, the financial secretary to the Treasury, confirmed last week that the mixed currency portfolio of euros, United States dollars and yen bought by selling gold is now worth £2.1bn.

But when the price of gold recently reached a six-year high, questions were asked. And the Treasury has confirmed that if the money had been kept in gold stocks, it would now be worth £2.95bn. In effect, the decision to sell off part of the gold reserve has cost the Exchequer £850m.

Conservatives are calling for Mr Brown to be held to account for his "bad housekeeping". The Tory MP Cheryl Gillan said: "I don't know why 40 per cent of our gold was invested back into euros because it is an untried, untested currency."

Gold -- Sharefin, 02:51:29 02/24/03 Mon

Shanghai Exchange ends China's gold marketing control

On Oct. 30, 2002, the Shanghai Gold Exchange (SGE) was officially opened. This event ended the Chinese government's control of the country's gold marketing system.

Before the SGE was established, all of the gold produced in China had to be sold to designated Chinese banks. Based on an allocation and quota system, all enterprises needing and using gold had to apply for and, with permission and approved quotas, buy gold from the authorized Chinese bank organizations.

Following the establishment of the Shanghai Silver Exchange in 2001, the establishment of the SGE took more than two years to prepare. Currently, the buyers and sellers participating in the SGE are limited to members authorized and registered in China. The SGE currently has 108 members. They include 13 commercial bank entities, 24 gold producers, 61 gold users, eight gold smelters and two gold coin manufacturers. All members are Chinese entities. The members control about 75% of the Chinese gold production, 80% of the country's gold consumption and 90% of the gold smelting capacity.

Traditionally, 96% of all Chinese gold consumption was used for the jewelry industry. Individual investment in gold was prohibited under the old system. Chinese gold demand in recent years was about 200 t/a (6.4 million oz/year). Gold demand in China is likely to increase to 500 t/a (16.4 million oz/ year) within the next decade, if individuals can purchase and invest in gold.

Gold -- Sharefin, 02:49:57 02/24/03 Mon

Real estate, bear, gold funds still shine

Throughout Wall Street's three-year decline, three fund sectors -- gold, real estate and so-called bear-market funds -- have been a haven for investors, providing solid returns that offset some of the overall market's losses. The popular wisdom is that these funds have the best of their gains behind them, but some analysts say it's not too late to buy into them.

With the economy still sputtering and the possibility of war with Iraq depressing the market, havens, or defensive sectors, still appeal to many investors.

Gold -- Sharefin, 02:44:18 02/24/03 Mon

Gold's Glittering Allure Often Blinds Investors

In his classic 1935 book, "The Battle for Investment Survival," stocks-advocate Gerald M. Loeb describes the desire for gold as "the most universal and deeply rooted commercial instinct of the human race."

It is an instinct that appears to have resurfaced in recent months as investors have flocked to gold amid concerns about worsening economic conditions and a possible war with Iraq. But is gold's reputation as the ultimate haven really justified?

A look at the factors underpinning the price of gold suggests that, far from safe, making an investment in gold at current levels could be a lot riskier than many people think. That is because the more that gold rises, the less connected those gains are to fundamental factors such as physical demand and the more they rely on the whims of speculative traders. While prices may keep climbing, understanding why and predicting what they will do next will get tougher by the day

Gold -- Sharefin, 02:31:13 02/24/03 Mon

The clock is ticking

The gold market in India could be set for a revamp over the next few months, following the announcement on Friday that the Indian government is lifting the ban on futures trading. The news has left the way clear for the National Multi-Commodity Exchange of India to start trading a further 54 commodities, including gold and silver from next month.

Gold -- Sharefin, 02:28:31 02/24/03 Mon

Gold Products Favored by Chinese Consumers

The Spring Festival and approaching Valentine's Day celebration will offer glimmering business opportunities for gold retailers, experts and insiders say.
Regarded as auspicious gifts, gold jewelry and decorations were some of the hottest selling items around the nation during Spring Festival.
Last November's liberalization of the gold market together with the re-emergence of small-sized gold bullion on the retail market have proved an exciting new investment opportunity for investors.
Besides the afore mentioned state-owned banks, the Shanghai Pudong Development Bank launched its gold leasing business last year -- the first time in China since 1949, when the domestic gold market was controlled by the central government.
Lu WenYuan, secretary-general of the China Gold Association, told China Daily that the active participation of the commercial banks was largely due to growing interest in the market.
So far, 108 units have registered as members of SGE, for the right to take part in on-spot gold trading.
They include 13 commercial banks, comprising state-owned groups, gold jewelry retailers, gold mine operators as well as gold processors.
"Liberalization of the market has brought a new business -- gold trading -- to banks, in other words, it has provided a new revenue channel for them," said Lu.
Liu Shan'en, an expert with the Beijing Gold Economics Research Center, said that the banks trading enthusiasm has been bolstered by a likely change in trading laws, which is set to allow individuals to invest in gold.

Gold -- Sharefin, 02:21:12 02/24/03 Mon

Gold continues to earn its shine

"The slowing economy has eliminated the fear of inflation, but it has raised concerns about deflation," said Loyd Stegent, president of Stegent Equity Advisors in Houston.

"Since lower interest rates have been slow to the rescue, the Fed has had to take additional steps to prevent the deflationary abyss that occurred during the Great Depression," he said. "So they have turned on the printing presses in an effort to reinflate the economy and have been buying Treasurys."

Gold, of course, is always a hedge against inflation, the end result of printing money.

To Stegent, the federal budget deficit also weakens the already slipping dollar, sending more people to precious metals as the haven of choice. He is telling clients to put 10 percent to 25 percent of their assets in gold mutual funds.

Gold -- Sharefin, 02:18:32 02/24/03 Mon

Gold still shines for the Swiss

Swiss experts believe the price of gold could rise to even greater heights - despite rocketing almost 40 per cent over the past two years.

Along with the Swiss franc, gold remains one of the world's traditional “save havens”. In times of uncertainty, investors pile into the yellow metal, safe in the knowledge that it is the only real security against economic collapse.

After the tumult of the dot-com era, and ongoing instability in global equity markets, gold has taken on a new lustre, even though demand for jewellery remains stable.

“The price of gold is determined by the geopolitical situation, as well as demand,” says René Petter, head of Bank Leu's precious-metals division.

Petter does not believe the Iraq crisis will be defused in the short term, and says demand for gold remains high - particularly among Japanese and Chinese investors.
Martin Jetzer, chief economist at HSBC Guyerzeller, agrees. “Two years ago the price of gold began an upward trend. This will probably continue until 2005,” Jetzer told swissinfo.

Jetzer also subscribes to the view that that a weak dollar has fuelled the gold boom. “We have seen this over the long-term,” he says.

Fabulous gold

Marc Faber, a Hong Kong-based Swiss finance expert who predicted the 1987 stock market crash as well as the 1997/8 financial meltdowns in Asia, believes gold is still a winner.

In his latest market commentary, Faber urges investors to jettison the dollar and US securities in favour of gold.

Gold -- Sharefin, 02:14:26 02/24/03 Mon

Asia Gold-Japan gold fever subsidies, eyes on banking reform

Demand for physical gold in Japan has been an on-again, off-again affair in the last two years with the latest statistics suggesting the current high prices have severely deterred safe-haven buying, dealers said.

Japan imported just 2,157 kilogrammes of gold in January, 73.6 percent less than in the year-earlier month, the latest data from the Ministry of Finance showed on Monday.

"It's because of the high prices and I don't think they will be back unless there is a banking crisis," said a dealer with a major refinery in the Asia region, referring to the slowdown in purchases.
For example, Japan imported a total of 24,260 kilogrammes of gold in January 2002, 19,754 kg in February and 13,183 kg in March, bringing the total for the quarter to 57,200 kg.

The chief reason for the rise in demand was the shift by bank depositors of a portion of their savings from Japanese yen into gold, a safe haven investment in the event of a banking collapse.

Gold -- Sharefin, 00:51:51 02/24/03 Mon

A 'barbarous relic' for a barbarous world

In contrast, we believed for two reasons that
gold and related assets were historically
cheap. First, supply/demand fundamentals were
improving in ways that had not been
recognized. Second, 5,000 years of history
assured us that investors eventually would
rediscover the monetary character of gold in
a dangerous, paper-intensive world.

Most of our return over the past decade
resulted from the further improvement and
spreading recognition of the commodity
fundamentals that we saw at the outset.
Investors by now generally understand that
gold demand chronically exceeds production;
that consumer demand, the largest component,
is growing with Asian incomes; and that gold
production has peaked and likely will decline
for some years as a result of diminished
exploration and development during years of
low prices.

How was excess demand satisfied for so many
years without substantially increasing gold
prices? The answer to that question is a
principal reason for our view that the
commodity fundamentals of gold are still far
more favorable than generally recognized.

Briefly, central banks met the excess demand
from official bullion reserves, by selling
significant volumes outright and by lending
even more through financial intermediaries to
producers and speculators. Producers and
speculators in turn sold the borrowed metal,
and physically delivered it, in order to
hedge future production, finance investment
or earn the spread between market interest
and low gold-lease rates. As a result,
producers, banks, and speculators in the
aggregate are obligated to return much
borrowed gold that now dangles from Indian
and Chinese earlobes. Estimates of that short
position range up to six years' mine
production and nearly half of nominal
worldwide central bank reserves.

Research by Reginald Howe and Frank Veneroso
increasingly supports the circumstantial case
that the Gold Anti-Trust Action Committee has
made for the high-end estimates.

In any case, it seems clear that there is a
short position that amounts to a large,
possibly unmanageable multiple of normal
demand. The resulting market imbalance, in
our view, eventually must be cleared at
substantially higher prices.

The second aspect of our initial rationale
was our belief that the traditional regard of
investors for the monetary character of gold
eventually would be renewed. That renewal
seems to have begun last year with the
spreading perception of rising, intertwined,
long-term geopolitical and financial system
risks. It has not yet contributed materially
to our returns, but we expect it to
strengthen over time and to substantially
boost investment demand for gold and related
asset values.

We think that prudent, mainstream investors
gradually will relearn history's lesson that
gold is what money ought to be. Gold is no-
one's liability, an asset that is produced by
work, not by credit; it is liquid, scarce,
divisible, anonymous, portable, dense, and
nearly indestructible. Call it a barbarous
relic for a barbarous world.

Periodic Ponzi Update PPU -- $hifty, 18:46:42 02/23/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,349.02 + Dow 8,018.11 = 9,367.13 divide by 2 = 4,683.56 Ponzi

Up 74.08 from last week.

Thanks for the link RossL !




Fiat -- Sharefin, 04:33:40 02/23/03 Sun

One Recession Away from Deflation

Feb 21, 2003

Global: One Recession Away from Deflation
United States: The Metrics of Uncertainty
Japan: Keep Digging
Japan: The National Accounts vs. Reality
India: Moving to the A of POTA

Global: One Recession Away from Deflation

Stephen Roach (New York)

Just like that -- many have been quick to call off the deflation alert. An oil shock, surging commodity prices, and now a 1.6% monthly spike in January's Producer Price Index all seem to be hinting more of incipient inflation. Yet, in my view, it would be entirely premature to issue the “all clear” signal on the deflation front -- especially in light of conditions in the world's three largest economies. Japan is still in deflation and Germany, Europe's dominant economy, is hardly out of danger. Meanwhile, America's GDP-based inflation rate averaged just 1.0% in the second half of 2002, closer to the precipice of deflation than at any point in nearly half a century. Consequently, notwithstanding the recent resurgence in commodity prices, it wouldn't take much for disinflation to morph into outright deflation. My concern is that another recession -- hardly a low-probability outcome with oil prices now in the danger zone -- could well be the trigger for just such an outcome.
Yet precisely the opposite now seems to be in the cards. Courtesy of a full-blown oil shock, the world is now flirting with yet another recession. Crude oil prices (as measured on a West Texas Intermediate basis) are now around $37 per barrel. Not only does that represent an 87% increase from levels prevailing at the start of 2002 (an average of $19.69 in January 2002), but today's prices ($36.79 as of the close on 20 February) are nearly identical with the highs hit on 20 September 2000 ($37.20) that played a key role in triggering the recession of 2001. Unfortunately, oil shocks and recessions go hand in hand. That was not just the case in 2001 but also the outcome in the aftermath of the first OPEC shock of late 1973, as well as the result of the spike associated with the Iranian Revolution in 1979. And, of course, the same was the case following the sharp run-up in oil prices leading up to the Gulf War. In other words, show me an oil shock and I'll show you a recession. It's hard to believe that the current oil shock will be the one exception.
Therein lies the risk. In my view, it was the widening of the global output gap in 2001-02 for a low-inflation world economy that led to the subsequent lack of pricing leverage and the close brush with deflation. And now -- courtesy of another oil shock -- that global output gap is set for a sharp further widening. As I see it, that can only intensify the lack of pricing leverage, taking the world all the closer to the brink of outright deflation. In other words, the current oil shock should not be interpreted as an inflationary event along the lines of the outcomes of the 1970s. It is, by contrast, very much a deflationary shock. Prior to this oil shock, I would have depicted the world economy as being only one recession away from deflation. To the extent that recession may now be in the offing, the case for deflation actually looks more compelling than ever.

Gold -- Sharefin, 20:03:18 02/22/03 Sat

Beyond Iraq

Paramount among these is the overvaluation of the US dollar. The US currency topped out versus a trade-weighted average of other currencies in May 2001, and has been in steady decline since. Thanks to dollar overvaluation, US consumers have enjoyed a decade long influx of attractive imported goods and low inflation. Thanks to dollar overvaluation, our trading partners have enjoyed increasing exports and strong domestic economic conditions. A weakening dollar changes all this. Fear of further dollar weakness will be self-reinforcing to the extent it triggers divestment of massive dollar asset positions accumulated by non-US governments and investors over the past two decades. The dollar represents 76% of world central bank reserves. As was the case with the dot COM stocks, the US dollar is over owned and over valued. The dollar will weaken substantially, and lead to higher US inflation along with weaker foreign economic conditions. In its January 3rd, 2003 commentary, Bridgewater noted that "a drying up of private demand combined with support from official sources is a classic warning sign of an imminent collapse in a currency. We believe we are on the precipice." Official sector support for the dollar is especially strong in Asia where dollar trade surpluses are huge and growing. According to Bridgewater, the US is now relying on the official sector for 40% of capital inflows, the highest in ten years.
No wonder investors are running for cover. Miniscule bond yields offer little protection against the prospect of an orchestrated devaluation of the world's key currencies. A paradigm shift in the relative valuation of paper and tangible assets is underway. In such a shift, the list of safe havens is short. A new generation of investors, still conditioned by overripe 1990's platitudes extolling paper assets, will discover what a previous generation had learned and forgotten---the merits of gold.
Against this backdrop, the willingness of individual and institutional investors to prefer paper assets as a store of value will continue its retreat. For the foreseeable future, paper assets will be mired in financial purgatory. The decade and a half from 1968 to 1982 provides a good historical analogy. For those fourteen years, the financial markets were trapped in a trading range, while gold advanced from $40 to $800. Despite the Vietnam War, the Watergate Scandal, the vicious 1973-74 bear market and the late 1970's bout of double-digit inflation, the financial system survived and evolved. It was not the end of the world. The period simply marked a lengthy succession of events that added up to poor financial market returns. It led investors to prefer tangible to financial assets.

