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Gold -- Sharefin, 07:41:06 04/01/03 Tue

The Golden Bull - I'm bullish on "things"

In a bull market, old resistance levels become barriers for price movements. They will be continually challenged and repelled until some new element of news or a change in fundamentals causes the trend to breakout. It is similar to a medieval siege. There will be a constant battle between buyers and sellers at these key resistance levels. There will be several attempts at challenging these key resistance levels until such time that buying power overwhelms selling power and the resistance level is breached. This last siege or battle took place at the $325-$330 level as shown in the chart above. This level is now acting as a key support level. Once resistance levels are breached, they in turn become support levels when prices correct. Note the charts of the last 1970s bull market in gold and silver below. There were corrective periods where the price pulled back as noted by the red arrows. However, also note that the primary bull market resumed it's upward trend. In other words, it is normal for any market cycle--whether it is bull or bear--to go through corrective countertrends.

In summary, gold and precious metals are now in the early stages of anew bull market. This is evident by the charts up above. This new bull market will go through corrective stages and periodic pullbacks. These periods should be used as opportunities to add to your holdings. As the charts of Homestake Mining during the Great Depression and the commodity bull market of the 70's indicate, bull markets in “things” can last a long time. Please take time to review these historical charts. Ponder them. Once you reflect long on the picture they tell, I believe you will come to the same conclusion as I have. You only need to make a few investment decisions in your lifetime. If you can discover a new trend and get on board that trend early and then ride that trend until it ends, that is how real fortunes are made.

Richard Russell -- Sharefin, 07:32:25 04/01/03 Tue

Gold: Secret Pressure

Gold gapped up today, but I continue to get the feeling that large interests are putting pressure on gold to halt any advance. This "secret pressure" has frightened buyers in gold and gold stocks -- you can sense this fear in the very tentative and fragile rise in the gold shares. As I write this morning, with gold up 4.50 Newmont, the gold leader, is actually down. It's as though the gold stocks distrust any rise in the metal.

All of which provided investors with an excellent opportunity to buy the gold shares at what will some day be seen as bargain prices.

Ultimately, manipulation will fail in the face of the primary bull trend in gold. When it does fail, gold will act like a coiled spring that has been released. Until then, gold holders will have to be patient. As a matter of fact, what's the hurry? Personally, I'm not in a hurry to see the destruction of the dollar. Which is what a second and third phase of the gold bull market will be discounting.

So my advice to "gold-bugs" is to be very patient. The US is heading into a period of unbelievably high deficits. The tell-tale signal of this administration's fiscal insanity would be a surging price for gold. To me it's obvious that large interests don't want gold to go anywhere.

Thus, it seems to me that gold and gold stocks will back-and-fill until the dam breaks. The current wall has been erected by the anti-gold element, better known as the central banks.

But as sure as gold is real money, the dam that has been constructed against a higher gold price will crack. When that happens, gold will rise higher than anyone believes possible. Gold will be like the Dow when it was priced at 161 back in 1949.

Richard Russell -- Sharefin, 07:30:31 04/01/03 Tue

Gold -- and the Dollar

I've been reading more and more about the possibility of gold manipulation. Nothing's been proved yet, but I suspect that gold is being manipulated. The Fed's money-manufacturing machine grinds out liquidity week after week.

Nobody, it seems, follows the money supply figures any more, but I do. I just received the figures for the most recent week, which was the week of March 17. For that week M-3, the broad measure of the money supply, was up $43.4 billion to a total of $8.59 trillion.

Consider this -- the worth of the entire gold industry, all its stocks, is estimated to be $90 billion. So in one week of dollar-manufacturing the Fed has "created" enough dollars to buy half of the entire gold industry. Does that make sense?

It's obvious that the Fed doesn't want the public to realize what an engine of inflation the Fed is. And there is no clearer signal that the Fed is pouring out Federal Reserve Notes (we mistakenly call them dollars) than rising gold.

Gold or real, tangible money will always compete with fiat or paper money -- therefore, all central banks have a vested interest in killing the "messenger." In other words, they don't want gold to rally.

Time after time we've seen gold pushing up, only to be knocked down again.

Lenny's Corner -- Sharefin, 07:21:41 04/01/03 Tue


While the gold market continues to be held hostage to the news and headlines, I sense
that we are finally beginning to see a greater influence of the underlying fundamentals
rather than the irrational exuberance or illogical despair of emotion that so painted the
gold market these past months. Physical buying by commercial/industrial concerns has re-emerged,
bolstering the floor of this market. Investors and speculators are now buying for all the
RIGHT reasons, rather than just piling into the market in the hope that the next fellow will be
happy to pay even a higher price. As the “reality” of the war sets in, the economic themes and
trends of the prospect for a lower USD, the massive deficits which will be incurred by the USA
government, the probabilities of the ongoing bear market in stocks, etc..etc..are now becoming
more apparent, and the gold market is faithfully responding. These are the levels that make
sense; these are the prices at which both investors and speculators should be buying, rather than
selling. After all has been said and done, all that is happening now is we are reverting the
original trend of the market, a secular bull. The war premium has come and gone, the revelers
(the specs) have come and gone, and now the professional traders are seeing value.

A fascinating birth in the gold market has been the news that an exchange-traded security has
begun trading on the Australian Stock Exchange. Each share of this fund is equal to 1/10 of one
ounce of gold, stored in the vaults in London, and is priced in Aussie Dollars. So far, volumes
have been meager, but it seems that not much promotion nor advertisement has been done. If
this is successful, it could be a blueprint for the establishment of much the same theory on other
exchanges, the most important, of course, being the USA, where it would trade in USD. It has
been the fervent hope of the World Gold Council to promote and establish such a trading vehicle
so that investors and speculators would have easier access to the purchase of physical gold.
While such exchange-traded vehicles have the potential to change the structure of the gold
market, I must admit that I remain quite skeptical. I have never understood that cries of some in
the industry that gold is hard to buy, that a better “wheel” needs to be invented in order to
encourage the investor. After all, the futures markets, where delivery of physical gold is required
when demanded by the buyer, remain the cheapest, most efficient, more transparent, most liquid,
and most heavily traded instrument on the planet.

Speaking of gold, China has now become the 10 th largest official holder of gold in the world, now
keeping 600 tons of gold as official reserves. This nation has been a rather aggressive buyer of
gold of late, and the industry is watching this trend most carefully.

While the Bundesbank has made its intentions to sell a bit, or more than a bit, of gold very clear in
the market, it now appears that the proverbial “fly in the ointment” has emerged. It seems that IF
the Bundesbank does sell gold, all of the profits go to the government, and not the Central Bank
who wishes to reinvest the proceeds. Mr. Ernst Welteke, who has been the champion of such
gold sales, was recently forced to admit that if the profits went to the government, rather than to
the Central Bank, that the Bundesbank would “reconsider” such sales. It would take a change in
the law to allow the Central Bank to retain the funds, and as such, is very unlikely. While the
market has feared gold sales by Germany, which currently has 3,446 tons of gold reserves, it now
is rather evident that it just aint gonna happen.

Gold -- Sharefin, 07:05:09 03/31/03 Mon

A Tarnished Dollar Will Put The Shine On Gold

For this very reason, I believe that gold, which has always been a precursor for financial distress ("the canary in a coal mine"), is most likely being "managed," and prevented from spiking up too quickly at times when the dollar is falling.

That said, it may seem surprising with all these negative forces stacking up against the dollar, that it hasn't fallen more quickly. That is partially because currency values are relative, and the alternative currencies against which the dollar is measured are not that attractive either.

The yen can hardly be considered safe, given that Japan's economy, stock market, bank system and credit rating have been in a decade-long meltdown. As for the "Rodney Dangerfield of currencies," the euro, it represents a number of economies plagued not only by sluggish growth but also by rigid regulatory structures and monetary/fiscal control mechanisms that will do more to impede growth than encourage it. In addition, if you think the U.S. equity markets have been a disaster, consider the dismal performance of their European counterparts. The U.S. dollar is most likely getting some of the benefit, as both U.S. and foreign shareholders bail out of European stocks and invest in the U.S..

The dollar's reserve status is clearly the most important reason for its continued strength. At last count, the dollar represented a whopping 76% of global central bank reserves, while gold reserves are at levels not seen for 50 years. Although the tide has turned on the dollar, the fact that these holdings are so pervasive means this devaluation process may play out over a long period of time. Since the dollar's dominance was achieved largely at the expense of gold's status, it will be gold that eventually benefits from the dollar's fall.

Imagine yourself as a foreign central banker today. You may have looked intelligent during the past decade, selling or otherwise pledging your non-yielding gold reserves and using the sale proceeds to invest in high-yielding U.S. Treasuries. How smart might you look now in the face of a rising gold price, a declining dollar and yields plunging to negative real rates of return?

Consider, also, the increasing rhetoric by a number of Asian central bankers and politicians, promoting a view of less reliance on the dollar and more on euros and gold as either reserves or transaction currencies. Even a small diversification away from the dollar as the settlement currency in Asian-block intra-trading would remove several hundred billion in dollar-demand.

Therefore, I believe central bankers will increasingly favor gold as the currency of last resort and although they may not be buyers of gold (certain Asian central banks aside), they will certainly reduce or completely stop their selling. (How they get back all the bullion they have loaned out, now that gold is rising, is another question.)

Finally, one of the most confusing debates taking place today is that of a possible deflation or inflation scenario. There exist intelligent arguments on both sides. In making a case for gold, I don't think it matters which scenario plays out.

Although most people believe gold performs only in an inflationary environment, they might be surprised to learn that 200 years of U.S. history has shown hoarding of gold occurs during deflationary periods when confidence in the credit quality of issuers of currency (whether sovereign or banks) is shaken. Given the current high level of foreign ownership of U.S. assets, if credit quality is called into question there will be immense downward pressure on the dollar as these holders rush for the exits. In this scenario, gold would rise in U.S. dollar terms. In a global deflation environment, which is very possible today, there would be an exodus of all major currencies, with gold being the only beneficiary.

Periodic Ponzi Update PPU -- $hifty, 00:41:17 03/31/03 Mon

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,369.60 + Dow 8,145.77 = 9,515.37 divide by 2 = 4,757.68 Ponzi

Down 226.22 from last week.

Thanks for the link RossL !




War, Peace, & Our Economic Future {w a Spiritual comment} -- auspec, 17:03:27 03/30/03 Sun

The following article snippets plus commentary tie together political, economic, monetary and spiritual topics. Read no further if you're not open to same. Thanks for this continued great country that allows me the freedom to speak my mind and heart......may it ALWAYS be so!

War, Peace & Our Economic Future

From GE by Llew Rockwell:


We are often told we must go to war because some swarthy foreign head of state is not a big fan of the U.S. president. This year, the person fitting that description is Saddam Hussein. Before that it was the Mullah Omar. A few years earlier, it was Milosevic. Before that, it was some ward-heeler in Somalia. Moving backwards in time, we had to take out the strongmen in Panama and Haiti. The story goes on and on. It seems that the U.S. government is addicted to conflict. It just can't seem to give it up.

Now, I know there will be plenty of disagreement when I say we ought to be trading with Iraq, not bombing it. But let's at least be clear on what we are talking about when we refer to the U.S. military machine. The U.S. will spend $400 billion on its military this year-and that doesn't include V.A. hospitals, most spying, the atom-bomb building at the Energy Department, the military part of Nasa, or the Pentagon's huge "black" or secret budget.

The second highest military budget in the world is Russia. Going down the list, next comes China, then Japan, then the U.K. You have to tick through 27 countries and add their total spending together to equal what the U.S. spends per year. Not since the Roman Empire has a single country been so militarily dominant.

Let's look at the relative strength of the U.S. versus Iraq in particular. Quantitatively, Iraq spends one quarter of one percent of what the U.S. government spends on its military. Qualitatively, the Iraqi military machine is crippled, with no spare parts for its ancient equipment. The soldiers are teenage conscripts in rags with old rifles. The idea that this is going to be a fair fight is a joke.

Those who worry about Iraq over-arming ought to look a bit closer to home. As for the shooting war, some military commentators have compared its ease to drowning puppies. Thanks to a combination of misrule and punishing sanctions, this once prosperous country has been reduced to rubble. The U.S. proposes to reduce it further, though in doing so the U.S. faces a difficult foe: the desire of a people not to be invaded by a foreign army.

The longtime emphasis of the old liberal tradition with regard to war is this: even the victor loses. We lose resources. We lose tax dollars. We lose trading relationships and good will around the world. Most of all, we lose freedom. And herein lies the biggest cost of war to us, for there is no way that the U.S. can maintain a free market that is the foundation of prosperity while at the same time attempting to create a global military central plan.

Big government abroad is incompatible with small government at home. To the extent we cheer war, we are cheering domestic socialism and our own eventual destruction as a civilization. But perhaps you do not need persuading on any of these matters. I know many people who look at the economy and the military belligerence of the US government and they react with despair. I reject this posture. For one thing, I am firmly convinced that the government has reached too far.

When you consider the full range of social, economic, and international planning on which it has embarked, you can know in advance that this cannot work. Government is not God, nor are the men who run it impeccable or infallible, nor do they have a direct pipeline to the Almighty. The method they have chosen to bring about security and order is destined toward failure.

The Impossibility of the War on Terrorism

The war against terrorism is a good example. Everyone in Washington is terrified of the next attack. To shore up the war, there has been no shortage of rhetoric. No expense is spared on arms escalation. There is no lack of will. The effort has the aid of plenty of smart people. It is backed by threats of massive bloodshed.

What is missing is the essential means to cause the war to yield beneficial results. Of all the millions of potential terrorists out there, and the infinite possibilities of how, when, and where they will strike, there is no way the state can possibly stop them.

Behind terrorism is political grievance, mostly having to do with frustration at the activities and arrogance of the state and its violations of rights. This is not speculation. This is the word of the terrorists themselves, from Timothy McVeigh to Osama Bin Laden to the suicide bombers.

The pool of actual terrorists (like the pool of the poor in the war on poverty) is limited and can be known, and they are the ones the state focuses on. But the pool of potential terrorists (and potential poor people) is unlimited, and unleashed by the very means the state employs.

Hence, not only does the state not accomplish its stated goals, it recruits more people into the armies of the enemy, and ends up completely swamped by a problem that grows ever worse, as the target population is able to make a mockery of the state through sheer defiance.

In the war on poverty, as more and more were added to the ranks of the poor and the intended beneficiaries of the programs themselves began to mock the state's benevolence, people began to speak of the failure and collapse of the Great Society. Of course the welfare state still exists, but the moral passion and ideological fervor are gone. In the same way, we will soon begin speaking of the collapse of the War on Terror.

Bin Laden is still on the loose, and everyone knows that there are hundreds or thousands of additional Bin Ladens out there. Terrorism has increased since the war began. Israel suffers daily, and in constantly changing ways, ways in which even the most famous and empowered intelligence and military units cannot anticipate or prevent.

But can't the state just kill more, employ ever more violence, perhaps even terrify the enemy into passivity? It cannot work. Even prisons experience rioting. A bracing comment from Israeli military historian Martin van Creveld: "The Americans in Vietnam tried it. They killed between two-and-a-half and three million Vietnamese. I don't see that it helped them much." Without admitting defeat, the Americans finally pulled out of Vietnam, which today has a thriving stock market.

Can the U.S. just back out of its war on terror? Wouldn't that mean surrender? It would mean that the state surrenders its role, but not that everyone else does. Had the airlines been in charge of their own security, 9-11 would not have happened. In the same way that the free market provides for all our material needs, it can provide our security needs as well.

In all the talk of war on Iraq, I've yet to hear anyone claim that taking out Saddam or bringing about a regime change will make the world a more peaceful, happy place. No one believes that. The last war on Iraq gave rise to al-Qaeda, due to sanctions and Christian troops in Saudi Arabia, led to the bombing of the Oklahoma City federal building, and emboldened an entire generation of Muslims to devote their lives to fighting America. What will the next one bring?

The War on Terror is impossible, not in the sense that it cannot cause immense amounts of bloodshed and destruction and loss of liberty, but in the sense that it cannot finally achieve what it is supposed to achieve, and will only end in creating more of the same conditions that led to its declaration in the first place.

In other words, it is a typical government program, costly and unworkable, like socialism, like the war on poverty, like the war on drugs, like every other attempt by the government to shape reality according to its own designs.

The next time Bush gets up to make his promises of the amazing things he will achieve through force of arms, how the world will be bent and shaped by his administration, think of Stalin speaking at the 15th Party Congress, promising "further to promote the development of our country's national economy in all branches of production." Everyone applauded, and waded in blood, pursuant to that goal, but in the end, even if he did not know it, it was impossible to achieve.

Mises on Peace

Mises, who was so brilliant when it comes to issues of money and credit, also saw the need for a thriving economy to operate amidst an environment of peace. "War," he said, "is harmful, not only to the conquered but to the conqueror. Society has arisen out of the works of peace; the essence of society is peacemaking. Peace and not war is the father of all things. Only economic action has created the wealth around us; labor, not the profession of arms, brings happiness. Peace builds, war destroys."

Our age is dominated by the state and its errors. The state has given us recession and war, while liberty has given us prosperity and peace. Which of the two paths prevails in the end depends on the ideas we hold about freedom, capitalism, and ourselves.

May we never forget the great truth that our founding fathers worked so hard to impart: tyranny destroys, while liberty is the mother of all that is beautiful and true in our world.

I make no apologies for being a champion of prosperity and its source, the free-market economy. It is what gives birth to civilization itself.

It is fashionable to reject concerns about the economy as narrow and uninteresting, a merely bourgeois interest. If this attitude comes to prevail, we have great reason to be concerned about our present age.

If, on the other hand, we can educate ourselves about the workings of economic forces, and the way in which they are the foundation of freedom and peace, we will not only emerge from this recession prepared to enter onto a new growth path; we will have gone a long way to protecting ourselves from future assaults on our right to be free.

Llewellyn H. Rockwell, Jr. ( is president of the Ludwig von Mises Institute in Auburn, Alabama, and editor of This text is drawn from the keynote address at the spring conference of Sage Capital Management in Houston, Texas, March 12, 2003.

Comment: Very disturbing times. It pains me to say the following but it must be said. Only the politically, spiritually and economically naive lend their support to the curent war in Iraqnam.

We who speak out against the war have been labeled everything from "un-American" to "ignorant" to whatever. So be it, I'll take my chances with history and with my Creator {what more can a fellow do?}. It disturbs me to no end that most {I assume} of the born-again Christian community follow our President and give him carte blanche in his policies simply because he spends the first part of each day on his knees before his Lord. That is marvelous BUT he spends the rest of the day bowing to elitist globalists, men and women who represent the darkest conspiratorial forces on the planet. Elitists with designs to enslave and control the entire globe.

Sorry, I can't go along with it. I know what I know & I see what I see. The simplicity of the pro-war arguements contrast greatly with the words and wisdom above presented by Llew Rockwell. TRUTH always wins out in the end, however painful. The abuse and manipulation of the "Christian Right" in current world settings would send the Master scurrying once again to overturn tables in the den of iniquity.'ve got a foot in two opposing worlds. You must decide who your master really is as you cannot serve both mammon and Christ.

I'm looking for the unique Christian spokesman who understands economically and politically what exactly is transpiring in these "late days". I have heard John Hagee, of San Antonio Texas, take on the CFR and one worlders, but otherwise the silence is deafening. Leading the "sheep" astray is not a task to take on lightly.

Spiritually.......what am I comfortable praying for in these wild and wooly days........?

Lord, please protect and guard over the innocent {if there is such a thing}.

Lord, please give your children wisdom and insight.

Lord, please route out EVIL, WHEREVER YOU ENCOUNTER IT!!!
In me, in my country and around the globe.

Your will be done.

Wistfully yours,


Fiat -- Sharefin, 23:40:35 03/28/03 Fri

Stocks Tanking? Call the Plunge Protection Team

Perhaps you've heard of the Plunge Protection Team. If not, let me acquaint you with this august group.

You know all those gut-wrenching dives in the Standard & Poor's 500 Index that mysteriously stabilize, then reverse into huge rallies into the futures close?

If you are a conspiracy theorist, the PPT is a select group of government officials and bankers who intervene from time to time to support the stock market.

According to some traders, pundits and a slick band of conspiracy theorists, the Federal Reserve -- the same central bank that buys and sells government securities above the table in daylight hours -- operates sub rosa in the stock market.

This girl did her homework....

Gold -- Sharefin, 22:40:02 03/27/03 Thu

Gold Production Down 5 Percent in Nevada

Gold production declined 5 percent last year in Nevada, the nation's largest gold producer, but higher prices added value to the state's $2.4 billion industry, state officials said Thursday.

Nevada gold mines produced 7.731 million ounces of gold valued at $2.4 billion in 2002. That represented a 9 percent increase in value from the previous year as the average price per ounce rose from $271 to $310, the Nevada Division of Minerals said.

Nevada ranks third in the world in gold production, behind South Africa and Australia.

The next largest U.S. gold producer is Utah, which mined 592,000 ounces in 2001, followed by Alaska, with 536,000 ounces.

Gold -- Sharefin, 22:37:39 03/27/03 Thu

A Guide To Metals Hedging - PDF File

Gold -- Sharefin, 22:27:34 03/27/03 Thu

Gold buying to jump as marriage season peaks

Gold buying in India, the world's largest consumer of the yellow metal, is likely to rise in the coming weeks as the marriage season peaks and with prices seen restricted in a narrow range, traders said on Thursday.

Jewellers were also replenishing stocks, which had fallen in the past two months as war jitters pushed prices up and deterred buying, they said.

"Gold demand is bound to rise in April as marriage buying can't be avoided," said Rajeev Popley, director of a leading jewellery firm, Popley Gold, adding consumers were comfortable with current prices and making big purchases.

Gold demand in India rises during the Hindu marriage season, which runs from January to May, as parents buy jewellery as gifts to their daughters to stand as financial security in a crisis.

"Consumers are quite comfortable with current prices, which have fallen drastically in the past two months," said Ranjit Rathod, a gold trader based in the southern city of Madras.
"Gone are the days when prices hovered at $300 an ounce. I think $325-$335 should be a good price range for active buying now," said Prithvi Raj Kothari, a Bombay-based gold trader.

Charts -- Sharefin, 22:08:11 03/27/03 Thu

A Pro's View

Gold -- Sharefin, 22:01:13 03/27/03 Thu

Gold Up on Fears of Lengthy War, Physical Buying

Gold firmed in Europe on Thursday as the U.S.-led war on Iraq entered its second week, with fears growing that the conflict could be longer and more costly in human and financial terms than most had imagined.

The safe-haven metal has benefited from renewed physical buying as consumers take advantage of a bout of lower prices around the $325 an ounce level -- some $60 off a recent 6-1/2 year high.

Gold buying in the world's biggest consumer India is likely to rise in coming weeks as the marriage season peaks. Jewellers were also replenishing stocks, which had fallen in the past two months as war jitters pushed prices up and deterred buying.

Gold demand in India rises during the Hindu marriage season, which runs from January to May, as parents buy jewelry gifts for their daughters to keep as financial security in a crisis.
"Gold has fallen back to a level where physical demand is supporting the market, which is a good indication that the risk premium has mostly, if not entirely, left the market," said John Reade, precious metals analyst with UBS Warburg.

The price of the yellow metal has crept higher over the past two days as concern grows about the war in Iraq that U.S. President George W. Bush has said was "far from over."

Oil jumped, the dollar eased and European shares sank on Thursday as jittery investors swapped their money back into safe-havens such as gold and bonds.

"Gold is trying to take back some ground. I am looking for some gains today," a London bullion trader said, adding that he did not expect the metal to get much higher than $334.

Analysts expected gold to tread carefully, with participants unwilling to take on large positions amid much uncertainty concerning the outcome of the war.

"Short-term direction will be taken from the currency markets, while the longer term outlook for gold is uncertain and will remain so until the outcome of the current conflict is uncertain," Reade said.

The dollar weakened against major currencies on Thursday, ticking back toward its lowest levels since U.S.-led attacks against Iraq began eight days ago.


Battered palladium saw no respite from its weakness, hovering just $6 away from a recent 5-1/4 year low at $183. Spot was quoted at $192.00/202.00 an ounce, compared with the previous $192.50/197.50 New York close.

"Palladium is struggling as rising supplies from new mining projects and a sharp increase in reclaimed metal are likely to swamp the already saturated market," James Moore of said.

He predicted further losses if the metal, used mainly to clean car exhaust emissions, fell below $180 an ounce.

Fiat -- Sharefin, 21:58:05 03/27/03 Thu

The Road to Perdition

Students of economic history are familiar with the boom and bust cycles that punctuate most of US economic history throughout the 20th century. These boom and bust cycles are the result of the expansion and contraction of credit engineered by the central bank, in this case the Federal Reserve. In a typical cycle, the Fed expands credit, which causes interest rates to fall, stimulating demand and consumption within the economy. As credit expands the economy picks up, business revenues rise along with profits. Expanding profits translate into a boom in financial markets as investors are willing to pay more for equities whose profits are rising. However, at some point in the business cycle, the boom no longer becomes sustainable. The expansion of credit creates above-normal demand for goods and services that leads to higher prices. The economy heats up and financial markets become grossly over-valued as investors bid up prices to extraordinary levels believing the boom will last into perpetuity. The economy and the markets are in danger of contracting and crashing. At this point, the Fed steps in and raises interest rates in order to cool off demand and speculation in the markets. The inevitable correction begins, the markets fall and the economy contracts. During this period of correction excess inventory is worked off, manufacturing slows down, and the stock market corrects from over valued levels to more normal valuations reflective of actual business conditions.

The Business Cycle

Once all of the excesses, which include all malinvestments of the previous boom, are liquidated and excess inventory levels are eliminated, another cycle of renewal begins. The Fed lowers interest rates and another credit expansion and business cycle begins. This has been the typical pattern of business cycles repeated with regularity in the past century. However, there are certain business cycles that are carried to extremes. They become super booms, a period of above-average economic growth and above-average stock market returns. A distinguishing feature of these booms is that they are fueled by massive amounts of credit. The large injections of credit into the economy fuel above-normal demand as a result of abundant credit and lower interest rates. This leads to large-scale demand in the economy and widespread speculation in the financial markets. These booms are also associated with technological advances giving rise to the “new era” myth that is used to justify market valuations and the belief in a perpetual boom. Such was the case of the 1920s. The advancement in technology, the economic boom, and the rising markets that followed led many to believe they were living in extraordinary times. What was not as widely recognized during this period of the extraordinary boom was the product of an aggressive monetary expansion by the Federal Reserve. In the aftermath of the 1929 stock market crash, what should have been a short-lived recession and short painful adjustment turned into a prolonged and deepening depression as the direct result of government interference with market. The cleansing mechanism of the market in liquidating malinvestments was interfered with through price and wage supports, and government taxation and spending were substituted for private sector investment. It would take a world war to bring us out of depression.
The result is that we have a politicized economy and market that is no longer in equilibrium. Fundamentals are no longer in line with market forces, but instead are altered by government intervention. This has led to increasing imbalances in our markets and in our economy that periodically leads to acute crises. These crises are increasing in frequency as continuous intervention must be brought to bear in order to avoid an economic collapse or stock market crash.
It now appears that intervention in the financial markets is becoming every bit as important to Fed policy in an effort to avoid a market crash and reignite another business cycle. With growing evidence that the consumer is now starting to retrench on spending plans and with the real estate boom starting to soften, the economy is now in danger of slipping back into recession. This time officials have to be worrying over what will reignite the business cycle. It appears that the consumer is tapped out. Therefore, unless another refinancing wave can begin by engineering interest rates even lower, there is nothing on the horizon outside massive government fiscal policy to keep the economy afloat, that is unless a stock market boom can be reengineered.

Fiat -- Sharefin, 21:48:15 03/27/03 Thu

War Belies the Fundamentals in Stock Market

As we stated in Monday's comment, this war belies the fundamentals of the stock market. Eventually, we will return to a very difficult environment after the war ends.
The latest news hasn't helped the economic environment as yesterday's release showed that the Conference Board Consumer Confidence Index dropped 2.3 points to 62.5 in March, the lowest level since October 1993. The Present Situation portion of the index also hit a 9-year low, while Expectations are at a 12-year low. Business and labor conditions are the worst in years and auto buying plans have dropped to their lowest level since June 1995. We would expect the University of Michigan Confidence report, to be released on Friday, to confirm these numbers.
The Bank of Japan, led by the new governor Toshihiko Fukui, had an emergency meeting with the government, but left rates unchanged. However, they decided to boost purchases of stocks held by commercial banks by 50% to $25 billion to shield debt-laden banks from having to record their enormous, but depressed, stock positions at the end of the March 31 fiscal year. The regulators have just recently forced the banks to revalue their portfolios to match market prices at the end of the fiscal year. The Central Bank seems to be cooperating with the government after 5 years of trying separately to halt deflation and revive the economy. We have been, and still are, of the opinion that after a financial mania like Japan and the U.S. have experienced, you have to let the free market work. You must allow the banks and companies that have become bloated with debt to either go under or restructure. In our opinion, Japan has worked too hard to fix the problem with monetary and fiscal stimulus while it could have been forcing the companies and banks to “mark to the market” the whole time. This would have separated the weak and speculative corporations and banks from the sound ones.

We received an email from a viewer last week about the BBC (British Broadcasting Company) reporting that a deal was struck between a former Japanese finance minister and Greenspan to take action in the stock and currency markets if they face a crisis. As we have responded to all of our viewers that believe the U.S. market is manipulated by the Fed, we don't believe it. We know that Greenspan knows it is illegal for the Fed to buy stocks, and we don't believe they would do anything illegal. On the other hand, even if they did, this stock market is so large that they wouldn't get away with it for long, and hopefully we will be wise enough to fade the market if it were moving in a direction that made no sense whatsoever.

Gold -- Sharefin, 21:33:56 03/27/03 Thu

Buying and selling bullion made easier on ASX

An Australian company and the World Gold Council have launched what is believed to be the world's first facility that allows investors to buy physical gold through a listed security.
Gold Bullion Securities [ASX:GOLD], which is set to list on the Australian Stock Exchange today (Friday), is designed to provide investors with the opportunity to own a direct interest in bullion, which will be insured and held in bank vaults in London on their behalf by custodian bank, HSBC Bank USA.

Both retail and institutional investors can now elect to trade in gold bullion as if they were trading in equities by buying and selling “GOLD” shares on the ASX. Under the structure of the new product - a joint initiative of Melbourne-based and Investor Resources-owned Gold Bullion Ltd and the WGC - those shares will also enjoy the liquidity backing of the London bullion market, which boasts a reported A$9 billion in daily transactions.
One GOLD share will be worth the equivalent of one-tenth of an ounce of gold. At the time of writing the spot price was US$330 per ounce and the Aussie/US dollar exchange rate was A$1.00/US$0.60, which converted to A$550/oz and therefore the securities were expected to begin trading at around A$55 apiece.