World financial wealth held in the form of paper assets stands conservatively at $50 trillion. The investment stock of gold, including central bank reserves, amounts to slightly more than $900 billion at the recent price. Central bank reserves of 33,000 tonnes account for slightly less than half of a very conservatively estimated investment stock of gold. Physical gold theoretically available to the market is at most $500 billion. Central banks, once feared as relentless sellers of the metal, are beginning to rethink their past folly. The net supply of central bank gold has been diminishing. The well publicized 400 tonnes being divested according to the Washington Agreement is being partially offset by the quiet accumulation of others, including the People's Republic of China. Iraq related hype notwithstanding, a significantly higher price target for gold seems appropriate. A reallocation of 1/10th of 1% of world financial assets, or $50 billion, would swamp the physical market, especially if it coincided with recognition by the central bank community that the dollar, rather than gold, is their least attractive asset. A mere $50 billion equates to more than two years of annual gold production, a quantity that could not clear the market within several hundred dollars of today's price.

ChartsRus -- Sharefin, 19:54:30 02/22/03 Sat

Hot off the press - two new gold indice series.
The first series are based on stock selections presented in the MineWeb article:
What is the point of the XAU & HUI?

These series are presented in short & long term charts along with a spread ratio vs gold to show performance.
All up 30 charts spread over 12 pages;
MineWeb Gold Indices

Of interest is the divergence between the hedged / non-hedged stocks.

The second series are from datasets provided by the AGC - Australian Gold Council & show the gold explorer/producer indices for Australia. Unfortunately these charts are only of short term nature.
AGC Gold Indices

option expiration ,hedgefunds,and -- Cyclist, 11:36:23 02/21/03 Fri

low liquidity of mutual funds will become a repeat performance at every third monthly Friday and the end of the month downturn of gold stocks.Time to buy ;right before the options expire today.

Silver -- Sharefin, 19:54:31 02/20/03 Thu

From LeMetropoleCafe on Silver AG

"Perhaps the best news of the day is the word circulating on the
Comex floor to "not be short silver under any circumstances." That
comes from the folks that have been running silver up and down like
a yo-yo these past months. Riggers, or no, their comments merit the
most serious attention. Their previous calls have been on the money,
so this is another call that I am taking to heart. My guess is the
price capping of silver is NOW OVER!

Silver at these prices make no sense. It is about to FLY and could
rocket through $5 very quickly!!!

GATA's Ed Steer on silver:

Hi Bill,
Things are getting interesting in the silver market. This is the
third day in a row that we've had upward movement in silver lease
rates. Today, rates more than doubled in the front months (to
1.44%), and up 70% in the one year to 1.70%. Not a lot, but the most
activity there's been in quite a while. With the situation in silver
even more precarious than it is in gold, it bears keeping an eye on

Gold -- Sharefin, 18:49:22 02/20/03 Thu

Fort Knox

How much gold the Federal Reserve will have to somehow procure from Canadian and South African mines, to carry out an expected or intended dealing with a financial meltdown. Namely, this by way of a gold standard/gold exchange policy which Greenspan of late has been promoting. Prior to becoming Fed boss, he promoted gold. Upon becoming head of the sinister PRIVATE central bank, upon orders, he downplayed gold and promoted paper money. The monopoly press ignores what was shown in the 1970s, namely there is no actual world bullion grade gold at Fort Knox. The bulk of the gold depository was quietly shipped in 1968 to stem a run on the gold of the Bank of England.[Hard-hitting independent journalist Tom Valentine and his then publication, National Tattler, now defunct, documented the absence of real gold at Fort Knox. At the time, his publication had a campaign demanding the Fort Knox vaults be opened for auditing.]

Gold -- Sharefin, 08:29:37 02/20/03 Thu

Sons of Gwalia digs itself into a big hole

Sons of Gwalia was on the verge of a crisis yesterday after it abandoned its interim dividend for the first time in more than 10 years and said it would struggle to meet its already revised full year net profit.

The company revealed it was cash-flow negative to the tune of $21.6 million for the six months to December 31 and had no cash in the bank due to the crippling impact of its hedge book, operational problems in its gold division and the severe down-turn in the global market for tantalum, of which Sons of Gwalia is the world's biggest producer.

The company's decision to conserve cash - it would have cost $12 million to maintain the 7.5c dividend paid in the second half last year - was seen as evidence the problems were bigger than the market first thought.

Its shares plunged a further 22c, or 12 per cent, to a fresh 11-year low of $1.61.

The latest fall leaves the miner valued at just $305.2 million compared to $1.33 billion 12 months ago and raises further questions about the future role of founding directors Peter and Chris Lalor.

Fiat vs Gold -- Sharefin, 08:24:23 02/20/03 Thu

DJ US Tsy: Anti-Money Laundering Steps For Metals Dealers
Dow Jones News Services

WASHINGTON (Dow Jones)--Metals and jewelry dealers that do more than $50,000 worth of business per year would need to set up an anti-money laundering strategy, under a new proposed rule released Wednesday by the U.S. Treasury.

The proposed rule covers precious metals dealers and refiners, jewelry manufacturers, loose gemstone merchants and retail stores that also act as a dealer in such items. Retail-only stores aren't covered by the rule, nor are dealers that buy or sell less than the $50,000 threshold.

The proposal is part of a series of regulations connected with the Patriot Act, counterterrorism legislation passed shortly after the Sept. 11, 2001, terrorist attacks. Businesses covered in the legislation are required to develop a strategy to prevent money laundering and curtail terrorist financing.

Comments are due 60 days after the rule is published in the Federal Register; Treasury said it expects the rule to be published next week.

Gold -- Sharefin, 08:22:14 02/20/03 Thu

Iran: Minister says gold reserves 500 tonnes, urges market regulation

Commerce Minister Mohammad Shari'atmadari on Sunday [16 February] called for gold market regulation in order to check fluctuations in prices of the precious metal.

Shari'atmadari in an address to a seminar on Gold and Standard advised the economic officials to raise standard in the business to lure in more customers on domestic market. He said gold sale on domestic market has almost doubled to 50 t from 22 t in the post-Islamic revolution era.

The Minister further called for increase in production of gold from domestic gold mines and application of satellite facilities for prospective gold-mine exploration. He said Iran's gold production has increased by 46 per cent to one ton in 2001 compared to that in 1997. He added that Iran stands 61st in the list of 93 major gold producers.

Shari'atmadari put Iran's gold reserves at about 500 t, saying the bulk has a meagre share of one per cent in the world's 50,000-tonne output.

Gold -- Sharefin, 08:17:55 02/20/03 Thu

Panic Is Near if 'The Gold Is Gone'

Murphy explains: "The essence of the rigging of the gold market is that the bullion banks borrowed central-bank gold from various vaults and flooded the market with supply, keeping the price down. The GATA camp has uncovered information that shows that around 15,000 to 16,000 tonnes of gold have left the central banks, leaving the central-bank reserves with about half of what is officially reported."

This is why those who follow such arcana are predicting an explosion in the price of gold. According to Murphy, "The gold establishment says that the gold loans from the central banks are only 4,600 to 5,000 tonnes," but his information is that these loans are more than three times that number, which means "they're running out of physical gold to continue the scheme."

According to Murphy, "The cartel has been able to get away with lying about the amount of gold in reserve because the International Monetary Fund [IMF] is the Arthur Andersen of the gold world." He has provided to Insight documents from central banks confirming that the IMF instructed them to count both lent and swapped gold as a reserve. "In other words, the IMF told the central banks to deceive the investment and gold world[s]. Once this gold is lent [or] swapped, it's gone until such time as it can be repurchased. And with the skyrocketing price of gold we're now seeing, it would be incredibly expensive, let alone nearly physically impossible, to get it back."

What is important to understand, says Murphy, "is that there is a mine and scrap supply deficit of 1,500 tonnes, which is an enormous deficit when yearly mine supply is only 2,500 tonnes and going down. On top of that, there are these under-reported gold loans and other derivatives that are on the short side. There is no way to pay this gold back to the central banks without the price of gold going up hundreds of dollars per ounce. So the peasants and women of the world will have to sell their jewelry at say $800 an ounce to bail out these short positions or someone is going to have to tell the world that they don't have the gold that they have reported," shaking the world's financial system to its core.

The gold bugs appear to be basing their identification of a world gold shortage on industry data, much of which has been summarized in two papers prepared by four different gold analysts at different times using separate methods. The first paper was written by governmental investment adviser Frank Veneroso and his associate, mining analyst Declan Costelloe. Titled Gold Derivatives, Gold Lending: Official Management of the Gold Price and the Current State of the Gold Market, it was presented at the 2002 International Gold Symposium in Lima, Peru, and estimates the gold deficit of the central banks at between 10,000 and 15,000 tonnes. The second paper, Gold Derivatives: Moving Towards Checkmate, by Mike Bolser, a retired businessman, and Reginald H. Howe, a private investor and proprietor of the Website, estimates the alleged shortage of central-bank gold at between 15,000 and 16,000 tonnes -- nearly a decade's worth of mine production.
John Embry, the manager of last year's best-performing North American gold fund and manager of the Royal Precious Metals Fund for the Royal Bank of Canada, says he is putting his and his clients' money on the "lunatic fringe" in this dispute: "I've examined all the evidence gathered by GATA and everyone else, and I think these guys are anything but lunatics. They've done their homework and have unearthed a lot of interesting stuff. The problem, though, is that the market is sufficiently opaque that there is really no way to know who is right and who is wrong."

"The fact is," continues Embry, "a lot of this stuff is based on estimations. I do however believe that, based on the evidence dug up by Veneroso and Howe, they are presenting equally if not more credible numbers than the other side. I find the campaign to undermine their credence simply bizarre. I think these guys [GATA] are right and that the number put out by Gold Fields Mineral Services as the amount of gold loaned out by the central banks is definitely wrong. Now, whether it's as much as 15,000 is up for interpretation. The recent release by the Bank of Portugal is important. When a central bank has 70 percent of its gold loaned or swapped, I don't think it is operating independently, and I suspect there are an awful lot of them that have loaned out much more than has been reported."

Embry says, "I've made a fortune for my clients investing in gold and gold stocks because I have operated on the premise that the Veneroso/Howe reports are right -- that gold was significantly undervalued in the daily quote and that it was going a lot higher. The circumstantial evidence, and I bet my clients' money on it, was very much in favor of the guys who said a great deal more central-bank gold had entered the market and driven the price down far too low. GATA has had this story from day one. I think that they're right and that officialdom doesn't want this exposed. GATA is willing to have a public debate but the gold world won't debate. I think there is a tacit admission of anyone who has an IQ above that of a grapefruit that Veneroso and Howe have a pretty good point. I'm an analyst who has looked at both sides of the issue and I bet my money on GATA. So far they've been right."

Whether the gold bugs are right about the reasons for the meteoric rise in the price of gold is uncertain, but, according to GATA's Murphy: "It's all the more reason to have the central banks come clean about the actual amount of gold that physically exists in their reserves. Either way, the price of gold will continue to rise because, as we already know and others are discovering, the gold is gone."

Gold -- Sharefin, 08:16:04 02/20/03 Thu

Murphy explains: "The essence of the rigging of the gold market is that the bullion banks borrowed central-bank gold from various vaults and flooded the market with supply, keeping the price down. The GATA camp has uncovered information that shows that around 15,000 to 16,000 tonnes of gold have left the central banks, leaving the central-bank reserves with about half of what is officially reported."

This is why those who follow such arcana are predicting an explosion in the price of gold. According to Murphy, "The gold establishment says that the gold loans from the central banks are only 4,600 to 5,000 tonnes," but his information is that these loans are more than three times that number, which means "they're running out of physical gold to continue the scheme."

According to Murphy, "The cartel has been able to get away with lying about the amount of gold in reserve because the International Monetary Fund [IMF] is the Arthur Andersen of the gold world." He has provided to Insight documents from central banks confirming that the IMF instructed them to count both lent and swapped gold as a reserve. "In other words, the IMF told the central banks to deceive the investment and gold world[s]. Once this gold is lent [or] swapped, it's gone until such time as it can be repurchased. And with the skyrocketing price of gold we're now seeing, it would be incredibly expensive, let alone nearly physically impossible, to get it back."

What is important to understand, says Murphy, "is that there is a mine and scrap supply deficit of 1,500 tonnes, which is an enormous deficit when yearly mine supply is only 2,500 tonnes and going down. On top of that, there are these under-reported gold loans and other derivatives that are on the short side. There is no way to pay this gold back to the central banks without the price of gold going up hundreds of dollars per ounce. So the peasants and women of the world will have to sell their jewelry at say $800 an ounce to bail out these short positions or someone is going to have to tell the world that they don't have the gold that they have reported," shaking the world's financial system to its core.
John Embry, the manager of last year's best-performing North American gold fund and manager of the Royal Precious Metals Fund for the Royal Bank of Canada, says he is putting his and his clients' money on the "lunatic fringe" in this dispute: "I've examined all the evidence gathered by GATA and everyone else, and I think these guys are anything but lunatics. They've done their homework and have unearthed a lot of interesting stuff. The problem, though, is that the market is sufficiently opaque that there is really no way to know who is right and who is wrong."

"The fact is," continues Embry, "a lot of this stuff is based on estimations. I do however believe that, based on the evidence dug up by Veneroso and Howe, they are presenting equally if not more credible numbers than the other side. I find the campaign to undermine their credence simply bizarre. I think these guys [GATA] are right and that the number put out by Gold Fields Mineral Services as the amount of gold loaned out by the central banks is definitely wrong. Now, whether it's as much as 15,000 is up for interpretation. The recent release by the Bank of Portugal is important. When a central bank has 70 percent of its gold loaned or swapped, I don't think it is operating independently, and I suspect there are an awful lot of them that have loaned out much more than has been reported."

Embry says, "I've made a fortune for my clients investing in gold and gold stocks because I have operated on the premise that the Veneroso/Howe reports are right -- that gold was significantly undervalued in the daily quote and that it was going a lot higher. The circumstantial evidence, and I bet my clients' money on it, was very much in favor of the guys who said a great deal more central-bank gold had entered the market and driven the price down far too low. GATA has had this story from day one. I think that they're right and that officialdom doesn't want this exposed. GATA is willing to have a public debate but the gold world won't debate. I think there is a tacit admission of anyone who has an IQ above that of a grapefruit that Veneroso and Howe have a pretty good point. I'm an analyst who has looked at both sides of the issue and I bet my money on GATA. So far they've been right."

Whether the gold bugs are right about the reasons for the meteoric rise in the price of gold is uncertain, but, according to GATA's Murphy: "It's all the more reason to have the central banks come clean about the actual amount of gold that physically exists in their reserves. Either way, the price of gold will continue to rise because, as we already know and others are discovering, the gold is gone."

Gold -- Sharefin, 23:28:06 02/17/03 Mon

Just a correction in gold -- and stocks?

Gold bugs are still bugging despite some sharp down days. In fact, they think they've found a smoking gun.

Or at least a smoking margin requirement.

Richard Russell of Dow Theory Letters just published this from a subscriber:

"I find it comical that less is said in the press about the margin requirements change that went into effect on gold on Feb. 6 -- announced Feb. 5, just as gold came off its 6 1/2-year high. Oh well, I guess since it isn't reported we can assume that has nothing to do with the recent $30 decline in gold. WOW!!! What a joke! Let's get some honest reporting from the press for a change."

Hey -- we do our best.

But one of the strengths of investment letters is that they will entertain wild theories that make the major media twitch. Such as that, over the past decade, the gold market has been knocked down by massive Central Bank sales -- something which turns out to have been (ahem) true.

Fiat -- Sharefin, 22:42:32 02/17/03 Mon

Will the Enron Tar Baby Go for the Gold?

The link for the prior article.

Fiat -- Sharefin, 22:40:41 02/17/03 Mon

By all accounts, last November former secretary Rubin, now a top official at Citigroup, telephoned Peter Fisher, the Treasury's current undersecretary for domestic finance, to suggest that he consider trying to dissuade the rating agencies from an impending downgrade of Enron's credit. Mr. Fisher, who in his prior job at the Federal Reserve Bank of New York had served as point man for the rescue of LTCM, demurred. Mr. Rubin's position with Citigroup, a major creditor of Enron, raises legitimate questions about his motives. More importantly, however, his suggestion belies any strong underlying belief in either financial transparency or the protection of individual investors. On the contrary, it shows a mind committed to the proposition that government officials may invoke their personal notions of the public interest surreptitiously to manipulate markets notwithstanding injury to private investors and without public disclosure of the benefits thereby conferred on their political friends.

Belief in this proposition probably does far more to explain passage of the CFMA than overt political contributions. Major markets targeted for derivatives deregulation -- interest rates, currencies, energy, and gold -- may be too large for private parties to manipulate, but they are all markets that governments regularly target with their own manipulative schemes. Prior to joining the Clinton administration, Mr. Summers described with academic rigor Gibson's paradox, i.e., the observed principle that in the absence of government interference, real long-term interest rates and gold prices move in an inverse relationship to each other. Gold leasing by central banks is the foundation for most gold derivatives, and their rapid growth since 1995 has corresponded with a breakdown in the operation of Gibson's paradox as long-term rates and gold prices fell in tandem. For more elaboration on this point, see Gibson's Paradox Revisited: Professor Summers Analyzes Gold Prices.

Derivatives are a powerful tool for pushing markets around, and the bigger the market, the greater the derivatives heft required. At virtually the same moment that Congress enacted the CFMA, the Fed approved the J.P. Morgan Chase merger, which by the OCC's figures at December 31, 2000, put 60% percent of the total notional OTC derivatives business of 400 reporting banks -- $24 trillion out of a total $40 trillion -- in one derivatives superbank that is also widely regarded as the Fed's bank. For a graphic display of the interest rate and gold derivatives of J.P. Morgan Chase, the nation's second largest bank, in comparison to those of Citibank, it largest, and all other commercial banks, see the charts near the end of Gold Regression Charts.

Talk about risk! LTCM, a private hedge fund, lost a mere trillion dollar gamble in derivatives despite being advised by the two Nobel laureates in economics who largely invented modern derivatives trading. When its troubles threatened to shatter the global financial system, the New York Fed felt compelled to organize a bailout. Unlike LTCM and other big derivatives losers, Enron was a major derivatives dealer. In both F.I.A.S.C.O. and his Senate testimony, Mr. Partnoy emphasized that major derivatives dealers have a huge edge over their customers no matter how large or sophisticated these institutions may be.

What is more, as the Enron case also illustrates, major derivatives dealers require good credit ratings and access to cheap funding. Today "too big to fail" is the best credit rating. It is not accidental that the OTC derivatives business outside the United States is also heavily concentrated in flagship banks like Deutsche Bank and UBS, the apparent purchaser in bankruptcy of Enron's energy trading business but not its trading book.

The following exchange between two seasoned investment professionals, John Neff and Mark Faber, reported in Barron's ("Roundtable 2002," January 21, 2002, p. 20) carries disturbing implications.

Mr. Neff: "Aren't there transparency issues in the emerging Asian markets?"

Mr. Faber: "In Asia, by and large, emerging economies don't have a lot of transparency. But where is the transparency in Enron? Where is the transparency in J.P. Morgan?"

The Enron affair makes painfully obvious that audited financial reports of large and complex enterprises, especially those with large OTC derivatives or other off balance sheet items, cannot be trusted to give an accurate representation of their true financial condition or the risks to which they are exposed. The federal government, of course, is the largest and probably most complex enterprise on the planet. As opaque as they were, Enron's accounting practices are likely no less misleading than Uncle Sam's.

Social Security is not indicted as a Ponzi scheme only because it is operated by federal officials and the ultimate suckers are Americans too young to vote or as yet unborn. Recent budget surpluses were not deficits only through the magic of a "unified" budget that applied income from trust funds, largely Social Security, to current expenses. But these problems are reasonably evident to those who care to look. In other areas, as demonstrated in a recent lawsuit by native Americans over trust funds administered on their behalf by the Secretary of the Treasury and Secretary of the Interior, federal officials are as secretive and duplicitous as Enron's.

No one knows where the many investigations of Enron may lead or what they may ultimately reveal. But there is little doubt that the smell of political scandal is in the air. Maybe that explains one of last week's more curious incidents. A visiting former politician told a top White House staffer that the last real audit of the nation's gold reserves took place more than a half century ago, and that only about 1000 tonnes remain of the 8500 supposed to be in Fort Knox. Fiction? Of course! The President is running for re-election despite suffering from previously undisclosed multiple sclerosis. What's more, he holds a Nobel in economics.

Lenny's Corner -- Sharefin, 22:28:09 02/17/03 Mon


As the momentum is now definitively on the downside, and as the equity markets and the USD are rallying, I would venture a guess that we continue southward in price. There are still oodles of speculators with long positions that have yet to disgorge, both in the USA and the Far East. It is a truism in the markets that if prices go to an extreme on the upside, the next move will be to extremes on the downside. Physical demand will continue to be poor until some stability is seen in the marketplace, and if prices continue their rate of decline, physical buyers will just watch from the sidelines waiting for a more sedate environment. As noted in this commentary in the last weeks, the gold market was extremely overbought, and we are now seeing the results thereof, a technical long liquidation that has erased virtually all of the recent gains in price, from the technical breakout from $330 to the highs at $390 per ounce.

Long-term investors in gold should not be dismayed or disappointed with the market action of late. It is my opinion that we are still in a long-term secular bull market and that very "tasty" gains are still ahead of us. At current prices, gold is still under the 25-year average price of $362, making it a conservative buy at current levels. But, those who followed our advice of using close sell stops in the gold market just made a bit more than they deserved had the gold market continued its slow and steady upward moves. Those who kept buying all the way up, and did not utilize proper money management techniques just got buried by the ultimately fatal emotions of hope, fear, and greed. Trading and investing is not only a matter of knowing which way the market is going, as sometimes that is rather easy, but of knowing when and how to use money management techniques to either curtail risk or to maximize gains. I have never been an extreme proponent of the "buy-and-hold" philosophy and the recent moves in the gold market bear out my philosophy. Even long term investors would have been benefited had they used sell-stops in this market, as they would have exited their positions higher and now have the opportunity to buy at sharply lower levels.

Gold -- Sharefin, 22:18:36 02/17/03 Mon

Power to the POG

Hands up everyone who believes the Price of Gold (POG) is being massively manipulated!?

Gold -- Sharefin, 22:16:29 02/17/03 Mon

Taylor On US Markets & Gold

Did the New Treasury Secretary do this to Gold?
Was it just a coincidence that the gold markets took a hit on the very first day our new Treasury Secretary took office? As Bill Murphy pointed out, it was almost exactly when O'Neil left as Treasury secretary that the price of gold began to rise. Then about the time our new Treasury secretary had a chance to sit down at his desk and drink his morning coffee, on his first day on the job (Feb 7) the new "fox" in charge of the chicken coup (The Exchange Stabalization Fund), seemingly wasted no time in overseeing a breathtaking $7 decline in gold. Then on Wednesday, the yellow metal got hit for $10 on the downside.

While we think it is possible the new Treasury secretary wasted no time in using the ESF to go put the cap back on the gold market, more than likely it was the increase in margin requirements implemented to help the troubled crony capitalist banking friends of our policymakers that caused gold to swoon. But the bullish dynamics for gold remain the same. Despite the contention that the new treasury secretary is in favor of a strong dollar, in light of an economy that is becoming increasingly weak, there is less justification now than in the past for a strong dollar. As Marc Faber opined, the dollar would have to decline 80% before America could compete with the Chinese in carrying out industrial activities that actually add to the wealth of nations. A strong dollar would necessarily mean that gold would have to be put back in its box, but if that becomes the suicidal policy of America, it will quicken our demise toward a deflationary collapse of the system.

Fiat -- Sharefin, 22:13:49 02/17/03 Mon

Six Myths of the Crash

Two and a half years into one of the most severe Bear Markets in History, the most striking feature of the typical economic discussion is the persistent state of denial about how parlous our situation truly is. Also notable is the unthinking promulgation of a species of economic fallacies which, though long since discredited, keep springing up like weeds to choke our reasoning about where we might go from here and, therefore, of how we should be preparing to act.

Let us take a look at a few of the more important reasons.

Myth #1: The consumer is two-thirds of the economy: as long as she is spending, we can avoid recession.

Myth #2: Lower interest rates and easy credit will promote recovery.

Myth #3: George Bush, Gordon Brown, Monsieur Mer and Signori Prodi and Tremonti are right: government spending can promote growth.

Myth #4: All tax cuts are good: those on dividends will drive equities higher.

Myth #5: We are staring deflation in the face.

Myth #6: Stocks always go up in the long run. The rally will start next quarter, or the quarter after that, or the quarter after that.

So where from here?

The first point to realise is that, whatever the monetary obfuscations of this fact, we have all squandered an enormous-perhaps an unsurpassed-amount of real wealth in the boom and the ramifications of this impoverishment will haunt us for some time to come.

Some say this will cause a deflationary collapse, but presently this seems a decidedly small, if nonetheless finite, probability-an out-of-the-money catastrophe option, if you will. At the first sign of any systemic crisis we will see the Fed swing into action with liquidity provision, and we will see exchanges shut; rules suspended or broken, and all manner of desperate remedies applied.

Butler/Barrik & Silver -- auspec, 19:07:03 02/17/03 Mon

Barrick's Silver Bombshell
By Theodore Butler

(The following essay was written by silver analyst Theodore Butler. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

On February 12, Barrick Gold issued two press releases. (Both can be found at One announced the firing of its current CEO, and his replacement, due to poor financial performance, especially its stock performance. The other press release concerned its fourth quarter earnings and details on the hedge book. While there has been ample discussion and numerous articles on the gold hedge book, it appears that a blockbuster announcement on silver in the press release has gone unnoticed. And since Barrick is one of, if not the largest, silver short in the world, their announcement that they intend to deliver against and to buy back and cover their entire silver hedge book (not gold), could have profound impact on the market.

About four or five years ago I wrote about Barrick Gold and the influence their forward selling had upon the price of gold and silver. I held them up as the example of manipulation of gold and silver through leasing and short selling. I complained about them to the Securities and Exchange Commission, the Commodity Futures Trading Commission, Barrick's own auditors, and, of course, to Barrick itself. I think I was the first one to raise the issue publicly. I say this not to boast, but only to give full disclosure and perspective in what I have to say about Barrick today.

My main gripe was about Barrick's role in hedging. Legitimate hedging did not allow for years of future production to be dumped on the market in physical form, as leasing and forward selling permitted. Further, I complained that selling short years of production forward, regardless of the price, was so stupid as to defy description. Most of my writing about Barrick took place while gold traded under $300, and even under $275. My point was that legitimate hedging doesn't take place at prices approximating the cost of production. Shareholders are not well served by the company eliminating the profit potential from rising gold prices. Had Barrick taken this advice to cover their gold shorts at those price levels, they would have come out as heroes, and their shareholders would have benefited greatly. In addition, had Barrick covered their gold shorts while prices were low, they would have been in position to hedge at much higher prices (over $100 higher) and lock in real profits for their shareholders. Instead, they actually increased their short position and have suffered the consequences.

While they obviously made a serious mistake in not closing out their gold shorts while prices were low, Barrick is not run by stupid people. As one of the largest gold miners in the world, they get advice from what are thought to be the best minds in the financial world. They appear to be learning from their mistakes in gold, based upon the unambiguous nature of what they say about their silver hedge intentions. In the Notes to the Financial Statement section of their earnings announcement, in a section entitled, "Spot deferred silver sales contracts and written silver call options", Barrick stated the following, on Feb. 12:

"Spot deferred silver sales contracts have the same delivery terms and pricing mechanism as spot deferred gold sales contracts. A group of these contracts totaling 14.3 million ounces of silver are accounted for as normal sales contracts, as it is probable that we will physically deliver silver production into the contracts. For a separate group of contracts totaling 21 million ounces, we intend to financially settle these contracts, and therefore they are accounted for as derivatives under FAS 133."

In following Barrick closely for many years, I can tell you they have never made such a statement before. In addition to delivering this year's (maybe entire) silver production against the hedge book, Barrick intends to "financially settle" the rest of the silver short hedge book. That's big news. So big, that had they made the same announcement about gold, it would be all anyone talked about. But they didn't say that about gold, only silver. And I think there is a very good reason for that, namely, that Barrick finally understands the real risk of a big silver short position.

Barrick, in addition to being the largest gold, and probably largest silver short in the world, is also the "soul" of physical forward short selling. They were the pioneers and are the leaders and pacesetters of gold and silver hedging. They wrote the book. Everyone else followed their lead. For Barrick to come out and state their intention to cover their silver shorts is both profound and intelligent. It is likely that other silver shorts, including other mining company shorts, will also see the light and follow Barrick. That could have a big impact on the silver market. And it would be in the best interests of the other shorts to follow the leader, precisely because Barrick's move makes good sense.

Barrick has good reason to have decided to get out of their silver shorts, the same good reason for an investor to buy silver - the risk/reward ratio. There is not much real room to the downside in silver nor potential hedging profits or protection. Silver prices have gigantic upside potential, $50 or $100 higher, or more. Dimes to the downside, dollars to the upside is not very inviting to a short seller.