There is no minimum trading volume requirement and, aside from brokerage fees, a management fee of 0.02 percent a month covers all corporate, storage and insurance charges associated with holding the gold bullion, which will be held in trust for each GOLD holder as identifiable bars segregated in the vaults.

GOLD shareholders will actually own gold rather than just a right, subject to third-party risk, to receive gold in the future. But before getting the urge to redeem your GBS securities by taking delivery of your allocated gold, only London bars weighing about 400oz, as prescribed by the London Bullion Market Association, will be issued. So an outlay of roughly A$220,000 or thereabouts should do the trick. Otherwise, keep the GOLD or settle for the cash.

Gold -- Sharefin, 21:29:10 03/27/03 Thu

Unpicking the Money Bill's twists and turns

JOHANNESBURG - Chief among the concerns likely to be tabled by SA's mining companies in response to government's recently proposed Money Bill - a royalty of between 2 and 8 percent on the gross revenue of mining companies - will be the extent to which government's Department of Finance is open for discussion. In the words of CIBC World Markets analyst, Jack Jones, the Money Bill looks like the “finished article”. Commenting on government flexibility, Martin Grote, chief director of tax policy in the Treasury, promised a sensible end product, but added that negotiations would be related to administrative matters - issues that required refinement to the bill rather than a refit. The bill has been submitted for public comment until April 18. Thereafter, the matter will be referred back to Parliament for further negotiation with portfolio committees and business.
till, the affect on earnings is significant. According to Rob Edwards, a mining analyst at Reniassance Capital in Moscow, the 4 percent royalty on platinum companies' gross revenues is equal to a 12 to 15 percent hit on share earnings. This is far from palatable when costs are rising 10 percent a year. Government may insist the royalty is competitve with world markets, but in a country where the marginal tax rate is relatively high for gold producers, not to mention the various social obligations SA companies must meet, the Money Bill creates one of the most punitive tax regimes around, another analyst says.

crucial 327 support -- Cyclist, 12:23:51 03/27/03 Thu

with a break out at 340.
Gold making a right shoulder in May with a projected low in November reflecting deflation.
Gold stocks will see their prices slashed until their p/e s' have gone down to around 10.
Support for Crude lies around 25,at the moment the price
might run up to 33 May contract.
This will be one of the best short positions to have during
summer and fall when the Dow will have reached 5000 or lower.
Bonds will be the place to be when the rate goes sub 4.6.with a projected low 2% in the fall.
All IMO ,1974 all over

War -- Sharefin, 02:35:52 03/27/03 Thu

Pax - or Pox - Americana?

Watching an empire being built is not an edifying process. But that is what the world is doing right now, including the capital markets. Every nuance of success or setback is quickly reflected in bond, equity and commodity markets. Perhaps it is unfair on the Americans that all their activities are instantly relayed to the rest of the world, which reacts accordingly. Previous empires were built without the benefit of live TV.

The war is not about oil, we are told, but wars have been fought over commodities in the past. The most obvious was the Boer War for control of the South African gold fields. Base metals have attracted less military interest, but they have undoubtedly been a driving force behind empire building. The Roman conquest of Britain allowed it to extract gold from Dolaucothi in South Wales, lead from the Mendips and tin from Cornwall. All were vital requirements for the leading edge technology of the day to keep the army properly equipped, and washed.

Britain acquired its Empire in a moment of absentmindedness as one historian described it. Certainly Cecil Rhodes did not establish Rhodesia for moral reasons. He wanted access to the gold he felt sure was there as well as to develop the farming potential. Arthur Wellesley, later the Duke of Wellington, seemed to have the acquisition of large amounts of personal booty as his main incentive for charging around India. The fact that these characters helped establish Pax Britannica seems rather incidental. Similarly Singapore and Hong Kong were built from islands that no one else wanted and were the only spots available to the entrepreneurs of the day.

It is a telling indicator of the change in attitudes that Hong Kong's initial primary function was to furnish a drugs trade that suited all parties. Somehow one can't envisage America colonising Columbia for the same purpose. The point was that the British Empire was essentially self-funding, something that seems to be far from the case with the Iraqi adventure, unless America takes control of the oil industry to exact reparations. But the war is not about oil. It is a moral war to bring democracy to the region. Where's the money in that?

The question of who will pay the bill for this exercise in sovereign governance has yet to be established. But it is something that the markets will have to digest sooner rather than later. The US Congress is already lopping big chunks off the budget proposed by George W Bush and Gordon Brown is unlikely to deliver any good news to British voters when he delivers his budget next month. Yet debt markets for both the US and the UK have enjoyed phenomenal returns in the last twelve months. One UK Gilt has risen by 7 per cent in that period.

It seems unlikely that returns of that magnitude from low risk assets will continue. Indeed, some retracement is much more likely, pushing up the cost of longer-term finance. That will not be good for equities, consumers or commodities. Base metal prices seem to be adjusting to this new reality after the party they enjoyed at the start of the year. But the declines have been modest so far, with nickel suffering the most. Its price has fallen back US$200 to US$8,290 a tonne in the last week. A move no doubt encouraged by another 3,000 tonne increase in inventories, probably from Norilsk. The other metals were little changed.

Whether Pax Americana will be as good for world trade, as Pax Britannica was a hundred years ago is unclear. Then, gold backing and a soundly financed treasury made sterling the global currency of choice. Today, an over-indebted US consumer, and increasingly its Government as well, are generating lots of dollars to sell. If the dollar keeps falling the US may need a few more of these adventures to sustain its economy. Iraq may well be a test case for deciding if the prefix to Americana will be Pax or Pox in the years to come.

Gold -- Sharefin, 20:59:37 03/26/03 Wed

Will the gold bull go the distance?

Fundamental, technical analysis backs long-term rise

For the long run, gold bulls like Pamela Aden, who writes the Aden Forecast with her sister Mary Anne, believes prospects remain strong. "The bull market is solid," said Aden, who made waves 20 years ago when the sisters correctly predicted gold rising above $850 and then falling below $300.

Peter Kendall, co-editor of the Elliot Wave Financial Forecast, agreed that gold looks good in the long run. But right now, the metal lies in the throes of bear market. Gold still has months to fall, he believes, after which it should resume its rise.

"We're waiting for another leg down," he said. "The long-term trend is the ending of the bear market (for gold) that began in 1980."
Kendall predicts the movement of gold using the Elliot Wave principle, which believes that positive and negative mood swings of the masses form a pattern that can be measured. Generally, there are five major waves before a significant reversal in direction occurs.

Gold is in its fifth, and final, wave, Kendall said. With commodities, usually this wave ends in a spike up and sharp reversal, which was what happened to gold in the first three months of the year.

The decline in gold "should finish in a matter of months and get into a new bull market," Kendall said.

Gold -- Sharefin, 20:56:09 03/26/03 Wed

IN DEPTH: Bobby Godsell, chief executive, AngloGold

Mineweb publisher and journalist, Alec Hogg, interviewed Bobby Godsell on 14 February 2003 on hedging, the mining charter, the bid for Normandy and making money from gold shares.

The most immediate change is that our need for revenue and price certainty has diminished. That comes from two sources. At really low prices, you've got to secure particularly your marginal operations. At plus $300/oz, we have less need for hedging, so we've taken 300t out of our hedge and are more exposed to the upside. Equally our operations are running well and so we need less insurance.
The second major change and the best news of 2002 is that the higher Rand gold price has liberated a whole lot of reserves in South Africa. South African orebodies are more defined by exchange rates and gold prices than by geology. We are looking at six new projects contributing 11Moz. Suddenly our guys in South Africa are walking tall again, they can see expansion and growth. We've come to the end of contracting, selling and closing and are planning major, new 20-year long projects.

Gold -- Sharefin, 20:48:32 03/26/03 Wed

Gill Leyland: Senior economic adviser to the World Gold Council

I think it's difficult to say or to pinpoint one factor that pushed the gold price up. Certainly that was in there, but I think as well there was a whole cocktail of factors. The political situation, clearly, is one, but not the only one. We had still the sort of limping world economic recovery, if indeed it is a recovery, rather than a stagnation, we've got obviously plunging stock markets, and we've also got worries about the dollar, because gold is often thought of as a dollar hedge. So there's a whole combination of factors, I think, pushing the gold price up at that time.

Fiat -- Sharefin, 20:45:00 03/26/03 Wed

Derivatives Risk in Commercial Banking

Derivatives activity at commercial banks, as measured by total notional values of over $56 trillion as of December 31, 2002, continues to grow dramatically. Derivatives serve an essential role in the U.S. and world economies but also present certain risks to the deposit insurance funds. This FYI explains what these risks are and describes how they are managed within commercial banking.

Fiat vs Gold -- Sharefin, 20:42:13 03/26/03 Wed


What needs to be grasped by all Americans who invest their money in the equity, currency, and commodity markets today is that the PPT is not a fantasy conjured up in the minds of conspiracy wackos who see aliens from outer space climbing over their backyard fence every other month. It is a verifiable reality. It exists. It is bigger than any of us imagine. It is the result of the hideous statist mindset that is taking over our country -- which believes that all aspects of economic life must be regulated and MANIPULATED by central planners from Washington. Yet such omnipresent manipulation and regulation goes contrary to the logic, the freedom, the entire meaning of America. When manifested in specific areas like the stock market, it becomes especially unsavory. If such an organization to rig the stock market was ever to become widely known throughout the country, then confidence in the integrity of the markets would be greatly diminished and probably destroyed. So the PPT and all federal bureaucrats who know of it must continually deny its existence. They must travel by night and operate through surrogates.
Here is where the Clinton-Rubin "strong dollar" policy and its gold leasing scheme becomes instructive. Rubin understood that to confront the Republican revolution of '94 and insure Clinton's re-election he needed to inflate the money supply; but to do so, he needed to suppress the price of gold so as to not alarm the Forex markets. However, he could not suppress the price of gold by just selling Fed owned gold. That was public; it would set off the Forex alarm bells and negate his desire to keep the dollar "strong" while still inflating it. He therefore hatched the scheme to lease gold to the bullion banks who would then sell it into the market. Leased gold could still be carried on the Fed's books as an asset; the movement of the gold would not be acknowledged to the world. The bond vigilantes and Forex markets would not get alarmed. The dollar could be inflated, yet made to appear to be strong. Capital would continue to flow into America. Clinton could be re-elected.

The lesson here is that any substantial printing to inflate the money supply must be done SECRETLY. If it is done in large amounts by conventional monetization of bonds and deficits, then it will set off those nasty alarm bells in the Forex markets. The dollar will plummet, capital will flow out of America, and the Dow will crash.

Fiat vs Gold -- Sharefin, 20:24:22 03/26/03 Wed

The War to Save the Dollar

The Americans could live with Saddam until he started
selling oil for euros instead of U.S. dollars. Then the
Europeans could live with him.

* * *


>From 1944 to 1971, the U.S. dollar was ``backed'' by gold,
meaning that the government agreed to buy and sell gold
for a fixed price in dollars. Other governments did
likewise, leading to fixed exchange rates between their
currencies. In 1971, when U.S. President Nixon abandoned
gold backing, the exchange rate system began to unravel.
Domestically, the U.S. dollar became a ``fiat'' currency,
i.e. a currency whose only ``backing'' is the legal
obligation to accept that currency as final payment of
debts. Internationally, however, there is no such thing
as a fiat currency, and no currency will be accepted as
payment unless it is guaranteed to buy some valuable


In 1973, the Organization of Petroleum Exporting Countries
(OPEC) quadrupled the price of oil but continued to accept
only U.S. dollars in payment, so that the demand for
dollars soared. From then on, the dollar was effectively
backed by oil instead of gold -- and the U.S. government
didn't even have to own the oil!

Because dollars can buy OPEC oil, countries that need to
import oil -- i.e. most developed countries -- will accept
dollars as payment for their exports. Hence everyone who
needs to buy from those exporters will accept dollars as
payment for other things, and so on, so that the dollar is
the preferred global currency. To pay their bills,
importers must have reserves of dollars. To prop up their
currencies against speculative attacks, the central banks
of all countries must have reserves of dollars. To get
capital, poor countries must borrow dollars, and to
service these debts they must export goods to obtain more
dollars. About 2/3 of all currency reserves, more than 4/5
of all currency transactions, more than half of the
world's exports, and all loans from the International
Monetary Fund(IMF) are denominated in dollars. As these
things create demand for the dollar and shore up its
value, OPEC is the more willing to accept payment in
dollars. So the system is self-reinforcing.

The result is that America can export dollars, which cost
nothing to produce, and receive real goods and services in
return. As long as those dollars are spent outside
America, they don't cause domestic inflation. And when
they eventually find their way into foreign reserves, they
can only be invested in American assets. This continuous
flow of foreign investment (on the ``capital account'')
props up the American real-estate market and stock market,
and allows America to run a mammoth trade deficit (on the
``current account'') without devaluing the dollar.
America's imports now exceed its exports by almost 50% (or
5% of GDP) and its foreign debt is 60% of annual GDP.

If OPEC were to abandon the dollar in favour of some other
currency, the whole process would slam into reverse.
America could no longer export paper dollars for real
goods and services. Corporations and central banks would
sell their dollar reserves, causing the value of the
dollar to plummet. The redemption of dollar reserves
would force sales of the assets in which those dollars are
invested, so that the American property and stock markets
would crash. Other investors who have bought American
property and stocks with borrowed money would declare
themselves bankrupt, causing some American banks to
collapse under the weight of bad debts. The newly
liberated dollars could only be spent on American goods
and services, which would begin to flow out of the country
(reducing living standards), while the glut of dollars
chasing these same goods and services would cause massive
domestic inflation. The flow of foreign investment would
dry up, so that America could no longer run a trade
deficit, but would have to export yet more goods and
services to pay for its imports, and to service its
massive foreign debt, and to accumulate reserves of the
new global currency -- whatever that currency might be...


In 1999, eleven member states of the European Union (EU)
adopted the euro as a common accounting currency. Greece
joined the Euro Zone a year later. On January 1, 2002,
the twelve countries withdrew their old money from
circulation, completing the biggest currency reform in

The Euro Zone already has a bigger share of world trade
than the USA. In particular, it imports more oil than the
USA and is the main trading partner of the Middle East.
It offers higher interest rates than the USA, but does not
have a huge foreign debt or trade deficit. These things
inspire confidence in the euro. It was perhaps for that
reason that in 2002, China started converting some of its
currency reserves from dollars to euros, while North Korea
abandoned the dollar and started using euros for trade.
The strength of the euro also encourages expansion of the
EU and puts pressure on current members Denmark, Sweden
and the U.K. to join the Euro Zone. In December 2002, ten
new countries were accepted for EU membership with effect
from May 2004. This will create a common market of 450
million people, which will buy more than half of OPEC's

In summary, the only argument for preferring dollars to
euros is that dollars can buy oil. As that argument does
not affect OPEC, it would make sense for OPEC to convert
its reserves to euros by mid 2004. If OPEC were then to
price its oil in euros, it would increase demand for the
euro, causing a huge increase in the value of its new euro
reserves. These possibilities are not discussed in the
U.S. media.


The first OPEC member to show serious disloyalty to the
dollar was Iran. Since 1999, Iran has been talking about
pricing oil in euros. In January 2002, George W. Bush
named Iran in his ``axis of evil'' although the country is
experimenting with democracy -- something that the USA, if
true to its professed values, would want to reward and
encourage. Undeterred, Iran converted most of its
currency reserves to euros during 2002, and a proposal to
price oil in euros is being considered by the central bank
and the parliament.

Let us see whether the Americans find an excuse to topple
Iran's fledgling democracy and to replace it with a
dictatorship that just happens to prefer dollars to euros.