Barrick's directors and risk control people took a close look at their overall liability, in light of their poor performance, and obviously concluded that silver presented a problem. A 46 million ounce silver short position ( there's almost 11 million additional ounces short via written call options) offers scant protection for Barrick to the downside, maybe $20 million on a decline in silver prices. But, at $25/per ounce, Barrick would be out a billion dollars on their silver hedge. At $50, they'd be out $2 billion, at $100, $4 billion. Smart management does not make bets that offer so little in reward with risk that might break the bank. Barrick has wised up. It's about time.

The reason Barrick has decided to close out their silver shorts also might have to do with the cost of doing so. Because silver is so dirt cheap, it would not take relatively large amounts of money. While Barrick is being intentionally cryptic in saying they will "financially settle" a large chunk of their silver short position, even if they paid cash for all 35 million ounces held physically short, that comes to $175 million, something Barrick could afford.

With the leading silver short saying, in effect, that they will short no more, the manipulation that has existed for decades is losing a key sponsor. Who will take their place, with $4.50 silver and everything saying buy, don't sell? There is the very real possibility of a domino effect here. Putting aside the deficit and real supply/demand fundamentals, if the other shorts wake up, as Barrick has, and go to cover their shorts and short no more, that alone could drive silver to $100/ounce.

Also, I can't help but recall the correspondence, over the past year, with the CFTC and the COMEX, about me questioning the legitimacy of the giant and concentrated silver short position. I said show the me the real silver or legitimate hedging it represented. They couldn't show the silver, because it doesn't exist. Now the largest silver short is clearly saying they don't wish to be hedged anymore. I ask the CFTC and COMEX, with Barrick renouncing silver hedging, who is legitimately hedging silver?

I want to congratulate Barrick for coming to their senses by terminating their silver hedges. All Barrick shareholders should be dancing with glee. They will no longer be in harm's way because of a silver price explosion. Many silver investors already know what Barrick now knows. Soon, the whole world will know.

Comment: Hi-O S.............

Periodic Ponzi Update PPU -- $hifty, 23:40:32 02/16/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,310.17 + Dow 7,908.8 = 9,218.97 divide by 2 = 4,609.48 Ponzi

Up 36.13 from last week.

Thanks for the link RossL

They lived up to their name on Friday !

Almost got whiplash!




Gold -- Sharefin, 22:51:21 02/16/03 Sun

Barrick's Hedge Book

Barrick Gold (ABX) is not one of our stock selections nor is it ever likely to be as long as it has a large hedge book, but its latest financial results (released last week) are worth commenting on.

ABX produced 5.7M ounces of gold in 2002 and made a profit of US$193M. The company forecast that 2003 production would be 5.4M ounces. However, as is usually the case with this company the most interesting aspect of the latest ABX results was the information that was disclosed about its hedge book. This information is particularly interesting because what Barrick does with its enormous hedge book can effect the entire gold industry.

As they have done every quarter for as long as anyone can remember, Barrick's management crowed last week about the fact that their forward sales program had allowed them to sell gold in the latest quarter at a price that was above the average spot price. They also confirmed that during the first several weeks of 2003 they had taken advantage of their ability to defer delivery into forward sales contracts and had, instead, sold 100% of their gold at the spot price. They did this because the spot price was higher than their forward sales price. This might seem like a logical thing to do, but it means that a liability has simply been pushed into the future. Furthermore, regardless of the current spot price it would only make sense for Barrick to defer delivery into forward sales contracts if they were confident that the spot price was going to be lower in the future than it is today. In other words, by their actions Barrick's management is saying that a gold price in the $350-$380 range is an aberration and that the price will fall back to $325 or lower.

At the end of 2002 Barrick's hedge book had a mark-to-market value of negative $639M. At the end of 2001 the mark-to-market value was positive $356M, so there was an unrealised loss of $995M in the hedge book during 2002. Deducting the reported earnings of $193M we get a net loss for 2002, including unrealised losses on derivatives, of $802M. So, during one of the best years for the gold price since the 1970s one of the world's largest gold mining companies lost $802M. If the gold price ends 2003 at $450 then Barrick will, at that time, have a hedge book with a mark-to-market value of negative $2.4B (assuming that all of this year's production is sold at the spot price). In this case it would have taken less than 2 years to wipe out all the gains achieved by the forward sales program over the past 15 years.

Silver -- Sharefin, 22:47:17 02/16/03 Sun

Hi-Yo Silver!

So why hasn't silver taken off like gold? I can only surmise, but I think it partially has to do with about eight traders on the COMEX, who regularly trade 350 million ounces of non-existent silver. They go long and short, and keep the price within the range with which they make profits, never letting it get out of hand, and silver seems to be stuck. It's against the COMEX rules, because in order to trade something, one must either have the money to buy it, or own it. Does anyone think that any trader has enough dollars to buy more silver than exists on earth? Why doesn't the COMEX shut down this outrage? Ask them. Previous queries have resulted in vague letters saying they are not doing anything illegal, or phrases like that, which is a crock of dill pickles.

Gold -- Sharefin, 22:42:28 02/16/03 Sun

Conspiracy or Coincidence?

Originally developed by the Chicago Mercantile Exchange, ‘SPAN' software is designed to quantify (correlate) price to risk in the commodities markets. Apparently, and confirming this is not easy, NYMEX plugs contract data into this program to determine if margin requirements need to be changed.

On Thursday February 5 at approximately 5:08 PM, NYMEX stated that ‘Gold futures margins will be increased to $1,500 from $1,000 for members, member firms, and hedgers, and to $2,025 from $1,350 for speculative customers.' What these new margin requirements did - again, difficult to confirm (until today) - was force many small speculators out of the market because they could no longer maintain margin. As for the larger players - the commercials/hedgers -- margin is not that much of an issue when you have Greenspan in your corner.

Gold -- Sharefin, 22:36:55 02/16/03 Sun


In a David and Goliath antitrust battle that's drawing intense interest from the world of avid gold investors, a New Orleans retail gold dealer is going toe-to-toe in an increasingly pitched legal fight against one of Wall Street's oldest and most prestigious investment banks and a Canadian mining giant.

The allegation: that the bank and the mining firm have colluded to drive down the price of gold to the detriment of individual investors.

In the latest volley last week, Blanchard and Co. Inc. of New Orleans updated its complaint against Barrick Gold Corp. of Toronto and J.P. Morgan Chase & Co. of New York.

Like its predecessor suit, the amended complaint filed in U.S. District Court in New Orleans asks the court to order Barrick to stop the alleged price manipulation.

In a sign of just how heated the battle has become, each has accused the other of libel.

Also last week, Barrick fired Chief Executive Randall Oliphant, who has been credited with devising the company's gold-hedging strategy, which is at the center of the lawsuit.
According to the explanation, Barrick first leases the gold at a rate of 1.5 percent. Then it sells the gold on the spot market. Finally, it deposits the proceeds into an account bearing, say, 5 percent interest.

Barrick benefits by keeping the difference between the lease rate it must pay and the interest rate it receives from the bank.

In addition, Barrick can make money another way. If the price of gold goes down, Barrick can buy it at a cheaper rate and repay the central bank. Thus, if the price drops to, say, $250 an ounce, Barrick can make $50 an ounce, plus the interest rate spread.

Because of its arrangement with J.P. Morgan Chase, Barrick has managed to make it an almost risk-free endeavor. Short sellers typically face the risk that the price of a commodity might go up. In that case, they have to buy the commodity at the higher price to pay back whoever lent it to them. But J.P. Morgan Chase gives Barrick 15 years to pay back the gold, or "cover" its short position in trading parlance. That means Barrick has an extraordinary amount of time to ride out a price spike. At the same time, Barrick can make money by selling the gold it produces while the price is high.

Furthermore, Barrick can pay back the leased gold with metal from its mines, thus paying what its owes in a low-cost way.
Blanchard, however, says that Barrick is engaging in "far more than mere 'hedging' to defend against price fluctuations."

Ryan, the Blanchard spokesman, notes that the 15-year period Barrick has to maintain its short position is unusually long if not unique in the industry, as is the quantity of gold that Barrick has in a short position, which totals 16.9 million ounces, according to Barrick's Internet site.

The suit alleges that the process of borrowing gold from the vaults of central banks for extraordinary lengths of time and dumping it into the gold market naturally drives down the price of the commodity.
When Barrick began its hedging program in 1987, Blanchard said, the price of gold was $450 an ounce. By 2001, it had dropped to $271.

To illustrate its allegations, Blanchard describes a series of steps Barrick took starting in 1997. According to the complaint, Barrick at that time spoke bullishly about the price of gold, saying that demand was 20 percent greater than new supply. At the same time, the suit says, Barrick increased its hedge position from 6.7 million to 18.8 million ounces, "effectively eliminating the purported 20 percent shortfall."

"The average price of gold fell more than $100" -- along the way benefiting Barrick's newly expanded short position -- the suit says.

"Over that same 14-year period (from 1987 to 2001)," the suit says, "as other producers struggled to survive the tremendous and unrelenting decline in price, Barrick grew exponentially by acquiring a number of gold mining and exploration firms."

Essentially, Blanchard alleges that Barrick drove down the price of gold in part so it could buy troubled gold-mining firms cheaply.

hmmm do I like bottoms... -- Cyclist, 19:48:24 02/16/03 Sun

Looking for Tuesday.

Sharefin:Have added some stuff to your chart,you can give me the means to post it.

Gold -- Sharefin, 03:58:05 02/16/03 Sun

From the GATA camp.(:-)))
I think most gold market observers have failed to recognize what is probably the most BULLISH indication for gold in many years. That was the sudden raising of the COMEX margin requirements by 50%. Almost everyone to the man has been bemoaning this due to the effect on the POG but if we look at it from a strategic point of view the Gold Cartel just revealed their Achilles Heel. Why did COMEX suddenly raised the margin requirement for gold with no advance notice? Was it because..

A) Gold is a barbarous relic of no interest to anyone?
B) Gold is in the throes of a bear market rally in a 23 year bear market?
C) Gold is about to drop like a stone if a war starts and the COMEX wants to protect its investors from irrational exuberrance?
D) Gold is about to fall hard because it is falsely indicating inflation that we don't have and COMEX doesn't want its investors to get over-invested before this fall?
E) None of the above?

Yep! It is "none of the above". What the COMEX telegraphed to the world is that "GOLD IS IN A RAGING BULL MARKET AND THERE ARE SOME VERY BIG MONEY INTERESTS WHO ARE ON THE WRONG SIDE OF THE BET". The Cabal also telegraphed that they have no gold left because they could not hold the market down with their usual methods which had failed on every attempt from $330 up to $390. This left them with two options (1) cover or (2) take a gamble on winning by changing the rules. They of course choose option 2. Now for those who are poker players this tells you that they have raised the bet with all their chips and they are holding a pair of deuces!!

I wouldn't mind betting that there are some shrewd speculators/investors out there with deep pockets who will call this bluff.

The cabal probably think it was brilliant strategy...time will tell, my guess is they probably under-estimated the other players!


Gold -- Sharefin, 03:25:04 02/16/03 Sun

Removing trouble:
Bush to Replace Head of Fannie, Freddie Watchdog

Sources familiar with the situation said Armando Falcon Jr., head of the Office of Federal Housing Enterprise Oversight, was asked by administration officials for his resignation Tuesday morning.

That was just hours before Falcon released the findings of a "systemic risk" study, which laid out a scenario in which Fannie Mae and Freddie Mac could experience severe financial difficulties that then would cause wide-ranging disruptions in the housing and financial markets.

Then John Embry who was a fund manager for the Royal Bank Of Canada click here got fired for agreeing that the gold markets are not quite as opaque as they seem & much of what GATA says is true.

Now Oliphant is sacked & the new guy is working hard on internal problems. Hmmm!!!!

Why is it that corporate business views removing the man at the center as the way to fixing a problem????

Gold -- Sharefin, 03:12:21 02/16/03 Sun

Hedging a 'lightning rod': Barrick CEO

Gold hedging has been a "lightning rod" issue for Toronto's Barrick Gold Corp. and the company's hedgebook is a little bigger than it would like, new chief executive Gregory Wilkins said Thursday.
"Over time, I think what we'd like to do is manage the book into a position that is a little less intrusive perhaps on the reserves," he said the day after being named Barrick's new CEO in a surprise announcement.
The move, Barrick said, was undertaken to "address its concerns over the recent performance and restore Barrick to the leadership position in the gold industry it has consistently maintained throughout much of its existence."
Overall, Mr. Wilkins - who in the past served as Barrick's chief financial officer - said his goal is to "reestablish Barrick as the premier company."
Already, he said, he's been given "a laundry list" of issues needing attention, but he wouldn't comment on specific areas of concern.
Looking ahead, the company - which said it will join the growing number of companies no longer giving bottom line earnings guidance - said it expects first-quarter gold production of 1.2 million ounces and full-year production of between 5.4 million and 5.5 million ounces.

On Thursday's call, analysts were told Barrick expects the first quarter of the current year to be its weakest because of lower ore grades.

Gold -- Sharefin, 02:59:02 02/16/03 Sun

Sprott Asset Management Adds Precious Metals Industry Expert John Embry To Its Team Of Investment Specialists

Eric Sprott, Chief Executive Officer of Sprott Asset Management Inc. (SAM) is pleased to announce the appointment of John Embry to the position of President of SAM effective March 2003. John Embry was lead portfolio manager of the Royal Precious Metals Fund and co-manager of the Royal Balanced Fund, Royal Canadian Equity Fund and Royal Global Resources Sector Fund.
We are thrilled about the addition of such an outstanding and prominent Canadian investment specialist to our team and are confident in John's abilities to bring forth new and exciting gold initiatives to our firm and our portfolios.

Mr. Embry, an industry expert in precious metals, has researched the gold sector for over thirty years and has accumulated industry experience as a portfolio management specialist since 1963. Using his expertise, Mr. Embry will have full management authority over the Sprott Gold and Precious Minerals Fund and will play an instrumental role in corporate and investment policy of the firm, pending regulatory approval.

Gold -- Sharefin, 02:47:15 02/16/03 Sun

A foolish, easy money gold market - McEwen

Speaking during Goldcorp's fourth quarter results conference call, chairman and chief executive Rob McEwen said the present market was becoming foolish with too much easy money.
McEwen warned that with capital more plentiful, future M&A activity risked being ego driven which increases the risk of failing to deliver [for shareholders]. He warned that he would be a seller when there was a “whole lot of new equity issues coming to market, because it would signal an unwelcome expansion of supply.

"We're at the beginning of another one of those epic periods. This is the third major gold bull market that will run for 7-8 years while the rest of the market experiences real pain. Think of gold as fire insurance."
McEwen also beat his usual drum on hedging, predicting a sticky end for companies that continued to hedged on a significant scale. He also confirmed that Goldcorp continues to look for expansion opportunities closer to home instead of having its executives live their lives in planes and hotels.

As far as selling its gold stockpile, McEwen indicated that that is some way off and he remains convinced that the best strategy is to continue accumulating gold with the proviso that investors are properly educated about the reasons for doing so.

Gold -- Sharefin, 02:44:49 02/16/03 Sun

Barrick's heavy hedging heartburn

Barrick Gold [ABX] released fourth quarter and 2002 results that were entirely overshadowed by the day-earlier firing of its chief executive, Randall Oliphant. Barrick founder and chairman, Peter Munk, said the change was necessitated by the company failing its shareholders. One of the admitted failings is the hedge book, an investor relations incubus.
A full transcript of Munk's statement and new pledge to shareholders is available on Mineweb.

The Barrick hedge book has dominated the broader gold investor debate in proportion to the increase in the gold price. The higher the price, the greater the conviction - but absent any proof - that the company faces an imminent meltdown as the notional loss on its hedge book goes critical.

A mining hedge book has two classifications depending on market conditions. When the commodity price is rising, it becomes a short sale of the mined product and investors revolt. When the commodity price falls, it becomes astute risk management that investors praise. So be it; Barrick got caught long the wrong religion, and now it is converting.

At issue then is how the company manages its conversion to the new, mainline faith of anti-hedging. Confession is one thing, adherence another.

Gold -- Sharefin, 02:32:32 02/16/03 Sun

Vox: Barrick

Firing your CEO on the day your annual results are due is a good way to get people whispering. When you're Barrick Gold, it's guaranteed to set the chatterers off at a high pitch.

There was no shortage of theories yesterday as to why Randall Oliphant might have been so unceremoniously let go. There were the usual cries about the company's hedging program, which some critics perennially believe may be a potential source of heavy damage. Others hinted that Barrick might be in trouble because, they say, it has been high grading its ore bodies (that is, it had shovelled out all the easy-to-get-at gold and was now facing quickly rising costs as it turned to the harder-to-reach metal.)
That said, it's probably safe to assume Barrick will continue to wind down the book to some extent. Last month, for the first time ever, Barrick rolled contracts forward - that is, it opted not to deliver into them, because it could sell for more in the spot market. This flexibility - the ability to defer contracts - has long been a major point to Barrick as it defended its hedging program from allegations that it was dangerous.

But even investors who don't fear a derivatives crunch at Barrick would prefer to see the company reducing its forward sales to give it more exposure to a rising gold price. The case for a long-term bull market in bullion hasn't convinced everyone, but investors buying gold stocks are likely to prefer those that can participate in such a rise.

Gold -- Sharefin, 02:29:39 02/16/03 Sun

Western Areas hedge book under scrutiny

One inhibitor to a fair offer would be the so-called toxicity of the hedge book, an exotic derivative structure that consumes 40 percent of Western Areas' portion of South Deep's production in its first 12 years. But more willing buyers could be sought for Western Areas if the hedge book could be ameliorated.

Gold -- Sharefin, 02:27:29 02/16/03 Sun

Sprott manager betting gold will top $500

The price of gold bullion has already increased sharply, having climbed to $357.40 (U.S.) an ounce from a 20-year low of $253 in 1999, but fund manager Jean-François Tardif thinks the price will rise much further.

"We think it is going to go north of $500 easily," said the senior portfolio manager at Toronto-based Sprott Asset Management Inc. The firm has recently bought a considerable amount of bullion.

Gold -- Sharefin, 02:23:52 02/16/03 Sun

Tale of two golds...

Historically, uncertain times, global recession and economic downturn have fueled demand for gold, as it has been the best hedge known to mankind. In the current scenario when global economic powers (read US and Japan) are going through one of their worst recessions gold has become even more valuable.

Gold -- Sharefin, 02:17:52 02/16/03 Sun

Rio Narcea cuts hedge contracts, sees lower output

Rio Narcea Gold Mines Ltd said on Friday it reduced its gold forward sales program, or hedging, by 82,736 ounces so it can benefit more from a rise in the gold price.

It said it had closed out its $437 an ounce gold calls representing 82,736 ounces with proceeds from a recent equity placement.

Hedging is a strategy used to offset risk. In mining producers sell their as-yet unmined gold in forward markets at fixed prices to protect income.

With the closing, the company is left with $437 an ounce calls on 111,418 ounces from now to mid-2005 and a small forward sales contract of 13,647 ounces through 2006 at $301 an ounce.

Gold -- Sharefin, 02:13:41 02/16/03 Sun

Some ordinary investors dropping stocks for gold

An unexpected breed of investor is buoying the gold market. Once the domain of true-believing gold “bugs” - and recently a refuge for investors wary of terrorism and war - gold is starting to attract a much wider following, including a number of people who, like Anderson, have never invested in the precious metal before.

The revived investor interest in the metal reflects a skepticism about the stock market, which is still shaking off one of the most wrenching boom-and-bust periods in its history.

Gold -- Sharefin, 02:11:57 02/16/03 Sun

Punters cold on hot gold

AND welcome to the evening news. Tonight's highlights include the booming gold price and how stockmarket punters are again lining their pockets as share prices soar in yet another mining frenzy.

Heard it before? Probably several times over the years, as each cyclical upturn in the gold price has sparked a scramble for penny stocks among fair-weather investors.

But this time it's all different. The 25 per cent jump in the gold price in the past six months has barely raised an eyebrow on the sharemarket, where talk of war and corporate scandal is dominating the agenda.

Market watchers, mustering all their imaginative powers, have branded this effect "the disconnect" - where the rise in the gold price is not matched by similar rises in share prices. The syndrome is largely the result of the gold bulls being outweighed by those who believe the party cannot last.
"People are not even speaking of gold outside the industry," he says. "It's just so long since people thought of gold as an investment.

"The question everyone is asking is: is this upturn sustainable? And the answer is yes.

"Over the past 12 months this recovery has been sustainable and it has certainly gained momentum in the last two to three months with the talk of war, but there are other indicators that demonstrate a growing interest in gold.

"Drill rigs are at a premium in the Goldfields as explorers seek new prospects, commercial real estate in Kalgoorlie is bursting at the seams and the local service industries in the Goldfields are again reporting growth, some at record levels."

Gold -- Sharefin, 02:03:54 02/16/03 Sun

Fundamentals are pushing gold into super-bull territory

Sceptics who don't believe the bull run in gold will last assume that its price is being driven mainly by war fears and terrorism dangers.

I say no, there is a much more fundamental reason.

A shift is happening in global investment patterns - out of paper and US assets and into hard assets and other countries.

The weakening US dollar and Wall Street are illustrating this shift, telling traders to expect strength out of gold's technically classic "rocket acceleration" pattern.

Other macro indicators suggest why money is moving out of the world's largest economy. The next bubbles due to burst are US property prices and US treasury bonds. No country in a declining growth environment can sustain record-high levels of personal, corporate and public debt, a huge trade deficit, the cost of a war on terrorism - as well as potential for a war in Iraq and in North Korea.

The action of the dollar in the past two years suggests the world has decided that the big growth years of the US are over and it is time to move into something else. Some of that money is already moving into gold.

Canny traders in China, Dubai and Malaysia last year established active gold exchanges to cater for the demand for gold bullion and coins. Traders on the bullion and futures desks know where the major pressure of buying is coming from. They say that in recent weeks much of it came from China, Japan and the Arab world.

Traders don't act without reason. They take into account that North Korea can now land missiles with nuclear bombs on the US west coast . And they most certainly believe US president George W Bush and his British counterpart, Tony Blair, must know more about the dangers from Iraq and terrorism than they can say.

Another factor in gold's favour is that there is some evidence that central bankers the world over have acted in concert since at least the mid-1990s to support a stronger dollar and a weaker gold price - and to achieve returns from what was seen as a depreciating asset.

Through complicated short sales, leases, swops and outright sales, a significant portion of reserve assets in the form of gold has disappeared. In its place is merely a claim against a financial institution or bullion dealer for its return.

Yet that institution or bullion dealer - now also under pressure in a declining earnings environment - is having to buy in physical gold or its equivalent in futures contracts, very expensively, at a higher gold price than expected.

A further dumping of the dollar, for whatever reason, could fuel a rocketing gold price to above 500/oz - which would, in turn, fuel more short covering and more demand for the physical metal.

The mines can produce only so much; they need years to expand production. Since 1996, demand for the metal has exceeded supply. Central banks sold their holdings - and this kept the gold price down - but now those banks are no longer sellers. In fact, they may be sweating about how to buy back the gold that enabled their profitable swops and leases.

The fundamentals are in place for one of the biggest gold price squeezes in history. Technical and long-term cycle factors are also strongly confirming this view. An (unlikely) quick war in Iraq won't kill the gold price.

While the gold price remains above the $332/oz area, medium- and long-term technical trend profiles indicate that there is a super-bull trend under way.

The fundamentals and cycles suggest there will be more upside in coming months but technically, there is scope for several days or weeks of consolidation before the next push. Even sceptics will want to be aboard when the gold price goes above the $359/oz or other technical resistance levels again.

Heroin Glut Looms -- AW, 02:02:51 02/16/03 Sun

Dateline Sunday Herald Sun 16 Feb

Since the Taliban left office in 2001, production rose from 185 tonnes in 2001 to 3400 tonnes in 2002. A further rise to 4000 tonnes is expected in 2003.

Let's all pause to welcome the American liberators

Fiat vs Gold -- Sharefin, 01:49:55 02/16/03 Sun

Tomorrow Land

The beneficiaries are, of course, debtors. They now get to borrow cheaper to refinance a lot of debt at lower rates, sustaining, theoretically, a short-term gain of some kind. What else would you call it? I had set up my accrual system using ten dollars in anticipated debt expense, and now I only accrue five dollars in debt expense, the difference must flow to the, as they say, well, I was going to say "bottom line" but with the modern accounting quirks, I'm not sure of anything anymore, so I will just say that it goes someplace. And that it is a good thing, because it means keeping more money.

And, there is the added benefit that accrues to a government selling a lot of debt to finance this huge, globally coordinated deficit-spending mania. Just as the government is spending oodles and oodles of money to amass huge, monstrous deficits, all the central banks are pounding interest rates into the cellar. Hmmm. What a coincidence, huh? I guess that they figure that it would be tacky to pay higher interest rates just when they needed more money.

The analogy I am going to use, as some "GP-13 rated, contains violent themes and mild profanity" example, is the metaphor of a guy, an ordinary guy, sinking in the water, wrapped in heavy iron chains that have "debt" written on them, and the Fed, in a scuba outfit, is shocking the guy with a Tazer, shouting "Swim, you lazy bastard! Swim!" But now that I have written it and re-read it, I have no idea what I am talking about, but it seems kinda funny and oddly perceptive, yet with that whimsically stupid and superficial flair that is my trademark.

I don't know why it is not obvious that borrowing for consumption merely brings future consumption forward to today, which means that there will be a corresponding less consumption tomorrow, and finally that tomorrow is, consulting my calendar, now. Perhaps if you are very, very quiet and you listen real, real closely, you can hear them actually thinking, "How can tomorrow be now? It ain't logical! Tomorrow is tomorrow, and it sure ain't now!"

Well, one aspect is if eight trillions or nine trillions or seven trillions of dollars have been lost in the market, obviously not all that much money has actually been "lost." But to the extent that those depreciated assets were used as collateral for loans, it is of significant interest to the lenders; the borrower doesn't have enough collateral to cover the loan anymore.

And who are some big lenders? The banks, meaning the Federal Reserve System as a whole, for one. Another is insurance companies, large corporations, other governments, 401(k)'s, IRA's, blah blah blah.

So, the summary is that the banks and lenders are in big trouble because they acted like morons with money, shoveling tons and tons of money to stupid investments that are now taking them down to Chapter 11, and the damnable Fed is, as always, bailing them out after encouraging them to get into the trouble in the first place.

And the way that the Fed bails them out is to screw the hell out of depositors and investors.

So, my children, we are witnessing the results of forty years of deficit-spending, government growing bigger and bigger, rampant money and credit creation, persistent low-level inflation, astounding disparities in wealth, and now we want some MORE deficit-spending and money creation? Get outta here! Really? Man, when we are awarded the booby prize in the smarts contest, we are going to be soooooo embarrassed!

Gold has fallen a little, giving one an opportunity of buying more gold. If you are dollar-cost-averaging with gold, as you should, and if you are not then the next time I see your mother I am going to tell her that you are acting like an idiot, then you will get more gold per dollar now. It worked with equities in the Nineties, and it will work now with gold.

Gold -- Sharefin, 01:36:27 02/16/03 Sun

The beginning of the end?

Nah. This is not the beginning of the end. It's not even the end of the beginning. It may be barely the beginning of the beginning. We are in a gold bull market. It will go higher, much higher than any of us can imagine. Every stock with gold in its title and the CEO not in handcuffs will go higher than you ever dreamed of.

On the other hand, there are going to be some days you wish you had never looked at the price of gold or your gold portfolio. Yesterday was such a day. It's all part of the wall of worry junior gold bull markets go through. The market had been going curvilinear since the first week of December and while gold bugs would prefer gold climb that way every day, markets don't move like that. Gold got a little carried away.

It's like a good news, bad news joke. The good news was that gold was rocketing to the moon and the bad news was that the gold shares weren't following in trail.

Richard Russell -- Sharefin, 01:34:06 02/16/03 Sun

Russell loves Gold

Subscribers who bought gold or gold shares for a "quick profit" should probably get out of their positions.

Reason -- you're in for the wrong reasons.

The correct reason is that gold and gold shares provide a defense against the Fed's policy of destroying the dollar. This entails holding gold items for years, perhaps even willing your gold coins to your children or your wife or your sweetie.

I never suggested buying gold items for quick or even intermediate-term potential profits. We're early in the gold bull market. It's even conceivable that gold could spend the rest of 2003 consolidating, backing-and-filling.

Personally, I'm in no hurry where gold is concerned. For the sake of argument, suppose gold rose to 500 by October. Would I take profits? I would not. I wouldn't on the basis that I don't want to swap gold for fiat paper. I bought gold to get OUT of fiat paper.

I don't view gold as an "investment." I see gold as a time-tested store of value.

And believe me, with the Federal Reserve system running our money, we need a true store of value. A hundred years from now the gold you own will still be money. A hundred years from now, the dollar will be a museum curiosity.

Richard Russell -- Sharefin, 01:31:42 02/16/03 Sun

Dow Theory Letters

Fullermoney, a top advisory out of London starts its January 31 report as follows --

"Why China may swoop on the world's available gold supply. China's foreign currency reserves are soaring as it becomes the global manufacturer of last resort. . . . China's obvious choice is to buy more gold while the price is low. Faced with a declining US dollar and an all but certain upward revaluation of the yuan at some future date, China has been buying gold recently. In December it bought approximately $1 billion in gold, increasing its bullion reserves by 16.08 million ounces in November 2002 to 19.29 million ounces at year-end. Will China buy more gold? Of course. If the country's monetary officials are smart, as I presume. Who wouldn't in their position?

"Could China swap most of its dollar reserves for gold? No, there isn't enough gold available. How much gold could China buy at a reasonable price? That depends on two factors -- what Chinese monetary authorities regard as a reasonable price, and how quickly everyone else catches on to the fact that China wants to boost its bullion reserves significantly. Why should China bother to buy gold at all if it can't buy enough to offset its dollar exposure? Because the price of gold is likely to appreciate significantly in terms of all fiat currencies over the next decade or two, even allowing for interest rates. In contrast, the supply of gold increases very slowly.