The second offender was Venezuela. In 2000, Venezuela's
twice elected president Hugo Chavez called a conference on
the future of fossil fuels and renewable energy. The
report of the conference, delivered by Chavez to the OPEC
summit in September 2000, recommended that OPEC set up a
high-tech electronic barter system, so that members could
trade oil for goods and services without the use of
dollars or any other currency. The chief beneficiaries
would be OPEC's poorer customers, who did not have large
currency reserves. Chavez made 13 such deals. In one of
them, Cuba provided health services in Venezuelan

In April 2002 there was a coup against Chavez. The coup
was welcomed by the Bush administration and by editorials
in numerous American newspapers, but collapsed two days
later, leaving evidence that the U.S. administration was
behind it [1].

The third and most blatant offender was Iraq. In October
2000, Saddam announced that Iraqi oil would be sold for
euros instead of dollars, with effect from November 6.
Soon afterwards, Saddam converted Iraq's entire $10
billion``oil for food'' reserve fund from dollars to
euros. These facts went unreported in the U.S. media.

George W. Bush assures us that Iraq's oil belongs to the
Iraqi people. But any asset priced in dollars is at least
partly an American asset because it adds to the demand for
dollars, allowing America to export more dollars and
receive more goods and services in return. So the test of
America's sincerity will be whether its new regime in Iraq
continues to accept euros for oil.


Dr Gavin R. Putland
Brisbane, Australia
March 26, 2003.


[1] See,6903,688071,00.html

For more information on the oil currency war, see and the
links on that page. On the fortunes of the U.S. dollar,
For more reflections on the economic significance of
natural resources, see and

Gold -- Sharefin, 21:38:03 03/25/03 Tue

War puts Newmont on alert in Indonesia

Denver-based Newmont Mining Corp.'s operations in Indonesia are on heightened alert this week after the U.S. government warned Americans about possible terrorist actions there because of the Iraq war.

Gold -- Sharefin, 21:34:23 03/25/03 Tue

Japanese gold imports tumble 92.6 percent

Japan's imports of gold slumped 92.6 percent in February from a year earlier to 1,452 kg, preliminary data from the Ministry of Finance showed on Monday.

Gold -- Sharefin, 21:33:14 03/25/03 Tue

Hoo boy! Some volatility, eh?

The volatility was of course not completely normal for the gold market, where minor upmoves, of the order of $ 1,00-2,00 per day, have been the norm for so long, interspersed with the odd raid on the gold price whenever it seemed that the gold bulls were starting to look forward to a break-out to higher levels.

These latter declines in the price of gold were typically about $ 8-10,00 or so, nothing like the $ 38 collapse during the first half of February. The reason for that unexpected event is well known: when Comes increased its margin requirement on gold futures by 50% at very short notice, and at a time when the open interest was the highest in 22 years, they caught a whole mess of large and small very optimistic gold bulls totally overextended in the market - fully invested in futures and equities.

If you, the reader, were standing on the sidelines with a stash of funds, waiting for the right opportunity to join in the rampaging gold market at that time, would you have rushed in to support the market, or would you have said to yourself, "Why rush; there is going to be a blood bath when investors are forced to sell because of the increased margin and, as they force the prices of futures down, they will get new margin calls on the few futures they could hang onto, and then they will be forced to sell some more. They might even have to sell some of their fully paid up equities to raise enough cash for margin; it seems logical this vicious circle will last a week or two, so there is no need to hurry."

Gold -- Sharefin, 21:26:32 03/25/03 Tue

Gold could be "Refuelling" for the next run

One way to look at the recent pullbacks is that it is merely a "refuelling" phase before the next Gold price push -- much like the pushes of last year and this year.
I believe the rocket beneath the Gold price will be lit when the realisation spreads that the US is in a debt hole and won't grow out of it quickly. Both deflation and subsequent inflation can support gold. Damage to confidence in the current economic and geopolitical environment -- for whatever reason -- can lead to investors dumping US assets and to a global depression similar to the 1930's.

The US Federal Reserve cannot continue to print trustworthy money whenever it needs to, whether in the form of uncontrolled government spending and trade deficits or otherwise. National, Federal, corporate and consumer debt is at the highest level in history. This wasn't a problem while the US and global economy were growing - but now the problem is slower growth. Consumers are having to deal with unemployment and debt. Wall Street at 29 times earnings is vulnerable. Bear markets tend to end somewhere between earnings of 7 and 11. A Wall Street selloff implies risk of a collapse of other asset class prices not only in the US, except gold.

On top of the dire US debt and slower-growth problems, geopolitical factors and weak economies in Europe and Japan add to the risks of a financial panic or stock market capitulation. Despite the debate last year - a selloff phase typical of a mature bear, has not been reached on Wall Street yet. From its 1929 top the Dow fell 89%. The Dow is now only 29.6% below its 2000 highs.

Although war successes may provide some temporary relief to confidence - Iraq and terrorists can also produce shocks such as nasty gadgets hurting the UK or mainland USA. History has shown many examples of gold price rises when confidence fails. Currency values become suspect and typically only then is it remembered that in intense times, gold also has a function as a medium of exchange.

The relative analysis of technical and cycle and fundamental evidence corroborate: a long term gold bull is underway and the current pullback is a dip buying opportunity. Even a stronger Rand will not deter the scale of gold run many indicators say is coming.

Gold -- Sharefin, 21:05:03 03/25/03 Tue

Fund manager says the case for gold transcends Iraq

For Hathaway, the investment case for gold is straightforward: "The overriding driver of money into gold is the loss of confidence in financial assets," he explains. "If you think that's going on, then you should have gold."

As Hathaway sees it, the reason to own gold is not the battle for Baghdad, but the battered U.S. dollar. The declining value of the dollar against the euro and other major currencies signals that U.S. trading partners are losing confidence in the greenback as the preferred store of value in a crisis.

Investors worldwide are increasingly troubled by the weak U.S. economy and ballooning budget deficits, Hathaway asserts -- which the Iraq war and any subsequent rebuilding effort will only exacerbate.

"People can see that the economic policies that have been pursued to date have not helped," Hathaway says. "They haven't given us any economic upturn. Consumer confidence and corporate profits are not recovering. We're in a muddling, unsatisfactory environment."

At the extreme, this breach could precipitate a deeper sell-off among dollar-denominated paper assets, namely equities, corporate bonds and government debt, spiking interest rates and sinking living standards for Americans.

In short, a bleak scenario tailor-made for gold, Hathaway contends.

Gold -- Sharefin, 20:50:35 03/25/03 Tue


Cambior Inc. announces that over the last month its repurchased 189,000 ounces of gold from its gold hedging program at an average price of $342 per ounce, compared to the average market price of gold since the beginning of 2003, which was $354 per ounce. Of this repurchase, 134,000 ounces will be used to close gold hedging contracts in 2003, resulting in a disbursement of $1.7 million. The other repurchased positions will be applied against hedging positions subsequent to 2003. Taking into account the delivery of gold production since the beginning of 2003 and gold production expected to be delivered before the end of March, Cambior will have reduced its hedging commitments by 24% or 307,000 ounces of gold compared to its position at December 31, 2002. This repurchase accelerates the Company's previously stated objective of reducing its commitments to 800,000 ounces by the end of the year 2003. As a result of the above-described repurchase, approximately 42% of the remaining production for 2003 is unhedged. Cambior remains attentive to market opportunities to further reduce its hedging positions.

Gold -- Sharefin, 20:46:55 03/25/03 Tue

Peering through gold's volatility

A snap survey of Johannesburg gold analysts shows a degree of faith in the yellow metal notwithstanding its proclivity to yo-yo lately as commentators vacillate over the length of the war in Iraq. The outcome is that the dollar gold price is expected to peak at $350 per ounce this year, but fall no lower than $310 per ounce. Pricing pressure would see the price falling to $310 within 3 months but climb again, analysts said. According to market watchers, the average price will come in at $325 for the 2003 calendar year.
From a fundamental point of view, supply is not likely to increase markedly. Gold Fields Mineral Services said there will be very little new production coming on stream this year. The effect will be to raise total output worldwide by no more than 1 percent. It expects, excluding South Africa, that only Russia and Australia will come in with higher production numbers. South Africa will show a slight increase in production owing to the ongoing expansion of Avgold's Target mining project in the Limpopo Province. This will be offset by the continued decline in North America and a first time decline in South America.

However, a higher gold price in 2002 could see most major producers increasing prospective reserves currently held on existing projects. Major producer, Barrick Gold, has already stated that current reserves could run out within the next 10 years if no new exploration projects are undertaken soon. This is not helped by the fact that exploration expenditure has dropped by over 70 percent from $3.3 billion in 1997 to $900 million in 2002.

Jewellery demand accounts for 80 percent of total demand with the remaining 20 percent split between retail investment, industrial and dental expenditure demand. Gold demand slumped in 2002 with overall demand down 9.4 percent, for the 4 quarters ending 2002. Jewellery took the strongest knock with demand down 11 percent. Although in the fourth quarter of 2002 there was a strong uptick in jewellery demand in India and continued growth in China.

Gold -- Sharefin, 20:45:32 03/25/03 Tue

Gold demand fell 3 pct in Q4-World Gold Council

Gold demand for jewelry, retail investment, industrial and other uses fell 3 percent in the fourth quarter of 2002 as higher prices and market volatility kept some Asian and Middle Eastern buyers on the sidelines, according to the industry-funded World Gold Council.

According to the council's quarterly Gold Demand Trends survey, made available on Tuesday, 992.3 tonnes of gold were bought in the final three months of 2002, down from 1,025.5 tonnes in the same period in 2001.
The report said the quarter was marked by slowly increasing interest in gold as an investment, due to mounting political tensions and weak stock markets and economic growth.
Demand from India, the world's No. 1 consumer, rose 24 percent in the fourth quarter to 193.5 tonnes due to a stabilizing of the rupee and a vibrant festival and wedding season in October and November.

Remember all those reports stating the lack of demand from India???
All those reports for months on end stating that India was not buying???

More PR BS........

Gold -- Sharefin, 20:37:16 03/25/03 Tue

Crisis moment for gold

Fate of industry rides on bullion price

Holmes says the critical drivers of a long-term secular bull gold market are "still in place." The Texas-based fund manager says U.S. deficit spending will continue to alarm foreign investors who had backed the dollar. A weaker dollar, in turn, will draw capital to gold, and gold-mining companies.

Holmes, like many gold strategists, also points out that gold supply from mines will keep declining, as it has been since the scandal over Indonesia-digging Bre-X Minerals tainted everything bullion in 1996.
Barry Cooper, an analyst at CIBC World Markets in Toronto, sees "deterioration of deposits and lack of new discoveries following six years of declining budgets. Not enough money is being spent to replace exploitation rate that I would estimate is twice the replacement rate," Cooper says.

Several investment banks, including UBS Warburg, estimate that $1.5 billion is being spent yearly on exploration for new gold, half the level of 10 years ago.

At a recent Canada gathering of geologists and others in the hard-rock trade, Cooper said he noticed few young miners. "Even if the money becomes available (for exploration), from what I saw the average age is over 45, so who is going to do the bush work needed for the grass-roots discoveries? This is becoming an abandoned industry, which usually means an opportunity is lurking."
The gold story these days goes hand in hand with the so-called hedge story. Gold almost fell below $250 an ounce in February 2001, when miners were forward-selling the metal to get extra income. Now, gold producers are rushing to "de-hedge."

Most of the world's largest gold producers are eliminating their forward sales, thus shrinking the amount of gold that central banks and bullion banks use in their lending practices. The leasing of gold benefited miners and large investors when the metal was below $300 an ounce and interest rates were higher, but no longer.

Andy Smith at Mitsui Precious Metals in London estimates the world's four largest miners, Barrick Gold, Newmont Mining, Anglogold and Placer Dome, have created $4.8 billion of demand for gold since September 2001, merely by buying back the gold that they were selling forward in complex derivative trades and other gold swaps and sales.

None of these "critical drivers," as the professionals put it, are making ordinary folks more comfortable with gold. A fraction of individual investors' assets are in gold or gold-mining stocks. Even at the $50 billion-plus pension funds run by state governments, exposure to gold is so small it rarely even makes the footnotes of annual reports.
The war, says Tu, "does not reverse the trends of our exploding trade and budget deficits, which could exceed $1 trillion this year alone. That does not change Fed's intention to inflate the economy out of a pending collapse. That does not change Chinese and Russian central banks' policies to increase gold holdings."

Indeed, of all the drivers in favor of higher gold prices, inflation may be most critical. Across Wall Street and in the offices of global economists, inflation forecasts for the next five years are rising - in part because central banks' cash infusions to their respective money supplies.

"Monetary policy is loose worldwide as the United States, Europe and Japan lower interest rates, attempting to restart their economies," says John C. Doody of the newsletter Gold Stock Analyst. "Once in the system, this excess liquidity is very difficult to wring out when recovery comes, and invariably results in increased rates of inflation."

Doody (and many of his colleagues agree) says "a great gold-stock buying opportunity is at hand." If he is right, and a bullion rally is even half as good as the tripling of gold equities from late 2001 through mid-December 2002, most investors, even those now licking their wounds, will walk away happy customers.

Gold -- Sharefin, 20:16:57 03/25/03 Tue

Supply Crunch, Insurance Premium Hike Hit Gold Demand

Mumbai, March 23: The hike in insurance premium for transporting precious metals, including gold, has replaced the earlier war premium built in gold prices before the war. As a result, even when gold prices have fallen in the international and domestic markets, the relative price is higher. This is mainly due to shrunken supplies on war-led fears.

At a time when demand for gold has surged with drop in prices, the Indian buyer is unable to take full advantage of not just the low prices, but even the reduced import duty on numbered bars announced in the 2003-04 Budget. Besides, a change of equation is currently on between the 20-odd entities which have been permitted to trade in gold and silver. This has led to supply constraints in a market which is in the midst of renewed demand for gold not witnessed since the past few months.
“Given the lower prices and the ongoing marriage season, the gold business has been pretty good these days,” said Bank of Nova Scotia (of Scotia Mocatta) director (India, bullion) Rajan Venkatesh. “However, there is also a sharp rise in the insurance premia charged by insurance companies and airline companies engaged in transporting precious metals.”

At this juncture, gold supplies have shrunk, primarily because of two reasons: One, the cancellation of flights to India by some of the US-based airline companies, which have to fly over the war-torn zone of the Middle East. Two, because of the war, some of the Switzerland-based leading gold producers have stopped sending their consignments to India.

Gold -- Sharefin, 20:04:58 03/25/03 Tue

Market Strategy Institute's Kamei Says Gold May Rise Further

``People in the streets are starting to buy physical gold again. It's a good opportunity to buy because it looks like the war in Iraq is getting longer. It's not easy to occupy and disarm Iraq.

``My target for gold is $360 by early May as the war drags on. Some people in Japan are starting to buy gold because they think the yen may go weaker. The new central bank governor (Toshihiko) Fukui is taking non-traditional measures'' to revive the economy.

Gold -- Sharefin, 20:02:12 03/25/03 Tue

Gold - delusion, dissolution, disaffection, disaster?

Tim Woods fetish with Andy comes to the fore......

Periodic Ponzi Update PPU -- $hifty, 23:44:25 03/23/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,421.84 + Dow 8,521.97 = 9,943.81 divide by 2 = 4,971.90 Ponzi

Up a Ponzi record 371.88 from last week.

Surpassing the old record up move of 343.68 on week 9/28/01

Thanks for the link RossL !

Should be another interesting week ahead!




Fiat -- Sharefin, 05:23:25 03/23/03 Sun

Hard Landing... a geopolitical and financial reality check

So, there you have it... why did Japan and the US share markets have a long successive string of UP days? Because the governments were buying shares. Why did gold open in the US virtually unchanged Tuesday through Friday during one of the most uncertain weeks in the past 50 years? Because gold would fall into the "other markets" category of those comments and was being micromanaged to prevent panic and a loss of confidence... and so far it's working.