"Bullion's advance in the 1970s was fueled by investors, mainly in the US and Europe. Today, they have just begun to buy gold, led by a few private individuals and hedge funds. The main private buyers during gold's new secular bull market, which has only just commenced, will come from the US, Asia, especially Japan, and lastly Europe. However, the greatest demand for gold over the next 10 to 20 years could come from China and other countries with substantial foreign reserves."

Russell Comment -- I have the greatest respect for the writer, David Fuller. I also want subscribers to take in Fuller's very long-term view of gold. He's talking in terms, not of weeks or months, but of years. Therefore, subscribers who buy or own gold should think in the same time period.

Fiat vs Gold -- Sharefin, 01:00:37 02/16/03 Sun

Credit Bubble Bulletin - Alan Greenspan

Texas Representative Ron Paul: “I have a question relating to the speech that you gave at the economic club in New York in December. Because you introduced your speech with three paragraphs dealing with gold and the -- and monetary policy. And you made some very pertinent points about gold, indicating that from the year 1800 to 1929 the price levels were essentially stable under gold. And after we got rid of the gold restraint on the monetary authorities, prices have essentially increased by over tenfold since that time. But you also follow that by indicating that inflation, when it was out of control in 1979, monetary policy changed direction in a way, and they were able to take care of inflation, more or less conquer inflation, and that now you are more or less not concerned about inflation, that your concern, really, is about deflation. And it was interesting that you brought up the subject of gold, of course. And there's a lot of speculation as to exactly why you did this and what this means.

But my question deals with whether or not we should forget about inflation, whether or not this has been dead and buried. Federal Reserve credit for the last three months has gone up at the rate of over 28 percent. Inflation is a monetary event, so therefore we have monetary inflation. The median CPI is almost going up at twice the rate as the CPI, close to 4 percent. The Commodity Research Bureau index is going up in the last 15 months over 35 percent. Gold is up 36 percent over 18 months, or 15 months. Oil is up 60 percent. So we have a lot of inflation. And we have medical care costs skyrocketing, housing costs going up, the cost of education going up, the cost of energy going up. And to assume that we shouldn't be concerned about inflation, all we can do now is print money, I would suggest that this is what we've been doing for three years, the monetary authorities. We've ... you've lowered the discount rate 12 times, and there's still no signs of good economic growth. So when - when will you express the concern about an inflationary recession? Because that to me seems like our greatest threat, because that has existed before, we even had a taste of it in the ‘70s. We called it stagflation. So I'd like you to comment on that as well as follow on your comments on just why you might have brought up the subject of gold as the New York speech.

Chairman Greenspan: “First of all, we have not lessened our concerns about inflation. Indeed, our general presumption is that we seek stable prices. And stable prices mean no inflation or deflation. The reason I raised the issue of gold is the fact that the general wisdom during the period subsequent to the 1930s is that as we moved to essentially a fiat money standard, that there was no anchor to the general price level. And, indeed, what we subsequently observed is, as you point out, a very marked increase in general price levels, indeed, around the world as moved ourselves from commodity standards, and specifically gold. I had always thought that the fiat money system was chronically and inevitably an inflation vehicle, and indeed, said so repeatedly.

I have been quite surprised, and I must say, pleased by the fact that central bankers have been able to effectively simulate many of the characteristics of the gold standard by constraining the degree of finance in a manner which effectively has brought down the general price levels. The individual price levels to which you allude are certainly correct. I might say the gold and the oil issue are clearly war related and not fundamental. But we still -- looking at the broadest measures of average inflation, and the best statistics that we have, still indicate very low inflation with no evidence of an acceleration. That does not mean, however, that we believe that inflation is somehow inconceivable anytime in the future. We will maintain a considerable vigilance on the issue of inflation, and are looking all the time for evidences of an emergence of inflation, which at this particular time we do not see. But that does not mean that we believe inflation is dead and that we need not be concerned about it. We will continue to monitor the financial system as best we can to make certain that we keep prices stable. They are stable now, and we hope to be able to continue that indefinitely into the future.”

My comment: There has been considerable debate in the gold community regarding the intent of Greenspan's recent observations on gold. I think his response to Representative Paul's poignant question clarifies the issue. Instead of laying analytical groundwork for a future return to some type of gold-backed monetary standard, Chairman Greenspan is propagating the opposite: Although central bankers did get off to a quite rocky start in their management of a global fiat monetary regime, their experience and newfound discipline has evolved into a system that “effectively simulates” the stability of a gold-anchored monetary regime. Indeed, Greenspan's comments are consistent with Fed Governor Bernanke's recent assertion that central bankers' commitment to “price stability” has provided a solid “anchor” for contemporary monetary systems. That such comments could be made nowadays (with a straight face) - after recurring global financial crises and a bursting of an historic global stock market Bubble, while in the midst of out of control U.S. (and, to a lesser extent global) mortgage lending excess, out of control U.S. trade deficits, a faltering dollar (world's reserve currency), and surging gold, energy, and commodity prices - is simply incredible. The faltering global financial system is absolutely anchorless and heading towards the rocks. Skipper Greenspan, refusing to heed increasingly desperate warning calls from the upper-deck, is locked in his quarters with the sheets pulled over his head.

Mesing w the Margins -- auspec, 20:44:32 02/15/03 Sat

COMEX is a fools' doubt about it. Tis simply not an honest market for gold or for silver. Play at your own risk, of course, but you better play w your EYES WIDE OPEN AS WELL. Risk is one thing......manipulation and stacking the deck is another thing altogether.

Lots of folks were pyramiding this market, buying contracts as their previous profits allowed. Nick Guano's boys were adding contracts every $10 or so all the way back to $280. That's a lot of contracts. No problem there.......pedal to the metal speculation, winner take all, loser goes home. I say he got wind of COMEX rules change and pulled the plug on the market. Personally, I don't trust the guy. I know for a fact that he has had MULTIPLE complaints filed against him with the US Postal Service, the Minnesota Attorney General and others. Frankly, he has no current US location of doing business that allows legal proceedings to be taken against him. Could be offshore. No follow up from the US Postal authorities makes me VERY suspicious of his true connections. I will tell you this......he precipitated this current down move......and likely w inside information. Good for his clients......they got a great profit and may likely be all over me. That's OK, I'm a big boy, but used to speaking my mind. I will give you probability breakdowns for his actions of selling down this market from near its high point.......

4%.......He just got lucky or smart and pulled the trigger at the right time. This is not his style as he is anything but a conservative investor.

66%......He somehow innocently got wind of the coming margin increases.

30%......He is in with the manipulation game. Hard to believe? Looks to me as though he was, one way or another, instrumental in setting off a $40 'correction' in the POG.

I would love for someone to inform me of his actual advice in pulling the plug on this market. Anyone?

You see......I've chased this guy from state to state. I've gone through possibly 80+ non-returned phone calls. I've heard "your refund check is coming" more times than I can count. No success w any state Attorney General because he avoids having an address where he can be served. No success w the US Postal folks, in fact NO response from them at all. It all smells to high heaven. He is totally untrustworthy and his timing with this gold correction reeks as far as I'm concerned {meaning his connections not his success}.

What's the bottom line on this margin increase. Basically, it's changing the rules in the middle of the game and it was meant to do exactly what it accomplished.....smash gold DOWN. Only the biggest of fools would fail to see that. What's the upside? Now we're talking.......

This shows incredible desperation on the part of the 'authorities'. There's the REAL HaHa!! THEY were looking into the "abyss" again!! They overplayed their hand and showed us all how late we're actually getting in this paper gold game! the COMEX margin {that's the bottom line}. The world gold price has been dissected from its fundamentals, it has been hijacked, by our buddies at COMEX. I have broadcast for nearly 2 years now that we are KICKING THEIR BUTTS, mainly because of the deep and appealing aroma of GOLD DESPERATION. This act of margin increases is the most blatant to date and is simply screaming "SUCCESS" for gold advocates. The worldwide POG is just as fraudulent as the COMEX rules!! Why? Because they dictate the worldwide POG on PAPER not physical gold. Uncle Festus does his thing.

What will break this NY stranglehold on gold? Numerous things.....the first being merely TIME. It's the game of a financial moron and it is doomed. Like Kanute holding back the tide. HaHa. Will they raise the margins again in gold, or silver for that matter, if needed? What do you think? Isn't it obvious?

What else fries em in their own fat? Worldwide gold demand as currently presented. Worldwide gold mining decreases in production as already written in stone. They are toast, burnt toast, burnt English Muffins and American Wunderbread! If you want to play COMEX.....then play away, but realize you would be much better off in Vegas. Any big player could break them in a fortnight by taking delivery of a large amount of contracts. Gotta have a lotta cahones and money to do it, or numerous "small" players could accomplish same.

Any folks who consider themselves gold advocates and don't own PHYSICAL gold are part of this problem and need to become part of the solution. They can't play games at the margin unless WE allow it. Shares and futures have their place, but PHYSICAL ownership is what will break their humped backs!! Shares and physical pretty much represent leverage over gold itself. They have used our own greed to control our market on the margin {literally and figuratively} as we go for the 'leverage'. How do you win a poker game when it is obvious someone is bluffing? Call their bluff of course. This margin raising shows they are BLUFFING. Look at history where any exchange has done this act in the past......silver w the Hunts, TOCOM and palladium. It is screaming "OBVIOUS DESPERATION".

We haven't just kicked their butts, we have made em cry "Uncle Festus" in the process.
Look behind the curtain, smell the sweet aroma, make your strategy, and pick your champaign.

Party on, Garth!


Gold -- Sharefin, 20:14:45 02/15/03 Sat

The Gold Volcano: 15 Roads Merge Golden Lava

The following large pools of capital will each be diverted into the precious metals asset groups. The promise of greater returns will be strengthened by economic conditions, monetary stress, desperate reactive government policy, and international chaos. A volcano will build, with the USDollar providing the power. Each major road will feed large amounts of money into the gold market. Some up-to-date background precedes discussion of each supplying road. Motives will be covered for each source to seek out gold. Many are the roads. Many are the motives. Together they will build a volcano under gold, merging the roads and lifting its price with awesome power.


US Treasury debt securities
Chinese and Russian Central Banks
Arab Petro-Dollars
Gold Miners
Federal Reserve Monetization
Japanese Savings
Pension Funds (managed and unmanaged)
Hedge Funds
Real Estate
Mortgage-Backed Securities
Corporate Bonds
S&P Stocks
New United States Gold-backed Dollar
New Argentina Silver-backed Peso

Gold -- Sharefin, 18:18:20 02/15/03 Sat

Don Cox Audio on Gold & War

Gold -- Sharefin, 07:27:44 02/15/03 Sat

Oil & Gold shares lag commodity boom

The intriguing feature about the oil and gold boom is that shares have lagged commodity prices by a wide margin.

Gold and gold stocks

Gold stocks have performed better than their oil counterparts but the charts of Kamal Naqvi, precious metals analyst of Macquarie Bank show that the indices have failed to beat their mid 2002 bull market peak. There are a few stocks that are the exceptions, notably Anglogold, the largest gold mining company in the world. The stock rose to new heights recently before falling back.

Gold -- Sharefin, 07:24:38 02/15/03 Sat

Gold south, oil north - Beware of the war premium

Gold is a lesson for oil traders. Speculative forces are dominating the market and the war premium is dangerous for the unwary.

Oil has surged because speculators believe that oil production and inventories are inadequate to satisfy demand. The reality is far different. The shortage of oil is a short term affair. There are more than adequate oil inventories in corporate and strategic reserves. Moreover a large speculative overhang of effective stocks in crude and products has been built up. Gold is a case study for oil traders.

Gold speculative positions - the stale bull factor

There is little doubt about it, but speculators large and small have been burnt by war hysteria and silly press comment, claiming near or around the top, that gold was a “safe” investment. At its speculative peak in the first week of February, the combined net bull position held by large and small speculators on Comex, the New York Exchange was the equivalent of around 14 million ounces. On the Tokyo Commodity Exchange it reached 5.8 million ounces, according to my Japanese broker informant. This was a combined speculative position of around 20 million ounces. “Open interest” on both exchanges i.e. futures and options positions open at the time, were the equivalent of around 43 million ounces, calculates Andy Smith, precious metals analyst of Mitsui Bussan.

In addition to those positions, hedge funds are active in the over the counter market. Although figures aren't available, volumes on the London Bullion Market, the largest in the world, rose by around a third from November to January to more than 18 million ounces a day. It is difficult to make an accurate estimate, but it appears that between 20 to 30 percent of normal global demand was controlled by speculators and “investors” at the peak. Dealers were terrified of taking the risk of offsetting positions, so the market was "long" and vulnerable to a sell off. The price tumble from an intra day peak of $389 to a low of $347 an ounce Thursday, before a revival to around $355 Friday, is the result of offloading by US and Japanese speculators. But they are still holding a large proportion of gold derivatives.

The action of the market confirmed the preceding warnings of this publication. Precious metals were overbought and in the danger zone.

Gold -- Sharefin, 05:52:24 02/15/03 Sat

Possible Cause or The Gold Trend is Your Friend

Gold as an investment class has finally gotten the attention of the investment world. Even TV anchors can no longer ignore it. With the exception of one week, the price of precious metals has been launched into space for nearly 10 consecutive weeks. Then, just as quickly, the price of gold shed almost $28 an ounce.

Many new gold investors, as well as some not so new, seem puzzled by gold's sudden drop-especially now when the fundamentals for gold and silver have never been better. Gold and silver demand is outstripping supply. The upcoming war and possible terrorist attacks that are expected to follow have added political uncertainty to gold's fundamental demand. On the financial front most importantly, we have a declining dollar. For the fourth consecutive year, our stock market is at a loss in the U.S. The economy seems to be drifting and along with it, corporate profits. On the monetary front, the money supply continues to expand at a high rate. Fed officials have made it well known that they will burn the currency if necessary to keep the markets liquid and America's climbing debt pyramid from imploding.

All of these factors are favorable for gold and silver. So why the drop in metals since February 4? There are several factors behind gold's decline of which anyone of them or a combination of any of the above can explain gold's pullback. There are four principal explanations are as follows:

1. Technical correction
2. Short positions in bullion and equities
3. Planned intervention
4. Fundamental valuations

One obvious observation is the big boys, otherwise known as commercial hedgers, are short in a big way-both gold and silver. Another observation is that there is not enough bullion on the exchanges to handle long positions, especially if longs demanded delivery. This is especially true in silver where the short position is or at near-record levels. The little guy is getting squeezed not realizing that those who are squeezing them are the ones that are most vulnerable. If the small trader demanded settlement in bullion, it would be all over for the silver shorts and the same for gold. It may be one reason with gold's recent run up that Exchange officials have increased margin requirements by 50%. This affects the small trader more than it affects the big boys. The big boys are better capitalized and have access to large lines of credit. The small trader is not in the same position. The hike in the margin requirements may be the first sign of a Vesuvian tremor that may be ready to erupt. The shorts are vulnerable if bullion prices erupt-or even worse-if the small trader finally wakes up to the fact that the emperor has no clothes.

Instead of being played like a fiddle, the small trader may one day eventually wake up and realize how vulnerable the shorts are and start demanding delivery. If that ever happened, I believe they would close down the exchanges and go to a cash market. There simply isn't the physical inventory to handle investment demand or cover short positions if physical delivery is demanded. Most transactions are settled in paper or cash. Therefore, paper has been able to control the physical markets rather than the other way around through leverage. That day may be coming to an end soon as all three of my storm fronts increase in intensity in the currency markets, financial markets and in the economy.

Reason #3 Intervention
The third reason why gold may have pulled back as quickly as it did is that there appears to be intervention of one sort of or another in the currency market, stock market and in the metals markets.

Note that the top in gold & silver (along with the US Dollar) coincided almost to the minute with Powell's speech.
This is a common feature when a major speech is broadcast to the nation.

Beefed up politics with a twist of sentiment.

Fiat -- Sharefin, 05:29:59 02/15/03 Sat

Greenspan's 'point of no return' rattles dollar

Currency investors only took a day to heed the warnings of Alan Greenspan, whose federal debt and tax-cut warnings this week marked the Fed chief's most candid discussion yet of the ingredients for a fiscal meltdown.
Most financial observers are tying the dollar's relapse, and a rebounding gold price, to terrorism, war, missiles and a faltering U.S. stock market. I beg to differ. In coming days and weeks, Greenspan's "point of no return" missives also will share credit, or blame, for melting stock and bond markets.

Stating the case against President Bush's five-year deficit-spending plans, Greenspan sketches a scenario where accumulated federal debt (about $6.4 trillion) and avalanching interest-rate payments ($332 billion in 2002) lead government finances to a "point of no return." The Federal Reserve chairman says the U.S. Treasury's comfort level on deficit spending amounts to between 1 percent and 2 percent of gross domestic product.

The American public, thanks in part to wide television and newspaper coverage of Greenspan's unusually candid answers to lawmakers' queries, is getting the financial education it should have received 32 years ago, when then-President Nixon snipped the dollar's price link to the price of gold.
With Federal Reserve officials waging a battle against Japan-style deflation of prices and wages, one wonders whether the real risk to the American economy, and the stock and bond markets, is really accelerating inflation and higher interest rates.

The Fed and other central banks this winter stated publicly they would be willing to effectively "junk up" their balance sheets.

Specifically (and this is ancient history to Fed-buffs even though the comments came just three months ago), Federal Reserve Gov. Ben Bernanke said, "By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

Gold -- Sharefin, 05:22:52 02/15/03 Sat

POG Correction Almost Over

Fund selling was blamed for gold's weakness Wednesday. Presumably in anticipation of further sales on the TOCOM exchange in Japan Thursday morning - Japan's markets reopened from a holiday Wednesday morning to find lower gold prices. It was a classic shakeout.
Certainly, this war nonsense has thrown a bombshell of confusion at the markets, and our outlook for gold and oil has to adapt to it. What I mean is that the media driven war focus brings in the weak hands that have been conditioned to speculate on the immediacy of war, almost to the neglect of the fundamental outlook for the dollar, as well as gold and oil. The result is volatility and of course, opportunity. Bear Sterns said it right when they described the war premium in gold at the margin.

Last year we said that whenever the peace trade (sentiment) inflates, investors should buy the dip in oil. Now that gold has been put in play at the margin, the same applies there, at least until our fundamental outlook for higher gold values changes.

Still the Second Largest Hedge Book in the World
If you think Anglogold's shares doubled during 2002 because it's the world's second biggest gold company (Newmont is arguably number one today), guess again. The company's shares gained for one reason only - its commitment to reduce the hedge book. Don't lose sight of that, and don't let this happen to your stock:

Indeed, Anglo's stock has performed exceptionally well relative to its blue chip peers. It was the only blue chip producer that broke out to new highs in the latest gold rally - December/January.

If you're willing to accept that companies like Barrick have the equivalent of a risk premium priced into their stock in lieu of their bearish hedge position, imagine what might happen to the price of their shares if management decided to liquidate the liability in a bull market (gold) - the stock wouldn't only go up, it would probably outperform its peers. There's extra leverage. Not only would the bottom line then fall more in line with gold price moves and flow more directly through to shareholders, but also, valuations could then recover to where the unhedged values already are.

From the Far Side -- Sharefin, 05:15:39 02/15/03 Sat

Jim Rogers and Marc Faber interview

great 45-minute video with JR and MF sitting in JR's NY apartment discussing the fate of the economic world for the next 10 years.

In the orange on the right side of the page click the "Riverside Conversations in Real Video" breedband (broadband) or smallband to load the video.

it's a dutch site but the whole thing is in english.

Gold -- Sharefin, 05:12:42 02/15/03 Sat

Why The POG Is Not $400 NOW!

It's been about a year since I examined what I identified as the POG price suppression through NY gold market trading. Those of you who read my earlier pieces recall how, consistently, overseas gains (from the NY close to the London am fix) were cancelled out during subsequent NY gold trading. I have been urged by some to re-examine the phenomenon since my last analysis (about 13 months ago) to see if it still exists.

The earlier articles showed that even though overseas trading had an upward bias, the relentless NY selling not only drove the price back down, but also seemed to have an intimidating effect on whoever was doing the overseas buying. This was illustrated by the fact that although NY selling pressure remained fairly constant during that year, the overseas buying strength was cut almost in half during the second six month period. At the time I remarked that unless there was some cataclysmic event there would be no large breakout (e.g., $25 spot rises that stick). The strength of NY selling would overwhelm and condition the overseas buyers to cautiously and fearfully participate even if events looked as if they should be buying. This week the NY crowd took out the mallet again. Since the London AM fix hit $385 on Feb 5, the NY close was down an average of $5.68 from the London AM fix for each of 6 subsequent trading days.

Looking at the data from January 14, 2002 (right after my last report), until today's N.Y. closing (February 12, 2003), shows some changes but still points to NY as the source of POG capping. The data still show 2 markets working in opposite directions despite the rise in POG from about $286 to $352 per oz today. For the 234 events, the London AM fix was greater than the previous day's NY close for 57.7 % of the time, while the NY close was greater than that day's London am fix for only 44.4% of the time. This was during the period when the POG market was RISING. Even more startling, the total accumulated dollar gains for the London AM fix minus the previous NY close was over $110 . NY closing vs. that day's London AM fix showed total accumulated LOSSES of about $54 . The NY market, in the main, seemed to be dragged ahead by overseas pressures. This means, strictly on a statistical basis, if you partial out the NY trading you would have a POG about $400 per oz.

Gold -- Sharefin, 22:10:26 02/14/03 Fri

US fuel reserves run to record low

Oil prices have topped new 28-month highs in London as fears of war with Iraq rise and the US admitts its fuel reserves have fallen to their lowest levels since the 1970s Arab oil embargo.

The price of benchmark Brent crude oil shot up 63 cents a barrel to $33.08 in early trade to levels not seen since November 2000.

Nervous investors

Despite the war fears, gold prices have been falling this week.

Gold is often seen as a safe haven investment for nervous investors in times of international tension, and the recent falls have taken some traders by surprise.

War jitters had helped gold to six-week-highs a week ago, trading at more than $390 an ounce.

But bullion dropped to $354.00 an ounce in London at 1200 GMT.

"People are very, very nervous indeed... day traders are bailing out as well," said Peter Tse, senior dealer at Scotia Mocatta in Hong Kong.

Fiat -- Sharefin, 01:16:56 02/13/03 Thu


In late January, the Senate confirmed John Snow as our new U.S. Treasury Secretary, the 73rd in the government agency's two-hundred plus year history. Snow, like Paul O'Neill and Robert Rubin before him, promised to follow a strong dollar policy and take steps to help spur on a U.S. economic recovery and long-term growth.

Well, I know you've just started your new job, Mr. Snow, but I've got some sobering news for you. You and your pals can keep talking about this alleged "strong dollar policy" until you're blue in the face, but it's not going to make a lick of difference if you don't start managing our currency more responsibly. The dollar's not just in decline; it's a mess. If something isn't done soon, I believe the dollar could lose it's status as the world's reserve currency and medium of exchange, something that would lead to a huge decline in the standard of living for U.S. citizens like nothing we've seen in nearly a century.

"Oh, Jim," the disbeliveers crow. "You're just being extreme. That would never happen. After all, the dollar has reigned supreme for several decades"

True, but it seems to me that people forget that that supremacy isn't a gimme. A sound currency, after all, reflects solid economic fundamentals: little to no debt, a trade surplus, a stable balance of payments-the difference between a nation's receipts of foreign currency and its expenditures of foreign currency-and growing international reserves.
History teaches us that such impudent fiscal behavior has always lead to economic disaster. During the early 1920s, rampant inflation destroyed the value of German currency. German workers had to be paid twice a day just to survive; it took a wheelbarrel full of bills just to buy a loaf of bread. In England during the 1970s the government continued to boost its money supply, injecting its economy with liquidity, until debt levels spun out of control. Suddenly, no other countries would buy their sovereign bonds. Finally, the International Monetary Fund had to step in and bail the Brits out. Quite a shift for a country that only 50 years earlier was one of the richest nations in the world. Want a more current example? Just look south, to Argentina, where its currency recently lost so much value that the government prohibited its citizens from making withdrawals at the bank.
The bigger problem for the American economy is that foreign investors and foreign governments may soon lose their appetite for the declining U.S. dollar. Interest rates, which are now absurdly low, will need to rise to give foreign investors an incentive to invest and hold on to our currency. If not, these foreign governments and investors may look for somewhere else to hold their money. Historically, when investors recognize that a currency is being debased or devalued, they tend to look for sanctuary in currencies that remain stable at the insistence of the population. For years, the Swiss franc was synonymous with monetary stability.
How long does the dollar have? A year? A decade? I'm not so sure. As long as there's no other currency stepping up to the plate and EU continues to struggle with the euro, the U.S. government will likely be able to continue to jigger the books, essentially floating our enormous tab on the backs of the rest of the world.

But remember: Whenever there has been an economic crisis like this, a new player has always emerged on the economic landscape. A century ago, few people would have believed that the dollar was going emerge out of the 19th century as the dominant world currency. There's always a phoenix that rises from the ashes. Who will it be for the 21st century? My guess is the Chinese yuan may eventually have its day in sun. The nation has a recipe for a sound currency-a huge population, an enormous balance of payments surplus, and a sizeable GDP to match. China is now the world's largest importer and the world's second largest creditor (Japan is first). For the moment, it's currency is not convertible, which must change now that it has been admitted to the World Trade Organization. There are still a lot of cultural barriers to get over-rampant xenophobia and fear of capitalist interests-but nothing assuages fears like steady flows of money into your coffers.

Gresham's law says that bad money tends to drive out good money. Well, whether we like it or not, whether we want to believe it or not, the U.S. dollar has become bad money. Despite proclamations from Washington about a strong dollar policy, I see no reason to believe that the dollar won't continue to decline, that we won't continue to borrow like beggars and put Band-Aids on gaping wounds in our monetary policy. That is, until the day when our creditors say enough is enough. And that day may not be far off.

Gold -- Sharefin, 00:31:54 02/13/03 Thu

Free Speech or The Dictatorship of Thought?

Much has changed since we began Financial Sense back in 1997. For one thing, we have added a lot more content to go along with my Storm Series with special resource pages focused on areas I felt would do well in the stormy days ahead. We will continue to add a lot more content in the future. In a moment, I will share with you a vision of that future.

First, I must relate to you what FSO is and what it is not. FSO is not a gold site, although views on gold are certainly given prominence on this site. Anyone who has read my Storm Series knows why gold is given this prominence. I believe that gold and silver are only in the first stages of what will be a major bull market in precious metals. However, gold and silver won't be the only investment that prospers during the coming Perfect Financial Storm of this new century. Other commodities or what I like to refer to as “things” will also do well during this time. For this reason, we have added content on energy and raw materials, and soon water.

Because FSO is more than just about gold, we have added content on the Fed, economic and financial news tracking the Perfect Financial Storm which we feature in Storm Watch. Storm Watch is about to get a new face-lift with interactive charts and data for tracking all three storm fronts in currencies, the economy and the financial markets. We have added an Internet radio broadcast with plans to add interactive video, seminars, and with time, documentaries. Also in the works is Financial Sense University (FSU) an on-line learning center that will feature articles, courses, books, video interviews and seminars on investing designed to expand viewer's knowledge and views on the financial markets.

Besides more content, we are also viewing the background and resumes of potential editorial contributors-some of whom hold opposing viewpoints to those held by myself. I hope that we will provide alternative views, balance and additional insight than those held by this author. I have found in my own reading that it is helpful to read the works of others to not only confirm my own thinking, but also keep it in check when trends change.

For these very same reasons, FSO has had and will continue to have guests on the program who hold different views in the same asset class. Even within the gold camp, there are differences of opinion. Just look around all the gold sites and you will find disparate views as to where gold is going, preferences for silver over gold, bullion over precious metals equities, coins versus bullion, unhedged versus hedged stocks, and technical analysis versus fundamental analysis. The new gold market in precious metals is no different than the previous bull markets in other asset classes that preceded it. There will be differences of opinion as to how to profit from this new bull market. Some will favor equities, others will advocate bullion and still others will prefer junior mining and exploration companies.

Even in the gold camp, we find censorship. This came as a great surprise to me over the last year, for the gold camp was the last place I expected to find it. I can't tell you the number of times I have been emailed material on a contributing author's security background and records, investment calls and failures in an attempt to have me censor their views. With my own commentary, I resisted censorship and no longer post at a site that once censored me and enticed me with advertisements.

There is something within the gold camp that needs to be cleaned up. Perhaps it is a lack of confidence after spending decades in obscurity that besets it. Today's gold camp reminds me of the movie, Braveheart. Like the Scottish nobles that fought among themselves instead of the enemy, the gold camp fights each other. Rather than recognize the strength of opposing views in search of the truth, it fights all of those who oppose its own views. One camp is against the theory of government intervention and fails to recognize this truth. Another lambastes bullion and equities; while advocating numismatic coins. One camp believes only in the virtues of technical analysis; while failing to acknowledge the role of fundamental analysis. Others pretend to encourage the views of others, only to recoil when their own views are threatened.

Like David and Goliath, the gold camp does not recognize its own strength. Gold represents money, freedom, and liberty. It is a disparate camp made up of different generals-all with their own agenda and rules for fighting war. Rather than acting unselfishly in search of truth, it acts and reacts defensively to any view that is different than its own circle of influence. Until that changes and until it is recognized that there is room for the opinions of others, it will remain a disparate group.