This was clearly a psy-ops move in the markets... get them going in the direction you want on the onset of war so the participants think that what's happening is good and the moves should continue in those directions. So, it's important to understand this whether you're using technical analysis or a fundamentally based approach. This is not a completely free market environment, I'd call it a managed free market environment. it's a controlled environment, with the controller having unlimited funds in the short term. That's my take. I mean... they told me so.

Now; what I'd like to point out is that in terms of the economy... in terms of earnings... in terms of anything that really matters quantitatively, there was nothing that happened last week to indicate that going forward there is reason to be optimistic. Even forgetting completely about this war and its implications, the US economy is in trouble. With the war factored in, tremendous damage was done last week... most investors realize that, and that's why the g8 is intervening. they are using the Soros axiom of "markets influence events they anticipate" to its fullest. The markets are telling us there will be stability and optimism and therefore the hope of the financial engineers is that will be the case... and it's no longer a conspiracy theory... they told us that's what they're doing (maybe by mistake but they did tell us).

The biggest damage last week was not in Baghdad. The biggest damage centers around the US split with its most important allies (and both neighbors to the north and south I might add) and launched a non UN sanctioned pre emptive attack on a sovereign state. The first in modern history I might add unless you consider Germany's attack on Poland a pre-emptive strike. Russia, Germany, France, China, Mexico, Canada, South Africa and many others called it a violation of international law at one time or another last week. The bottom line? There is no more international law. How's that you say? Because with the UN left in tatters and stripped of any authority, "international law" is now in the eyes of the beholder. As a sovereign state, international law is now what you think it is... and if someone disagrees then they either live with it or if they think you may represent a threat, they bomb you preemptively. That's what the US told everyone last week by its actions. I think a lot of people don't get that yet. The UN is gone except as a humanitarian aid outlet... think of it as a politicized Red Cross. Look for a lot of diplomats to be looking for work. There is now currently no serious framework to resolve disputes among countries except war... setting us back oh I'd say 50-70 years... and the US has indicated to the world that if you feel threatened, it's ok to bomb your neighbor and take it over. That's the reality people. A reasonable person might conclude that this will point to... more war. That's certainly where I think it points.

Gold -- Sharefin, 04:39:19 03/23/03 Sun

Gold: Demand Up, Prices Down

Demand for gold has shot up in India even as the US-led attack on Iraq on Thursday partially removed the built-in war premium that led to lower prices. Coupled with lowered import duty announced in the Budget 2003-04 and rationalisation of sales tax by various states demand for the yellow metal, put on hold since the past few months of price rise, had begun to swell, trader said.

Around $25 was priced in as war premium in gold prices. With the commencement of the war, a part of this premium was seen evaporating.

In India import duty was lowered in the Budget 2003-04 (for numbered gold bars) to Rs 100 per 10 gm from Rs 250 and there has been rationalisation of sales tax by various states, the collective impact of which was lower price for imported gold.
“There's plenty of demand for gold,” said Bombay Bullion Association (BBA) president Suresh Hundia.

The daily all-India demand would be around 1.5-2 tonne, Mr Hundia said.

Bullion analyst Bhargava Vaidya said, “there was good offtake because people had waited far too long to buy gold.”

According to ICICI Bank's Mr Narandra Gupta, “Investors and traders, who had sold their gold to cash their holdings at recent high prices and had not bought gold to replenish the same, have all returned to buy gold.”

According to Mr Gupta, around 2,000 bars of gold would be sold on a daily basis.

What is more, the demand is expected to pick up further, as the war is expected to be short. This would further take away the built-in war premium leading to further fall in gold prices, trader said.

Gold -- Sharefin, 04:34:58 03/23/03 Sun

Why Invest In Gold

A Study on the Benefits of Gold Equities.

Important factors helping gold prices are:
1) Underperforming equity markets - gold is negatively correlated with the S&P 500.
2) Deficit spending and zero real rates of return on T-bills trigger a weaker dollar.
3) Gold mining companies have announced a continued reduction of hedge programs.
4) Continued presence of physical demand despite real price rises.
5) Renewed fund interest has seen hedge fund position on COMEX rise to levels seen in 1996.
6) Investment demand in Japan has risen five fold over the past year.
7) Changes in the supply side due to falling new gold mine production are bullish for bullion prices.

Not dependent on any corporation or government's "promise to pay."
Hedges against:
bank failures
foreign-exchange controls
currency devaluation
Particularly relevant to emerging markets.


Gold -- Sharefin, 03:52:59 03/23/03 Sun

Denial Confronts Illiteracy: 69 Mass Delusions

We live in dangerous times. But we also live in times where delusional behavior is raising the risks and intensifying the danger. An unchecked cancer is growing on our nation's consciousness, fed by denial of degenerative hardship, grown from a layer of ignorance, inhibiting its ability to perceive reality and to properly make decisions for the future. The American public clings to a scintilla of hope that all will be well, jobs secured, threats eliminated, wealth restored, pensions returned to health. My January article "Predictions for the 2003 Year - Bear Claws" closed the preface with an admonition on pervasive delusion within the American psyche:

A dangerous multi-faceted delusion has caught our entire nation in its grip, characterized by naïve perceptions and acceptance of economic disinformation, fair stock values, safe haven in real estate, ultimate sanctuary in Treasury bonds, imminent economic recovery, quick resolution to Iraqi conflict, moderation of crude oil prices, and trust in failed re-tread federal government (Keynesian) and Federal Reserve (monetary) stimulus programs. Pervasive delusion breeds a climate for further accidents, errors, and additional financial losses. The new year will provide ample opportunity to toss much more cold water of reality on our faces. This bear has only begun to claw its way toward Main Street and Wall Street. A ray of hope lies in new the new Bush economic package and the Fed's willingness to forestall deflation. However, the harsh reality calls for political squabbling, watering down its best elements, and watching them fall short of accomplishing much more than procrastinating the time of reckoning. (JW, January 2003)

If anything, the delusions are becoming deeper, wider, more desperate, and departing farther from reality in just the first three months of this new year. A sense of profound denial lingers after the bust of the economic miracle, irresponsibly founded upon the greatest debt-generated speculative mania in human history. Could the New Economic miracle have been a mirage? Won't our fabulous productivity pull us out of the morass? Doesn't debt build wealth? Wasn't the business cycle repealed? Can't the Fed save our skins as in the past? Can't the federal government just print enough money to rescue the economy? Didn't the strong USDollar produce the world's engine of growth and prosperity? What in God's name went wrong? What are we missing? In short, the answer lies in "Economics 101" at a fundamental level. Our entire economics community supports a heretical system that produces apologists for perpetual debt abuse.

I have been astounded and dismayed by the pervasive level of delusion harbored within and widely shared by the American public. Denial of the shattered American Dream seems to be festering against a backdrop of alarming financial illiteracy which saddles citizens and investors of this country. We simply have no interest, nor ability, nor sources of learning, in order to raise our collective intelligence on financial matters. The end result has been the advancement of clinical delusion, based largely on the belief that all will be well, as prosperity is restored. Our empire will remain intact, as will our world dominance. Is such a view based in reality? I think not, and expect that a difficult transition is in progress as our nation sees a significant cutback in its collective wealth, as adjustments are forced upon our spending patterns at all levels, as the abusive expansion of debts are dealt with in draconian fashion. In this piece I hope to disabuse readers of many persistent delusions in support of fallacious views. My list of delusions outlines the neurotic condition of the American mindset.

World opinion and international impressions of the United States are hard to monitor. The world's eyes surely see a nation which offers unlimited opportunity for individual success. They acknowledge a system which delivers tremendous reward for good ideas and innovative, if not revolutionary, approaches. They perceive a land where readily available credit can be used to build businesses, true engines of wealth and jobs. They observe a society which offers perhaps more economic fairness to people of diverse color and creed, than anywhere else in the world. They witness unnerving speed of change within our realm. The enjoy our unique contributions to the arts, films, jazz, and even our western cowboy genre. They benefit and are grateful for huge charity and aid throughout the world. They detect incredible wealth in stark contrast to abject poverty, in wonderment.

Perception has an opposite side, sadly evident in recent years. The rest of the world is now steeped in consternation, looking at us and wondering if we have taken leave of our senses. They see a nation whose leaders are either fools or criminals, often inexperienced but overseeing large arsenals, thrusting the western world toward a dangerous war. They are catching their breath after an historically unprecedented speculative disaster struck within our financial markets. They witness a world financial system wretch toward a probable recession and possible depression, as failed discredited monetary and fiscal policy is repeated in unknowing blind futility. They suffer a nation with a superiority complex, stifling arrogance, and ignorance of international culture. They observe a nation conduct politics directed and motivated by big business and press photo opps. They watch a people beset by parallel burdens. Careless abuse of debt has hobbled our ability to maintain the current exalted standard of living. Thoughtless abuse of food has created a ball & chain to be dragged around, called obesity. They see a younger set who learn from television and video games instead of reading, take their fashion cues from the ghetto, and produce music that lately sounds more like bad poetry put to an angry beat. Yet we actually maintain the belief we are a shining beacon to the world, not only in business, but with an emulated culture. More delusion. Instead, we are increasingly the object of world scorn. We are causing big problems. We have been infecting the world with financial viruses which emanate from a debt-based system founded upon hazardous currency and uncontrollable deficit spending, whereby leverage and other gearing are employed in every corner, magnifying the risks.

Below are 69 individual delusions, each clearly identifiable and rampantly spreading. They start with the war and economy, drifting to the USDollar, Treasury debt and banking, gold, stocks, real estate, and miscellaneous areas.

Gold -- Sharefin, 03:47:35 03/23/03 Sun

Gold loses war premium as US escalates bombing

New York gold fell to a 3-1/2-month low on Friday as the United States started a major air strike against Iraq and markets were abuzz with unconfirmed reports that President Saddam Hussein was dead.

Profit-taking has now wiped out all of gold's more than $40 an ounce safe-haven gains for 2003, with the war premium starting to erode even before the attack began.

COMEX April gold fell to $325.80 an ounce, its lowest since Dec. 11, on market talk the Iraqi dictator had been killed in a Wednesday evening airstrike on Baghdad that kicked off the war to topple his government and find Iraq's suspected cache of illegal weapons, traders said.

"Some of that selling originated off that rumor," said James Pogoda, vice president of precious metals at Mitsubishi International Corp.

British and U.S. officials said they could not confirm the reports. Later, as large explosions rocked Iraq's capital for the third night, the United States said it had begun the major air war it had promised.

Stop-loss selling accelerated the fall once gold fell below $330 an ounce, which was major resistance before gold broke higher late last year on its way to a 6-1/2-year high on Feb. 5 at $390.80.

Gold dealers said market conditions were thin, because Tokyo markets were closed for a national holiday. Japanese investors were some of the biggest buyers in gold's rally.

Like gold, other safe havens such as the Swiss franc and U.S. Treasuries went down on Friday.

Rotation among financial assets is now working against gold, after favoring bullion in 2002 and early 2003. The dollar surged, while the Dow Jones industrial stock average was up more than 200 points higher in late afternoon on confidence that the war would be over quickly, as U.S.-led forces raced northward toward Iraq's capital, securing Iraqi oil fields and air strips along the way.

"It's starting to look like a lot of the war premium is already out of gold," said Ian MacDonald, head of bullion trading at Commerzbank.

"You've got a short-term issue here, in as much as buying patterns can be very much disrupted from the Middle East, being a big consumer of gold in the last year or so," he said, adding that in the 1991 Gulf War Middle East purchases were interrupted for a few weeks.

Gold has a history of price volatility in times of war -- it rose more than $40 in the run up to the first Gulf War, then gave it right back once the war started.

"We've cleared the decks of any concerns about Iraq, at least on a temporary basis. Who knows what will happen later on, but so far it looks like things have progressed well," said John Tyree, a futures broker Rosenthal-Collins in New York.

"You're seeing tremendous liquidation and short selling as well, I imagine. A lot of people are liquidating under the $330 level," he said.

Gold -- Sharefin, 03:44:57 03/23/03 Sun

Gold prices have gone down as the war with Iraq has
heated up, but Charles de Vaulx of the First Eagle Gold Fund thinks there's
still a case to be made for buying gold and gold mining stocks.

Gold investors struck a bonanza last year, and Eagle, ranked the top-ranked,
gold-oriented mutual fund by Morningstar, had a return of 107%.

De Vaulx, co-manager of the $204 million fund with Jean-Marie Eveillard, said
February's peak prices could not be sustained. Momentum investors and "hot
money" rushed into the market, attracted by the prospect that war in Iraq might
result in an extended period of high oil prices, as well as an exodus of Middle
Eastern money out of the U.S. and into gold.

Despite the recent pullback, de Vaulx sees the possibility of positive things
for the gold market, including a record U.S. trade deficit, continued U.S.
currency weakness and a stock market that by some measures remains overvalued -
even after more than two years of losses.

Low interest rates are another factor. De Vaulx points out that the current,
short-term Federal Funds rate of 1.25% paired with the current inflation rate
of 2.4% equals real interest of negative 1.15%. Gold can look good by

De Vaulx carefully avoids predicting where gold prices may be headed;
regardless, he says investors are always well-advised to keep 2% to 5% of their
portfolio in gold or gold-linked equities, "as an insurance policy."

More that 15% of Eagle Gold Fund's assets are currently held in gold bullion,
making it the fund's top holding.

De Vaulx said during the metal's run-up last year many mining stocks became
too pricey. But after declining 30% or more since January, "gold stocks do seem
fairly cheap again," de Vaulx said. "I wouldn't say dirt cheap, but cheap
enough to be purchased."
De Vaulx said Eagle holds a bias against gold mining companies that hedge
their sales by signing contracts for future deliveries at fixed prices.
De Vaulx says the industry is hard-pressed to open new gold mines unless the
metal's price is above $350 an ounce; thus gold is "trading below its
replacement cost," De Vaulx said.

Gold -- Sharefin, 03:40:21 03/23/03 Sun

Lease Rate Spikes Prove (Gold & Silver) Price-Rigging

Although the "leasing" of precious metals by central banks is in itself a highly suspect practice that reeks of manipulation, it is the existence and simply insane magnitude of occasional spikes in lease rates that, if properly pointed out, gives even someone who is not a precious metals buff the willies.

For reasons that have been discusses by various analysts over the past five to ten years, "leasing" of precious metals is a thinly disguised effort to flood the market with precious metals in order to "manage" their prices. Leasing is the most in-transparent of official financial transactions, with few if any reporting requirements, and a total blackout of information as to how lease rates are actually determined. The very fact that a central bank that holds gold or silver as a reserve asset on behalf of the citizens of its country is willing to "loan" that metal to banks at ridiculously low interest rates, rates that have no equal in any of part of any economy (other than maybe in Japan, and recently the US, where near-zero interest rates have been, or are fast becoming, a way of life) just smells like a rat.

High precious metals prices are always anathema to any government or central bank that relies on the public's confidence in its worthless paper currency, and for that very reason must always be 'controlled" if the fiat-based monetary system is to survive. It therefore only makes sense that a central bank should be willing to flood the market with precious metals at strategic times in order to achieve and maintain that control. So the onus of rodent body-odor always dwells on this practice by definition, and readers should not conclude from this article that any sort of legitimacy is conceded by seemingly treating lease rates as bona fide results of actual market forces..

Gold -- Sharefin, 03:31:17 03/23/03 Sun

Is the next bull market in gold?