As I have written so many times and on different occasions, gold and silver are in the first stages of a new bull market in metals. However, this new bull market will take place in various stages against a background of emerging storm fronts that will meet and merge together to form The Perfect Financial Storm. We are truly living in historic times. What we are about to experience will be unlike anything the world has ever experienced before. Old paradigms of how things will unfold will be irrelevant as civilizations clash, economies fail, financial markets collapse and the world turns to war. In this new world, an open and educated mind, a true and steady heart and unwavering faith, as well as strength of character will be the only means of survival.


Excellent article with many cognitive aspects...^o-o^....

Gold -- Sharefin, 00:07:14 02/13/03 Thu

Barrick Gold Fires Oliphant, Names Wilkins CEO

Barrick Gold Corp., the world's third-biggest gold producer, fired Chief Executive Randall Oliphant after the company's stock fell 13 percent in the past year as the price of bullion surged to a six-year high.

The company replaced Oliphant with Gregory Wilkins, who worked for Toronto-based Barrick from 1981 to 1993, when he resigned as chief financial officer. The 47-year-old Wilkins has been a Barrick director for the past 12 years.

Investors soured on Barrick because of Oliphant's policy of hedging, or selling some gold before it's mined to protect against a drop in bullion prices. While hedging added $2.2 billion to Barrick's revenue since 1988, largely during a slump in gold, investors are concerned the company will miss out on potential earnings as spot bullion prices rise.

``The big question is whether this signals a change in strategy,'' said Kevin Nyysola, who runs the C$270 million ($176 million) Canadian Natural Resource Fund at Investors Group Inc. and holds Barrick shares. ``Replacing one person with another and not doing anything with the hedge book isn't going to get the stock price moving.''
``You don't want to come into the office one morning and have something blow up on you,'' he said. `` You're producing a commodity and you're selling it. It should be a simple process.''

`No. 1' Priority

Oliphant was already trying to answer his critics. He had planned to cut the number of ounces Barrick pre-sold by a third to 12 million by the end of this year. That would be equivalent to 15 percent of its reserves, compared with 10 percent at Newmont. Barrick said it will provide an update on the plan when its reports earnings later today.

In January, Barrick for the first time in 15 years sold all the metal it produced in a month on the spot market to take advantage of bullion's surge, spokesman Vince Borg said.

Using its size and investment-grade credit rating, Barrick convinced its gold lenders to allow repayment deferrals as long as 15 years. That enables the company to sell on the open market when prices rise, Chief Financial Officer Jamie Sokalsky said in an interview last year.

The company has to do a better job advertising that flexibility, said Robert Cohen, who holds 4.75 percent of the C$161 million Dynamic Canadian Precious Metals Fund's assets he manages in Barrick stock.

``I think that's No. 1,'' Cohen said. ``The perception of the average person on the street is that Barrick is far more hedged than it really is.''

Cyclist -- Sharefin, 00:03:55 02/13/03 Thu

Your target doesn't surprise me.
So far we've got two gaps (breakaway & half-way) in the CME Gold contract.
With a target in the area you forcast.

timeline -- Cyclist, 15:15:40 02/12/03 Wed

The gold market is heading to 333 spot ,65 XAU ,and
more important the XAU /Gold ratio of .195.
All these numbers will converge into the third week of FEB.
The above FWIW

War -- Sharefin, 06:56:54 02/12/03 Wed


The Secret Patriot Act II Destroys What Is Left of American Liberty

A Brief Analysis of the Domestic Security Enhancement Act 2003, Also Known as Patriot Act II
By Alex Jones
(Posted Feb 10, 2003)

Congressman Ron Paul (R-Tex) told the Washington Times that no member of Congress was allowed to read the first Patriot Act that was passed by the House on October 27, 2001. The first Patriot Act was universally decried by civil libertarians and Constitutional scholars from across the political spectrum. William Safire, while writing for the New York Times, described the first Patriot Act's powers by saying that President Bush was “seizing dictatorial control.

On February 7, 2003 the Center for Public Integrity, a non-partisan public interest think-tank in DC, revealed the full text of the Domestic Security Enhancement Act of 2003. The classified document had been leaked to them by an unnamed source inside the Federal government. The document consisted of a 33-page section by section analysis of the accompanying 87-page bill.

*Note: On February 10, 2003 I discovered that not only was there a house version that had been covertly brought to Hastert, but that many provisions of the now public Patriot Act II had already been introduced as pork barrel riders on Senate Bill S. 22. Dozens of subsections and even the titles of the subsections are identical to those in the House version. This is very important because it catches the Justice Department in a bald-faced lie. The Justice Department claimed that the secret legislation brought into the House was only for study, and that at this time there was no intention to try and pass it. Now upon reading S. 22, it is clear that the leadership of the Senate is fully aware of the Patriot Act II, and have passed these riders out of their committees into the full bill. I spent two hours scanning through S. 22 and, let me tell you, it is a nightmare for anyone who loves liberty. It even contains the Our Lady of Peace Act that registers all gun owners. It bans the private sale of all firearms, creates a Federal ballistics database, and much more.

The bill itself is stamped “Confidential - Not for Distribution.” Upon reading the analysis and bill, I was stunned by the scientifically crafted tyranny contained in the legislation. The Justice Department Office of Legislative Affairs admits that they had indeed covertly transmitted a copy of the legislation to Speaker of the House Dennis Hastert, (R-Il) and the Vice President of the United States, Dick Cheney as well as the executive heads of federal law enforcement agencies.

It is important to note that no member of Congress was allowed to see the first Patriot Act before its passage, and that no debate was tolerate by the House and Senate leadership. The intentions of the White House and Speaker Hastert concerning Patriot Act II appear to be a carbon copy replay of the events that led to the unprecedented passage of the first Patriot Act.

There are two glaring areas that need to be looked at concerning this new legislation:

1. The secretive tactics being used by the White House and Speaker Hastert to keep even the existence of this legislation secret would be more at home in Communist China than in the United States. The fact that Dick Cheney publicly managed the steamroller passage of the first Patriot Act, insuring that no one was allowed to read it and publicly threatening members of Congress that if they didn't vote in favor of it that they would be blamed for the next terrorist attack, is by the White House's own definition terrorism. The move to clandestinely craft and then bully passage of any legislation by the Executive Branch is clearly an impeachable offence.

2. The second Patriot Act is a mirror image of powers that Julius Caesar and Adolf Hitler gave themselves. Whereas the First Patriot Act only gutted the First, Third, Fourth and Fifth Amendments, and seriously damaged the Seventh and the Tenth, the Second Patriot Act reorganizes the entire Federal government as well as many areas of state government under the dictatorial control of the Justice Department, the Office of Homeland Security and the FEMA NORTHCOM military command. The Domestic Security Enhancement Act 2003, also known as the Second Patriot Act is by its very structure the definition of dictatorship.

I challenge all Americans to study the new Patriot Act and to compare it to the Constitution, Bill of Rights and Declaration of Independence. Ninety percent of the act has nothing to do with terrorism and is instead a giant Federal power-grab with tentacles reaching into every facet of our society. It strips American citizens of all of their rights and grants the government and its private agents total immunity.

Here is a quick thumbnail sketch of just some of the draconian measures encapsulated within this tyrannical legislation:

SECTION 501 (Expatriation of Terrorists) expands the Bush administration's “enemy combatant” definition to all American citizens who “may” have violated any provision of Section 802 of the first Patriot Act. (Section 802 is the new definition of domestic terrorism, and the definition is “any action that endangers human life that is a violation of any Federal or State law.”) Section 501 of the second Patriot Act directly connects to Section 125 of the same act. The Justice Department boldly claims that the incredibly broad Section 802 of the First USA Patriot Act isn't broad enough and that a new, unlimited definition of terrorism is needed.

Under Section 501 a US citizen engaging in lawful activities can be grabbed off the street and thrown into a van never to be seen again. The Justice Department states that they can do this because the person “had inferred from conduct” that they were not a US citizen. Remember Section 802 of the First USA Patriot Act states that any violation of Federal or State law can result in the “enemy combatant” terrorist designation.

SECTION 201 of the second Patriot Act makes it a criminal act for any member of the government or any citizen to release any information concerning the incarceration or whereabouts of detainees. It also states that law enforcement does not even have to tell the press who they have arrested and they never have to release the names.

SECTION 301 and 306 (Terrorist Identification Database) set up a national database of “suspected terrorists” and radically expand the database to include anyone associated with suspected terrorist groups and anyone involved in crimes or having supported any group designated as “terrorist.” These sections also set up a national DNA database for anyone on probation or who has been on probation for any crime, and orders State governments to collect the DNA for the Federal government.

SECTION 312 gives immunity to law enforcement engaging in spying operations against the American people and would place substantial restrictions on court injunctions against Federal violations of civil rights across the board.

SECTION 101 will designate individual terrorists as foreign powers and again strip them of all rights under the “enemy combatant” designation.

SECTION 102 states clearly that any information gathering, regardless of whether or not those activities are illegal, can be considered to be clandestine intelligence activities for a foreign power. This makes news gathering illegal.

SECTION 103 allows the Federal government to use wartime martial law powers domestically and internationally without Congress declaring that a state of war exists.

SECTION 106 is bone-chilling in its straightforwardness. It states that broad general warrants by the secret FSIA court (a panel of secret judges set up in a star chamber system that convenes in an undisclosed location) granted under the first Patriot Act are not good enough. It states that government agents must be given immunity for carrying out searches with no prior court approval. This section throws out the entire Fourth Amendment against unreasonable searches and seizures.

SECTION 109 allows secret star chamber courts to issue contemp charges against any individual or corporation who refuses to incriminate themselves or others. This sections annihilate the last vestiges of the Fifth Amendment.

SECTION 110 restates that key police state clauses in the first Patriot Act were not sunsetted and removes the five year sunset clause from other subsections of the first Patriot Act. After all, the media has told us: “this is the New America. Get used to it. This is forever.”

SECTION 111 expands the definition of the “enemy combatant” designation.

SECTION 122 restates the government's newly announced power of “surveillance without a court order.”

SECTION 123 restates that the government no longer needs warrants and that the investigations can be a giant dragnet-style sweep described in press reports about the Total Information Awareness Network. One passage reads, “thus the focus of domestic surveillance may be less precise than that directed against more conventional types of crime.”

*Note: Over and over again, in subsection after subsection, the second Patriot Act states that its new Soviet-type powers will be used to fight international terrorism, domestic terrorism and other types of crimes. Of course the government has already announced in Section 802 of the first USA Patriot act that any crime is considered domestic terrorism.

SECTION 126 grants the government the right to mine the entire spectrum of public and private sector information from bank records to educational and medical records. This is the enacting law to allow ECHELON and the Total Information Awareness Network to totally break down any and all walls of privacy.

The government states that they must look at everything to “determine” if individuals or groups might have a connection to terrorist groups. As you can now see, you are guilty until proven innocent.

SECTION 127 allows the government to takeover coroners' and medical examiners' operations whenever they see fit. See how this is like Bill Clinton's special medical examiner he had in Arkansas that ruled that people had committed suicide when their arms and legs had been cut off.

SECTION 128 allows the Federal government to place gag orders on Federal and State Grand Juries and to take over the proceedings. It also disallows individuals or organizations to even try to quash a Federal subpoena. So now defending yourself will be a terrorist action.

SECTION 129 destroys any remaining whistleblower protection for Federal agents.

SECTION 202 allows corporations to keep secret their activities with toxic biological, chemical or radiological materials.

SECTION 205 allows top Federal officials to keep all their financial dealings secret, and anyone investigating them can be considered a terrorist. This should be very useful for Dick Cheney to stop anyone investigating Haliburton.

SECTION 303 sets up national DNA database of suspected terrorists. The database will also be used to “stop other unlawful activities.” It will share the information with state, local and foreign agencies for the same purposes.

SECTION 311 federalizes your local police department in the area of information sharing.

SECTION 313 provides liability protection for businesses, especially big businesses that spy on their customers for Homeland Security, violating their privacy agreements. It goes on to say that these are all preventative measures - has anyone seen Minority Report? This is the access hub for the Total Information Awareness Network.

SECTION 321 authorizes foreign governments to spy on the American people and to share information with foreign governments.

SECTION 322 removes Congress from the extradition process and allows officers of the Homeland Security complex to extradite American citizens anywhere they wish. It also allows Homeland Security to secretly take individuals out of foreign countries.

SECTION 402 is titled “Providing Material Support to Terrorism.” The section reads that there is no requirement to show that the individual even had the intent to aid terrorists.

SECTION 403 expands the definition of weapons of mass destruction to include any activity that affects interstate or foreign commerce.

SECTION 404 makes it a crime for a terrorist or “other criminals” to use encryption in the commission of a crime.

SECTION 408 creates “lifetime parole” (basically, slavery) for a whole host of crimes.

SECTION 410 creates no statute of limitations for anyone that engages in terrorist actions or supports terrorists. Remember: any crime is now considered terrorism under the first Patriot Act.

SECTION 411 expands crimes that are punishable by death. Again, they point to Section 802 of the first Patriot Act and state that any terrorist act or support of terrorist act can result in the death penalty.

SECTION 421 increases penalties for terrorist financing. This section states that any type of financial activity connected to terrorism will result to time in prison and $10-50,000 fines per violation.

SECTIONS 427 sets up asset forfeiture provisions for anyone engaging in terrorist activities.

There are many other sections that I did not cover in the interest of time. The American people were shocked by the despotic nature of the first Patriot Act. The second Patriot Act dwarfs all police state legislation in modern world history.

Usually, corrupt governments allow their citizens lots of wonderful rights on paper, while carrying out their jackbooted oppression covertly. From snatch and grab operations to warantless searches, Patriot Act II is an Adolf Hitler wish list.

You can understand why President Bush, Dick Cheney and Dennis Hastert want to keep this legislation secret not just from Congress, but the American people as well. Bill Allison, Managing Editor of the Center for Public Integrity, the group that broke this story, stated on my radio show that it was obvious that they were just waiting for another terrorist attack to opportunistically get this new bill through. He then shocked me with an insightful comment about how the Federal government was crafting this so that they could go after the American people in general. He also agreed that the FBI has been quietly demonizing patriots and Christians and “those who carry around pocket Constitutions.”

I have produced two documentary films and written a book about what really happened on September 11th. The bottom line is this: the military-industrial complex carried the attacks out as a pretext for control. Anyone who doubts this just hasn't looked at the mountains of hard evidence.

Of course, the current group of white collar criminals in the White House might not care that we're finding out the details of their next phase. Because, after all, when smallpox gets released, or more buildings start blowing up, the President can stand up there at his lectern suppressing a smirk, squeeze out a tear or two, and tell us that “See I was right. I had to take away your rights to keep you safe. And now it's your fault that all of these children are dead.” >From that point on, anyone who criticizes tyranny will be shouted down by the paid talking head government mouthpieces in the mainstream media.

You have to admit, it's a beautiful script. Unfortunately, it's being played out in the real world. If we don't get the word out that government is using terror to control our lives while doing nothing to stop the terrorists, we will deserve what we get - tyranny. But our children won't deserve it.

Forum archived -- Sharefin, 06:45:01 02/12/03 Wed

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