Gold -- Sharefin, 03:25:56 03/23/03 Sun

India gold importers resume buying

Traders in India, the world's largest buyers of gold, resumed purchases on Thursday as global prices hovered in a narrow range after the start of U.S. strikes against Iraq.

Traders said importers were active on fears prices would jump if the war was prolonged or if terror attacks struck other parts of the globe.

Gold -- Sharefin, 03:22:07 03/23/03 Sun

Major Gold Producers Expect Price Rebound Despite Iraq

Two of the world's biggest gold producers said Thursday that the bullion price will rise in coming months, despite recent selling linked to the start of the Iraqi conflict.
U.S.-based Newmont Mining Corp. , the world's biggest producer, and South Africa's Gold Fields Ltd. , the fourth largest, said the price recovery will be largely linked to concerns about the U.S. economy.

Analysts say that the so-called war premium in gold has vanished over the past few weeks as investors take the view that the U.S.-led war in Iraq will be successful and short-lived.

But Ian Cockerill, chief executive of Gold Fields, said that there is still an "overwhelmingly positive" argument for buying gold in an economic environment where the U.S. dollar is predicted to soften further. "The war is an event that is taking place, but it is superimposed on what is a weakening U.S. economy," he told reporters at the Paydirt gold conference in Perth.

"America has been on a spending binge and at some stage someone has to pay for that, and that is going to lead to the reality that the dollar is overvalued," he added. "And if you believe in a weakening U.S. dollar then, by definition, you should believe in an improving gold price."

Cockerill said investors are betting that the war will finish swiftly. "But I don't believe that we are going to see any real change in the global financial markets - the seeds for real economic problems are there and are likely to stay there."

John Dow, managing director of Newmont Australia, said that the gold price has lost some of its war-related glitter in recent weeks. "But underlying that are the fundamental financial conditions that are going to keep the price of gold probably somewhere where it is now, or maybe even (cause) further increases," Dow said.

"We are in a long-term upward trend and the forces that are causing it are only getting worse," he added.

"You might see a short-term price reaction (downwards) in a matter of days, but longer term the U.S. economy isn't going to be fixed overnight and the debt crisis that is looming in the U.S. isn't going to go away."

Gold -- Sharefin, 03:18:50 03/23/03 Sun

'Weapon of mass distraction' good for gold - Cockerill

Gold bull Ian Cockerill, chief executive of the world's fourth largest gold company Gold Fields, believes the major forces he postulated this time last year that were supporting a positive gold market were just as compelling today, especially the strong correlation between a lower US dollar and higher gold price.
Gold's store of value had been reinforced by the geopolitical and economic portents of these uncertain times. War on terror and the increasing global divides (between nations and people) plus the frail US dollar and financial markets were key risk elements that wouldn't diminish overnight and hence would continue to sustain a robust gold price. “People are insecure and are resorting to gold as a safe haven investment,” Cockerill said.

The Gold Fields boss told delegates at an Aussie gold conference in Perth today (Thursday), at which he also spoke last March, that the US's massive current account deficit needed a whopping US$2 billion per day of fresh foreign money pumped into the country to prop up the economy and that the war with Iraq was US President George Bush's “weapon of mass distraction”. Cockerill emphasised that he wasn't suggesting the war was a premeditated strategy to deflect attention away from the ailing US economy, but nevertheless the military conflict was an event superimposed upon the massive US debt strain and softer US dollar. “Clearly a reversal of flows of money into America as its economy slows down would see a continuing weakening of the US dollar,” he said. “We can see that the dollar has started on its downward trend.”

Cockerill expected the volatility to remain in the gold price beyond the Gulf war. “The war will come (which it did during his presentation) … and the war will go, hopefully swiftly, but I don't believe we're going to see any real change in global financial markets,” he said. “The seeds of the economic problems are likely to stay.”

Gold -- Sharefin, 03:10:53 03/23/03 Sun

War jitters force Indian gold importers to go slow

India, the world's largest gold buyer, has cut imports in anticipation of volatile prices as the United States prepares to launch a military assault on Iraq, traders said on Wednesday.
"There will be a rush for imports if prices fall to $325 an ounce," said Nayan Pansare, a senior official of trading firm Inter Gold Ltd.

War & Oil -- Sharefin, 04:07:59 03/21/03 Fri

Economic perspective on the war

Geoffrey Heard, Australia

*** It's not about oil or Iraq. It's about the US and Europe going
head-to-head on world economic dominance. ***

Summary: Why is George Bush so hell bent on war with Iraq? Why does his
administration reject every positive Iraqi move? It all makes sense when
you consider the economic implications for the USA of not going to war
with Iraq. The war in Iraq is actually the US and Europe going head to
head on economic leadership of the world.

America's Bush administration has been caught in outright lies, gross
exaggerations and incredible inaccuracies as it trotted out its litany
of paper thin excuses for making war on Iraq. Along with its two
supporters, Britain and Australia, it has shifted its ground and
reversed its position with a barefaced contempt for its audience. It has
manipulated information, deceived by commission and omission and
frantically "bought" UN votes with billion dollar bribes.

Faced with the failure of gaining UN Security Council support for
invading Iraq, the USA has threatened to invade without authorisation.
It would act in breach of the UN's very constitution to allegedly
enforced UN resolutions.

It is plain bizarre. Where does this desperation for war come from?

There are many things driving President Bush and his administration to
invade Iraq, unseat Saddam Hussein and take over the country. But the
biggest one is hidden and very, very simple. It is about the currency
used to trade oil and consequently, who will dominate the world
economically, in the foreseeable future -- the USA or the European

Iraq is a European Union beachhead in that confrontation. America had a
monopoly on the oil trade, with the US dollar being the fiat currency,
but Iraq broke ranks in 1999, started to trade oil in the EU's euros,
and profited. If America invades Iraq and takes over, it will hurl the
EU and its euro back into the sea and make America's position as the
dominant economic power in the world all but impregnable.

It is the biggest grab for world power in modern times.

America's allies in the invasion, Britain and Australia, are betting
America will win and that they will get some trickle-down benefits for
jumping on to the US bandwagon.

France and Germany are the spearhead of the European force -- Russia
would like to go European but possibly can still be bought off.

Presumably, China would like to see the Europeans build a share of
international trade currency ownership at this point while it continues
to grow its international trading presence to the point where it, too,
can share the leadership rewards.


Oddly, little or nothing is appearing in the general media about this
issue, although key people are becoming aware of it -- note the recent
slide in the value of the US dollar. Are traders afraid of war? They are
more likely to be afraid there will not be war.

But despite the silence in the general media, a major world discussion
is developing around this issue, particularly on the internet. Among the
many articles: Henry Liu, in the 'Asia Times' last June, it has been a
hot topic on the Feasta forum, an Irish-based group exploring
sustainable economics, and W. Clark's "The Real Reasons for the Upcoming
War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken
Truth" has been published by the 'Sierra Times', '', and

This debate is not about whether America would suffer from losing the US
dollar monopoly on oil trading -- that is a given -- rather it is about
exactly how hard the USA would be hit. The smart money seems to be
saying the impact would be in the range from severe to catastrophic. The
USA could collapse economically.


The key to it all is the fiat currency for trading oil.

Under an OPEC agreement, all oil has been traded in US dollars since
1971 ( after the dropping of the gold standard ) which makes the US dollar
the de facto major international trading currency. If other nations have
to hoard dollars to buy oil, then they want to use that hoard for other
trading too. This fact gives America a huge trading advantage and helps
make it the dominant economy in the world.

As an economic bloc, the European Union is the only challenger to the
USA's economic position, and it created the euro to challenge the dollar
in international markets. However, the EU is not yet united behind the
euro -- there is a lot of jingoistic national politics involved, not
least in Britain -- and in any case, so long as nations throughout the
world must hoard dollars to buy oil, the euro can make only very limited
inroads into the dollar's dominance.

In 1999, Iraq, with the world's second largest oil reserves, switched to
trading its oil in euros. American analysts fell about laughing; Iraq
had just made a mistake that was going to beggar the nation. But two
years on, alarm bells were sounding; the euro was rising against the
dollar, Iraq had given itself a huge economic free kick by switching.

Iran started thinking about switching too; Venezuela, the 4th largest
oil producer, began looking at it and has been cutting out the dollar by
bartering oil with several nations including America's bete noir, Cuba.
Russia is seeking to ramp up oil production with Europe ( trading in
euros ) an obvious market.

The greenback's grip on oil trading and consequently on world trade in
general, was under serious threat. If America did not stamp on this
immediately, this economic brushfire could rapidly be fanned into a
wildfire capable of consuming the US's economy and its dominance of
world trade.


Imagine this: you are deep in debt but every day you write cheques for
millions of dollars you don't have -- another luxury car, a holiday home
at the beach, the world trip of a lifetime.

Your cheques should be worthless but they keep buying stuff because
those cheques you write never reach the bank! You have an agreement with
the owners of one thing everyone wants, call it petrol/gas, that they
will accept only your cheques as payment. This means everyone must hoard
your cheques so they can buy petrol/gas. Since they have to keep a stock
of your cheques, they use them to buy other stuff too. You write a
cheque to buy a TV, the TV shop owner swaps your cheque for petrol/gas,
that seller buys some vegetables at the fruit shop, the fruiterer passes
it on to buy bread, the baker buys some flour with it, and on it goes,
round and round -- but never back to the bank.

You have a debt on your books, but so long as your cheque never reaches
the bank, you don't have to pay. In effect, you have received your TV

This is the position the USA has enjoyed for 30 years -- it has been
getting a free world trade ride for all that time. It has been receiving
a huge subsidy from everyone else in the world. As it debt has been
growing, it has printed more money ( written more cheques ) to keep
trading. No wonder it is an economic powerhouse!

Then one day, one petrol seller says he is going to accept another
person's cheques, a couple of others think that might be a good idea. If
this spreads, people are going to stop hoarding your cheques and they
will come flying home to the bank. Since you don't have enough in the
bank to cover all the cheques, very nasty stuff is going to hit the fan!

But you are big, tough and very aggressive. You don't scare the other
guy who can write cheques, he's pretty big too, but given a 'legitimate'
excuse, you can beat the tripes out of the lone gas seller and scare him
and his mates into submission.

And that, in a nutshell, is what the USA is doing right now with Iraq.

Continued in the next post....

War & Oil -- Sharefin, 04:04:29 03/21/03 Fri


America is so eager to attack Iraq now because of the speed with which
the euro fire could spread. If Iran, Venezuela and Russia join Iraq and
sell large quantities of oil for euros, the euro would have the leverage
it needs to become a powerful force in general international trade.
Other nations would have to start swapping some of their dollars for

The dollars the USA has printed, the 'cheques' it has written, would
start to fly home, stripping away the illusion of value behind them. The
USA's real economic condition is about as bad as it could be; it is the
most debt-ridden nation on earth, owing about US$12,000 for every single
one of it's 280 million men, women and children. It is worse than the
position of Indonesia when it imploded economically a few years ago, or
more recently, that of Argentina.

Even if OPEC did not switch to euros wholesale ( and that would make a
very nice non-oil profit for the OPEC countries, including minimising
the various contrived debts America has forced on some of them ) , the
US's difficulties would build. Even if only a small part of the oil
trade went euro, that would do two things immediately:

* Increase the attractiveness to EU members of joining the 'eurozone',
which in turn would make the euro stronger and make it more attractive
to oil nations as a trading currency and to other nations as a general
trading currency.

* Start the US dollars flying home demanding value when there isn't
enough in the bank to cover them.

* The markets would over-react as usual and in no time, the US dollar's
value would be spiralling down.


America's response to the euro threat was predictable. It has come out

It aims to achieve four primary things by going to war with Iraq:

* Safeguard the American economy by returning Iraq to trading oil in US
dollars, so the greenback is once again the exclusive oil currency.

* Send a very clear message to any other oil producers just what will
happen to them if they do not stay in the dollar circle. Iran has
already received one message -- remember how puzzled you were that in
the midst of moderation and secularization, Iran was named as a member
of the axis of evil?

* Place the second largest reserves of oil in the world under direct
American control.

* Provide a secular, subject state where the US can maintain a huge
force ( perhaps with nominal elements from allies such as Britain and
Australia ) to dominate the Middle East and its vital oil. This would
enable the US to avoid using what it sees as the unreliable Turkey, the
politically impossible Israel and surely the next state in its sights,
Saudi Arabia, the birthplace of al Qaeda and a hotbed of anti-American

* Severe setback the European Union and its euro, the only trading bloc
and currency strong enough to attack the USA's dominance of world trade
through the dollar.

* Provide cover for the US to run a covert operation to overturn the
democratically elected government of Venezuela and replace it with an
America-friendly military supported junta -- and put Venezuala's oil
into American hands.

Locking the world back into dollar oil trading would consolidate
America's current position and make it all but impregnable as the
dominant world power -- economically and militarily. A splintered Europe
( the US is working hard to split Europe; Britain was easy, but other
Europeans have offered support in terms of UN votes ) and its euro would
suffer a serious setback and might take decades to recover.

It is the boldest grab for absolute power the world has seen in modern
times. America is hardly likely to allow the possible slaughter of a few
hundred thousand Iraqis stand between it and world domination.

War -- Sharefin, 04:01:07 03/21/03 Fri

Anybody Using This First Amendment?

American investigative reporter Greg Palast writes for the London Observer and reports for BBC news. His stories have appeared in the annual Project Censored lists but rarely in mainstream American media. Palast's book, "The Best Democracy Money Can Buy," now out in an expanded paperback edition with 40 percent new material, made the New York Times' Best Sellers list in its first week in stores.
Q: You also write about how the Bush administration stifled investigation of Saudis.

A: Yeah, well, I should stop saying that because it doesn't help the war effort. You know, a great investigator like Bob Woodward wrote that book Bush at War. I should feel ashamed about bringing up how Bush got us into war through his buddies, the Saudis.

People like Mike Moore make a lot out of the Bush connections to the Bin Laden family. That's useful to know, but I think there are more important connections.

For example, the BBC and Guardian reporting teams have information which is solid from two separate sources that there was a meeting in 1996 where Saudi billionaires agreed to fund Al Quaeda. It was kind of like, "Stop blowing up our country, get out of Saudi Arabia - what does it cost to get you to go play in Afghanistan?" The problem with that, besides giving money that not only terrorizes Afghanistan but also ends up in the pockets of people taking flying lessons with no intention to land, is that you need to follow that money.

Oh, by the way, a couple days after the attack on the World Trade Center, did you notice that we suddenly had a list of the financial institutions and charities which were funding terrorists? They didn't have that on September 8th? No one asked, "Hey, when did you guys come up with this? Boy, you must have stayed up all night, huh? You just uncovered all these guys in two days!" No, the stuff was in the files and not being acted on, in part for bureaucratic reasons but in part because of reluctance first by the Clinton administration - do understand, the Clinton administration was very reluctant to bother the Saudi Arabians because they were the people sitting on the oil spigots - but we went from reluctance to downright interference from the Bush administration.

For example, very specifically, I bring up in the book the failure to hunt down the sources and the total operation of the Pakistan bomb building program. And we're worried about Saddam Hussein? Colin Powell stands up in front the United Nations and says we can't let some crazy, fanatical dictator with nuclear bombs stay in office, and my wife says, "Oh, we're invading Pakistan, right?" But instead we've got George Bush with his arm around the dictator of Pakistan, Musharraf, who we know has weapons of mass destruction and has threatened to use them; but our President stands there and gets his picture taken with him like he's a prom date. The problem was that the CIA was not permitted to check into the funding of the Pakistan bomb program because it was funded by the Saudis, and that would embarrass the United States and in particular we have to look at some of the people involved: Sheikh Abdullah Bakhsh, Adnan Khashoggi.

Now, Bakhsh is a very interesting guy because he's identified as being one of the people whose money may have somehow ended up in nefarious hands. Whether he directed that or not I have no idea, but why not investigate the guy? Well, supposedly for geopolitical reasons; but maybe that was influenced by the fact that Sheikh Abdullah Bakhsh is also the guy who saved Harken Oil from bankruptcy - which is our President's former oil company. Now, did Bush say, "You're not allowed to investigate my former partners"? I can't imagine such a directive. What I do know is that when you have these kinds of entangling financial and personal relationships, political relationships, it influences your viewpoint so that you are susceptible to the line that we shouldn't bother these poor Saudis. So it's not a giant conspiracy. It is a political outlook poisoned by personal finance.

Q: A systemic problem rather than a conspiracy?

A: Yeah, right, it's not some odd little flaw in the system. It is the system - in which, there is back-scratching, helping each other financially. That's how it operates.

Plus it's not exactly a career-maker for agents to go after the President's partners or his Daddy's partners. That doesn't make a good impression.

You see, we're trying to clean up campaign financing, but we also have to clean up presidential family funding if we're ever going to have any reform. That's the most poisonous part of the Bush operation. There are two people who had the courage to stand up to this publicly. One is Cynthia McKinney, who was destroyed for trying to question the Bush family financing.

Fiat -- Sharefin, 05:50:39 03/20/03 Thu

Officials set for war on the financial front

Call it duct tape for the global financial system.
Like civil defense officials, who are putting in place contingency plans and drilling civilians on security as U.S. and British forces advance toward Iraq, financial authorities in many countries are taking steps to ensure the continuity of commerce if worse comes to worst.
For now, however, experts say these measures will probably take the form of heightened vigilance, rather than immediate action like the coordinated interest-rate cuts by key central banks that followed Sept. 11.
In part, that is because the economic effects and possible financial strains of this war are perhaps even more difficult to anticipate than the consequences of a short-term shock from terrorist attacks. In the run-up to the current conflict in Iraq, financial markets have already eased the pressure, sending stocks sharply higher and driving down oil prices.
"At the moment the scenario is almost too good to be true," said Gary Hufbauer, senior fellow at the Institute for International Economics in Washington. "The markets are priced for a perfect war."
But wars rarely go exactly according to plan, and economists say the current relief in the financial markets at the end of diplomatic wrangling over Iraq could easily be replaced by dismay if the war bogs down or spreads, or if there are significant terrorist reprisals against the West.
That is why central bankers have signaled that they are likely to wait and watch, rather than take immediate steps to lower borrowing costs once the shooting starts.
The Federal Reserve, the Bank of England and the European Central Bank all lowered interest rates modestly in the weeks leading up to the breakdown of United Nations negotiations over Iraq, in an effort to inoculate their economies against the effects of war.
While central bankers have emphasized that they are ready to loosen monetary policy further if needed, they have also expressed a surprising degree of uncertainty over the possible economic consequences of the conflict. Some analysts say the next move for interest rates, at least in the euro zone, could even be upward. There, the European Central Bank must contend with the possible inflationary effects of high oil prices and a stronger euro, though both have eased in the last week.
Central bankers and regulatory authorities in Europe have held confidential discussions in recent weeks on the issue of financial stability in the event of war, amid concerns about the soundness of big banks. "We stand ready to coordinate action upon request of our central banks," said Margaret Critchlow, a spokeswoman for the Bank for International Settlements, the Basel, Switzerland-based institution that acts as a central banker of last resort.
Though no leading financial institutions in Europe or the United States have failed during the three-year economic downturn, the authorities have been worried that weakness in financial markets might bring some banks - particularly in Germany - closer to the brink. European regulators and central bankers last week published a memorandum of understanding outlining efforts to improve cooperation during financial crises.

Fiat -- Sharefin, 09:48:35 03/19/03 Wed

US and Japan to protect markets

Just days ahead of a war, the US and Japan are prepared to co-operate to support the financial markets if there is a crisis.

A deal was struck last week in the US between a former Japanese finance minister and the head of the US central bank, the Federal Reserve's Alan Greenspan.

"There was an agreement between Japan and the US to take action co-operatively in foreign exchange, stocks and other markets if the markets face a crisis," Chief Cabinet Secretary Yasuo Fukuda said.

The move came as Japan's key Nikkei 225 index dropped to another 20-year low, falling about 1.5% to hit 7,824.82, before rebounding.

Finance and economics minister Heizo Takenaka said the Bank of Japan and stock exchanges would be watching the markets closely during the current Iraq crisis.

Economic troubles
"We will follow the prime minister's instructions, co-operate with the Bank of Japan and exchanges, and respond appropriately," he said.

The looming war comes as Japan's economy continues to struggle with weak domestic demand, record unemployment and a third year of deflation.

Stronger exports also look threatened as the weakening of the dollar has pushed up the yen.

Japan's Financial Services Agency has already announced a number of measures to support the markets including easing rules on companies to buy their own shares.

A deal was struck last week in the US between a former Japanese finance minister and the head of the US central bank, the Federal Reserve's Alan Greenspan.

"There was an agreement between Japan and the US to take action co-operatively in foreign exchange, stocks and other markets if the markets face a crisis," Chief Cabinet Secretary Yasuo Fukuda said.

The move came as Japan's key Nikkei 225 index dropped to another 20-year low, falling about 1.5% to hit 7,824.82, before rebounding.

Finance and economics minister Heizo Takenaka said the Bank of Japan and stock exchanges would be watching the markets closely during the current Iraq crisis.

Economic troubles

"We will follow the prime minister's instructions, co-operate with the Bank of Japan and exchanges, and respond appropriately," he said.

The looming war comes as Japan's economy continues to struggle with weak domestic demand, record unemployment and a third year of deflation.

Stronger exports also look threatened as the weakening of the dollar has pushed up the yen.

Japan's Financial Services Agency has already announced a number of measures to support the markets including easing rules on companies to buy their own shares.

Gold -- Sharefin, 22:51:25 03/18/03 Tue

Russell on real money, better known as Gold

Gold - There are two main scenarios regarding the future of the US, at least two which I take seriously.

The first is held by a number of highly intelligent people such as Bill Gross. This scenario holds that the US is headed for increasing inflation as the Fed is forced to print new oceans of money to cover our continuing deficits and debts.

The other scenario held by such analysts as Bob Prechter and James Dines is that we face a deflationary depression, as the bear market bears down relentlessly on the mountains of debt that is built into the US economy at every level.

Assuming that one of these scenarios is correct, what is our salvation as investors? In both cases, I believe the salvation of investors is real money, better known as gold.

In a major inflation, the purchasing power of the dollar is sure to decline. If that happens, the case for gold is obvious enough. As the value of paper money declines, the value of real money (gold) will become clear, even to the most stubborn anti-gold element.

In a major deflation, the pressure on business would be relentless. In this case, the Fed would go all out to fight the forces of deflation. Fed Governor has already announced that the Fed would not hesitate to use its chief weapon, its "printing press" to fight deflation. The Fed would also bring interest down to zero or even to a negative level, and it might even turn to buying stocks if necessary. So in the case of a deflationary depression, the Fed would flood the world in liquidity, putting massive pressure on the dollar -- and here again investors would turn to the safety of gold.

I continue to see this area as the accumulation area for gold. I believe that history will look at the wide fluctuations of gold and gold stocks in this area as "minor" and unimportant. The real moves in gold lie ahead, perhaps many months and even years ahead.

Right now, I suspect that there is a great deal of manipulation in gold. Mines that are hedged are trying to unwind their hedge positions and they therefore have an interest in gold holding steady or certainly not rising. Large investors and governments who are in the process of accumulating gold don't want higher gold at this point. Central banks, who view gold as the enemy, certainly don't want higher gold. Thus gold is fighting important interests, none of which want higher gold prices.

These interests have a problem, however. The problem is that they are pitted against the most powerful force in the market, the primary trend. The primary trend of gold is bullish, and in due time this will become obvious to the investing public. When that happens, gold will be moving into its second psychological phase.

Gold -- Sharefin, 22:46:14 03/18/03 Tue

Gold geezers hang tough

The gold-timing letters who were around when gold spiked in 1980 (See my Feb. 10 column) all seem to regard last week's break as a correction in a bull market.
This is the authentic voice of the grizzled gold geezer -- they've all been burned. My observation of gold bugs is that they are not as fanatical, at least in the short run, as they are generally portrayed. Many of them are quite active traders.

As Harry Schultz of the International Harry Shultz Letter ("I've traded gold on and off for over 50 years") has just observed in his patented orthography:

"I've said so often that gold advocates must rid themselves of the disproved buy-and-hold theory... Just as farmers plant and harvest, over and over, we must also buy and sell, over and over."
And then there's Dow Theory Letters' Richard Russell. We quote him too much. But at age 78, this is his market.

Recently, Russell has written:
"I believe we should accumulate a 10 percent position in gold and gold shares and then just hold that position. The position goes up, it goes down, it goes around, I don't give a damn where it goes. Once you have the position, put it aside.

"Do you call your Realtor every week and ask him what your house is worth? It's the same thing with your gold position."

Fiat -- Sharefin, 22:42:38 03/18/03 Tue

Plunge protection and rallying shares

STOCK markets rallied last week because it looked as if war with Iraq was going to be postponed. Yesterday the markets rallied because it looked like the war was about to begin. The two reasons contradict each other. The explanations do not make sense unless the markets are being rigged.

And who might want to do that? Well the US government would. The last thing President George W Bush needs is for his invasion of Iraq to set off a stock market crash, a collapse in the price of the dollar, a rush into gold or a spike in the price of oil. It is the kind of distraction that could be very unsettling.

The American public's support for Bush's Middle East adventure is not so cast-iron strong that he wants to tempt fate. So, according to the conspiracy theorists, the US authorities have been intervening anonymously in the markets to move them in the direction they want and to burn out any short-term speculators positioned the other way.

So do we believe the conspiracy story? Well, it is known that America has a secret standing committee known unofficially as the 'plunge protection team' which consists of the President, the Secretary of the Treasury, the Federal Reserve chairman Alan Greenspan, various other senior administration officials and the leading movers and shakers of Wall Street. The official purpose of this committee, as detailed a few years ago in the Washington Post, is to stabilise unruly markets for the greater good of the US as a whole. Seeking to prevent a military operation being undermined by panic in the financial markets would appear to be well within its brief.

The conspiracy theory also seems to fit the facts. The more astute watchers of markets say that the only explanation for what began last week and continued yesterday was a US government-inspired support action to get markets where they wanted before the outbreak of hostilities.

The trick about buying and selling in markets is to complete the trade without moving the price. The massive and sudden surge of activity last week and yesterday only made sense if it was intended to shift the price. Last week and again precisely at 3.30pm yesterday, massive selling undermined the euro on the currency markets and made the dollar correspondingly stronger. To the minute, there was similar sudden heavy selling in the gold market. Last week this bashed the metal's price from $350 to nearer $330 and yesterday it killed off the recovery.

So much for gold as a safe haven in times of war.

Last week again, heavy selling and officially-inspired rumours of a fleet of loaded Saudi tankers heading this way brought the price of crude back from its peak. Yesterday the price was undermined by helpful rumours that the US government would release some of its vast strategic oil stockpile.

All very convenient, as was the rally in equities led by the New York's Dow Jones Industrial Average. The Dow, surprisingly, is one of the world's least sophisticated indices. It is composed of 30 shares but these are not weighted for market capitalisation, so the Dow's value is much easier to manipulate than Wall Street's size and importance would suggest.

Because its shares sell for more than $130, one company, 3M, accounts for more than 10% of the Dow's value. IBM is another such heavyweight. Aggressive buying of these two companies has a remarkable effect on the index - certainly enough to create a bandwagon on to which others will jump. Needless to say, 3M has seen huge volume in recent days.

Convinced? We may not know what really happened for months, or even years. But there has been some astonishingly ham-fisted dealing in recent days if it was not deliberate market manipulation. And given that truth is the first casualty in war, why should we expect markets to be a no-go area for the architects of spin and the conditioners of expectations?

These markets are no place for innocents or innocence.

Gold -- Sharefin, 22:37:41 03/18/03 Tue

What's wrong with gold stocks?

Extreme bullishness is not unusual in a strong bull market. But that extreme bullishness will only persist for a lengthy time at the end of the run (remember the tech bull of 1999-2000) not in the early stages of the bull, as we believe we are. Second gold prices responding to the shifting winds of geopolitical concerns are also not unusual but it is not the prime reason for the rise of gold. That real reason belongs to the falling US Dollar.

As the world polarizes and we move towards a war that many do not want even as many do (and may already be under way by the time this is published) the United States with a $450 billion annual trade deficit, a growing budgetary deficit that will hit over $300 billion this year and 40% of its debt in the hands of foreigners and an already falling currency can ill afford to get into trade wars with the rest of the world. But this is very possible by-product of the fall out at the United Nations. Already the exchanges between the US and France in particular could prove to be quite debilitating. Boycotts of French goods are growing in the US while some of the dialogue between leaders has veered off the normal course of diplomatic splits.

The huge trade deficit coupled with the budgetary deficits and huge holdings of US debt in the hands of foreigners acts like a huge put on the US. If even a small portion of the debt came back coupled with an outbreak of trade wars (that were in some cases already underway) the US Dollar, which is the world's reserve currency, could fall even further. The US Dollar has fallen 17% as measured by the US Dollar Index, which is the US$ measured against a basket of world currencies. The bull up trend that began in 1995 has clearly given way as our monthly chart shows. We have also fallen under a key area of support/resistance that defined the top of the entire 1987-1999 bottoming pattern.

But gold rising as a response to a falling US$ is only part of the picture. Despite the rise in prices demand for gold remains firm. The world's central banks no longer have the capability to sell or lease gold that they did in the past. It is estimated conservatively that at least 15% of the world's central banks gold have sold or leased (5000 tonnes) over the past several years, and some have estimated that it could be as high as 45% (15,000 tonnes). Some countries such as Canada have literally stripped the vaults of their gold reserves replacing it with now depreciating US Treasury Bonds/Bills even as gold prices rise.

Demand is rising in the world's fastest growing economy China and remains firm in India the world's second most populous country (and for silver as well). The Chinese central bank has indicated a willingness to add to its gold reserves even as other central banks sell theirs. As well next year we are expected to see the introduction of the Gold Islamic Dinar to act as a medium of exchange for Muslim countries. This will add to world demand. Gold's annual demand has been in the area of 4000 tonnes/year with upwards of 1500 tonnes/year being required to fill shortfalls from mine supply and other sources.

Similarly there are growing severe shortages in the "poor man's" gold, silver. Previous large supplies have fallen sharply and mine output is insufficient to meet potential demand in the years to come. Yet silver prices have remained quite depressed. This should change going forward. Supplies of dealer silver are low enough (estimated around 55 million ounces - annual usage at Kodak (EK-NYSE) alone is roughly 50 million ounces) that if someone asked to have a large futures contracts position to be delivered it could cause a price spike.

Gold -- Sharefin, 22:31:18 03/18/03 Tue

Could Iraq spell an end to the 'cult' of gold?

AT ONE minute before 3.30pm yesterday, a small incident on the markets revealed everything an investor needs to know about the fate of gold, the so-called "safe-haven" asset, over the next few months.

White House spokesman Ari Fleischer stepped before the world's media and announced that US president George Bush would address the nation later that evening - giving Saddam Hussein an ultimatum to leave Iraq or face war.

Within seconds, traders who have built substantial holdings in gold since war-talk started in 2002 were dumping bullion on the market. By 3:31pm, the price of the precious metal was down by $2 an ounce. By late evening, London spot gold prices were off 2.5 per cent from mid-afternoon, at $335 an oz.

John Maynard Keynes is oft-quoted in financial circles for reputedly calling gold a "barbaric relic". Actually, Keynes was referring to the gold standard, but details aside, the sentiment is apt for today's market: the price of gold is on the brink of being savaged once the US and UK go to war in Iraq.

City analysts are united in the belief that gold is set to tumble. Yesterday's example was a clear lesson that, given the slightest glimpse of certainty about when hostilities will start, investors will sell the commodity on the assumption its price is going in one direction - and that's down.
All of which raises an intriguing question: Will this war mark the end of the "cult" of gold as a safe-haven for investors?

Andrew Milligan, director of strategy at Standard Life Investments in Edinburgh, points to several fundamental problems with gold as an asset for retail investors. Not least of those are the costs of storage and security when the investment is in coins and bars. The obvious solution - buying shares in mining companies or putting money in funds with a bias towards gold - only exposes the investor to the vagaries they wanted to avoid in the first place. Anglo-American shares dived 40 per cent in the middle of last year when equity markets collapsed.

Worse still, gold does not give investors a stream of income - the gains are purely in the capital. Weak dividends on equities are more attractive than no payout at all.

The final nail in the coffin for gold is the availability of far superior investments as a haven in troubled times.

Milligan says: "Years ago, the attractions of gold as a stable investment were obvious.

"But nowadays there are a large number of financial instruments which do the job much more efficiently - they are more liquid, easier to own, and you get an income on top.

"If one is extremely concerned about the outlook for the world and thinking of gold, one would do well to ask: what's wrong with index-linked government bonds?"

Gold still has uses to financial markets - the price is often a good indicator of inflation expectations. But as an investment, its status looks shaky.

One huge obstacle may block the end of the cult of gold: the profusion of bodies such as the World Gold Council in London, which stand ready to point to the many merits of investing in yellow metal, tough times or not. But when the tanks start to roll into Iraq the lustre of gold will fade. Alternative assets will suddenly look more attractive, in particular one of the other great "safe-haven" investments: the US dollar. As confidence in the world's largest economy recovers, traders will push the greenback up, and gold will head back down.

Gold -- Sharefin, 22:27:42 03/18/03 Tue

It glitters, but gold's not that solid

With the world mired in geopolitical and economic uncertainty, many investors' thoughts turn to gold, which can seem like a smarter investment than stocks.

Here are several ways to invest in gold, as described by David Kathman of

• Gold stocks: Often very volatile, combining the volatility of gold with the riskiness of a business.

• Gold mutual funds: Generally less volatile than stocks but still rather volatile.

• Gold accounts: Purchased through bullion banks, usually with large minimum investments.

• Chunks of gold: (in coin or bar form, which have to be stored somewhere safe).

• Gold certificates and pool accounts: Available for those who wish to buy small amounts.

Gold -- Sharefin, 22:23:41 03/18/03 Tue

Gold to come under pressure

The gold price may come under pressure in the short term as uncertainty surrounding a US-led war against Iraq is removed from the market.

However, GFMS Metals Consulting is upbeat about the prospects for the base metals sector for the rest of the year, as long as the war is short-lived.

The United States' decision to give Saddam Hussein 48 hours to flee Iraq or face an invading force has removed speculation about the timing of another Gulf War, as the market switches its attention to the likelihood of a short and successful military campaign.

"It is uncertainty that drives the market, and now that certainty seems to be upon us it is probably time that you will see some weakness in the gold market," Daiwa Securities resources analyst Mark Pervan said.

He said gold prices in the short term would depend on the swiftness of the military conflict, its impact on the economy and on oil prices, as well as the possibility of further conflicts such as terrorist attacks.

He also said the price could be impacted by short term speculators as well as investors moving back into equity markets.

"You can lay arguments either way for the gold market," he said.

"The market has certainly liquidated its long position, there is a possibility we could see them (investors) re-enter the market and push gold prices back up but only for a short term I suspect.

"But then people may feel more confident about getting into equity markets now that there is certainty, and the moment you start seeing stronger equity markets, it is going to hurt the gold market to a certain degree."

But Mr Pervan said a combination of factors, including a shaky US dollar, an uncertain economic outlook and significant producer de-hedging, should put a floor on the gold price at around $US320 an ounce.

Gold -- Sharefin, 22:12:52 03/18/03 Tue

Australian Broker Raises 2003 Gold Price Forecast

Macquarie Research Equities has raised its 2003 gold price forecast, following the precious metal's remarkable performance so far this year.

The broking house lifted its price forecast from $US315 an ounce to $US340, on the back of gold's sharp rise in the first quarter of 2003 and its assessment higher prices would be sustained into the second half.
Macquarie said even without the prospect of war, background factors continued to support the gold price.

"Concerns remain about absolute and relative currency valuations (particularly the US dollar), the lacklustre global economy, the remaining potential for terrorism and wider geographical tensions (eg North Korea).

"Gold producers continue to highlight their intentions to continue to reduce their hedge books," Macquarie added.

Gold -- Sharefin, 22:07:22 03/18/03 Tue

Multi-currency rally may boost gold

Sharp gains for explorers, even with bullion swoon
Against a backdrop of war, signs are emerging the gold market may be ready to resume the rally that made it last year's star performer.

Wall Street banks are advising clients to take advantage of the weakness in gold mining shares. Veteran gold investors are reminding their followers that gold, and the accompanying mining equities, are by their very nature rocky -- and subject to swift declines and rapid rises.

Producer inflation in the United States -- largely a measure of prices for basic goods -- is gaining, boding a possible spell of accelerated inflation for consumers. The Producer Price Index is showing a 25 percent rise in heating oil prices alone -- and a fair bit of food inflation, too. Inflation is almost always a boost to gold, which is seen as an alternative to eroding currencies amid higher prices for goods.

In addition, the metal, thanks to a mostly rising dollar in the past several days, is gaining, albeit slowly, in the value of most currencies. Such a multi-currency rally is, according to experts, one of the hallmarks of a lasting bullion rally.

Gold -- Sharefin, 22:04:34 03/18/03 Tue

Gold Hedging Falls Further Out Of Fashion - PDF file

The international gold hedge book - the cumulative hedging
activities of 84 gold producers, representing 66% of global output -
fell further in the fourth quarter of 2002, declining by 4.9 Moz (153
tonnes) to total 80.9 Moz (2,515t). The total fall during 2002 was a
massive 14.8 Moz (459t), according to the latest issue of the Gold
Hedging Indicator (GHI), which is produced by Haliburton Mineral
Services and Virtual Metals Research and Consulting and is sponsored
by NM Rothschild & Sons Limited. To put it into context, this
reduction in hedging more than offsets the amount of central bank
gold sold during 2002 under the terms of the European Gold
Agreement. The recent strong climb in the gold price together with
low interest rates have considerably weakened the propensity of gold
producers to lock in prices
through hedging, and gold has again become more of a `pure' price
play for investors.

Fiat -- Sharefin, 21:58:49 03/18/03 Tue

I'm with Buffett: Some derivatives are scary

It's the huge financial transactions that you don't see that worry a lot of people. Poor disclosure and lots of destructive capacity is a lethal combination.

If the red robin of springtime doubled as a harbinger for a new bull market, there'd be birdwatchers on every corner. As it is, people try to spin the least bit of news into reasons why it's upon us. But we are not there yet, not in the aftermath of the biggest bubble in history. When we get closer, the incessant bottom-calling will have given way to total disaffection -- and you also won't find our Fed chairman or The Wall Street Journal pitching derivatives as the greatest thing since sliced bread.

Liquored up on leverage
A preliminary follow-up to last week's comments on derivatives: As I mentioned, Warren Buffett thinks the derivatives market is a time bomb. Though he did not draw the distinction I am about to make, I assume he would agree with me. When discussing the derivatives market, I do not mean to imply that there is a problem with exchange-traded derivatives, a.k.a. stock options, futures, etc. These do not have the same potential for abuse as "over-the-counter" derivatives, because the counterparty risk is policed by the exchanges. Also, since prices are set in a marketplace, valuation is transparent, as opposed to OTC derivatives, where no one knows what the real values are. There, prices are a function of guesswork and people's ability to make things up. And of course, it is in this market where exposure and the potential for cascading risk are greatest.

Last Monday, William Poole, the president of the St. Louis Federal Reserve Bank, amplified Buffett's time-bomb warning in a speech before the Office of Federal Housing Enterprise. (To read the speech, click on the link at left under Related Sites.) Poole's comments set off an incendiary device of their own, as Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs), major participants in the derivatives market, ended the day sharply lower. (Both bounced back as the week wore on.)

Before reprising the remarks that probably got people most upset, let me just mention a couple of his statistics: Housing-oriented debt, which comprised only 5% of nonfinancial debt at the end of World War II and about 20% in the early '60s, has grown to 30% today. Of that debt, 40% is issued by Fannie Mae, Freddie Mac or Ginnie Mae. (The latter, as a government-backed institution, obviously has no credit risk, but the same is not true for Fannie and Freddie.) In addition, Fannie and Freddie are far more leveraged than FDIC-insured commercial banks.

(Editor's note: Leverage, sometimes known as the leverage ratio, divides assets by total equity in a company and gives a sense of its ability to withstand shocks. Fannie has a leverage ratio of 63.1. Freddie's is 38.0. The leverage ratio of the banks in the Standard & Poor's Banking index is 11.3.)

Gold -- Sharefin, 21:49:54 03/18/03 Tue

Gold climbs, with multiple options for wary investors

Only 28 people showed up in Orlando two weeks ago for a speech by Frank Holmes, chairman and chief executive of one of the most successful mutual funds of 2002 -- U.S. Global Investors.

While most mutual funds lost value or considered themselves lucky to eke out a tiny gain, Holmes' fund, which invests largely in gold and silver mining companies and even bullion, acted like a resurrected tech stock, climbing an impressive 30 percent in value.

That was a big crowd, Holmes said sarcastically, noting his speech at the previous year's Florida Money Show drew an audience of four.

"When there's 2,000 people trying to get in here, you'll know we are at a top."
Those who are the most worried about Western civilization as we know it -- or just about the liquidity of anybody else -- would want to take physical possession of their precious metals.

That is happening on a regular basis at Sarasota Rare Coin Gallery, says president Kent Gulley.

Sales are as good now as they were right before Jan. 1, 2000, when many people were afraid that computers wouldn't be able to cope with the calendar change and that the financial system would crash as a result.

"This time around, there are larger players," Gulley said.

Gold -- Sharefin, 21:37:59 03/18/03 Tue

Gold carries a wealth warning

The precious metal is traditionally a 'safe haven' in turbulent times. But, says Liam Halligan, anxious investors could be burnt if they rush in now; the war premium is already in the price

In times of economic and political uncertainty, one trend is predictable: the price of gold rises. On cue, geopolitical tensions and volatile equity markets have seen the yellow metal soar.
A store of value for thousands of years, gold has recently ridden a popularity wave not seen since the late 70s and 80s, when it acted as a hedge against high inflation. Imminent war in the Gulf, and property and government bonds which look dangerously over-valued, have set gold markets buzzing. It's one aspect of a surge of interest in "safe haven" investments, from Swiss francs to classic cars.
But central banks care a lot more about deflation than they do about exchanging gold for cash. And that's why they could, in fact, provoke another gold price rise.

The Federal Reserve, for instance, has very publicly declared its determination to counter the deflationary threat. "The USA has a printing press," said Fed Governor Ben Bernanke, in a recent speech. "It allows us to produce as many dollars as we wish at essentially no cost. We conclude that, under a paper money system, a determined government can always generate higher spending and hence positive inflation."

This speech had a dramatic impact on gold markets. By raising the possibility that central banks could print money to fend off deflation, it helped push gold prices up.

"We now face the intriguing question of whether leading central bankers want to encourage a gold price rally in order to lessen market fears about deflation," says David Hale, the respected Chicago-based economist.

"And if the only option left to policymakers is to print money in quantities sufficient to create rising prices, the continued search for wealth preservation will lead to a higher price of gold."

Fiat -- Sharefin, 21:30:02 03/18/03 Tue


The sad part about the last depression continues to be the lack of understanding about what caused it. Extensive inflating of money and credit brought on a boom and eventually, a bust. The similarities between then and now are striking. If we have another depression, the economists and the media will blind themselves to the real cause. They will be far more interested in casting blame. The whole thing will be so politicized and distorted, that the important lessons to be learned won't register. We will fail to acknowledge that a government monopoly on unbacked paper money and bank credit not only debases the currency, it gives the government unlimited financing for social schemes, foreign aid, subsidies and war. It allows the government to intervene virtually anywhere. It further enables the state to persuade its central bank to inflate endlessly and foster speculative booms, which then turn into the kind of devastating bear markets that wipe people out.

Are we in store for a depression now? Fortune magazine quotes Warren Buffet on the insanity of stock values reached during the great bubble. "Unfortunately, the hangover may prove proportional to the binge," says Mr. Buffett. Commenting on these remarks, Richard Russell wrote, "We have just seen the greatest binge or bubble in U.S. stock market history. What if the bear market is ‘proportional' to the bubble? In that case, we may experience one of the worst bear markets in U.S. history. At any rate, that's the kind of bear market that I see ahead." Highly successful money manager, Michael O'Higgins says, "When you say it can't be like 1929 through 1931 [when stocks lost 89 percent of their value], you're right. It could be worse." He looks for a depression to begin imminently. "Perhaps the greatest deflation and depression of all time," he says, "following the greatest speculative boom of all time." He goes on to say that the depression will not end until high levels of corporate, government and consumer debt are liquidated.

Gold -- Sharefin, 21:18:12 03/18/03 Tue

Top fund managers back gold

“For the last 20 years investors have been net sellers of gold, but recently the improving fundamentals for gold have been reinforced by a renewed interest in it as an investment asset,” he said.

Sandy McGregor, also a director at Allan Gray and the group's chief resources fund manager, also tips gold for an extended run. “The last great gold bull market was driven by similar concerns that we face today and it lasted 10 years between 1970 and 1980. Central banks in the US, Europe and Japan have pushed interest rates to the lowest levels since the 1930s in an effort to prop up global growth. Monetary policy is extremely lax and fiscal deficits are ballooning,” he said.

McGregor points to growing funding concerns being faced by the US economy, which is running a deficit of $500 billion - more than 4 percent of its gross domestic product. Economists fear the lack of foreign cash inflows into the world's largest economy, against the backdrop of the record funding shortfalls, will keep the dollar under pressure. In the absence of a credible alternative, given “a lack of confidence in the Euro and the Yen”, gold could be a beneficiary of the search for a safer investment class.

“The global bear market has made investors cautious about equity markets, even bonds seem more risky following the collapse of some large corporations. “In the light of all of this, it is not surprising that there has been renewed interest in gold as a store of wealth. With interest rates so low, it has never been cheaper to hold gold,” says McGregor.

Gold -- Sharefin, 21:14:54 03/18/03 Tue

Letter to Mineweb from Jeffrey M. Christian, CPM Group

As I look around the precious metals markets these days, I am astounded by what seems to be an incredible ignorance among market participants, analysts, mining executives, and others. It's not just me: Hedge fund clients, people entering the business from the currency markets, or the petroleum industry, and others continue to express shock and chagrin at the degree to which the precious metals markets appear to be so poorly understood by their own members.

I am trying to come to terms with this phenomenon. It is important to the precious metals markets and industries. As the gold producers seek to try to make gold a mainstream asset, they will bounce off of institutional fund managers who will listen to the chatter in the gold market, and conclude it is not right for them. The degree of misinformation present today in the market, and the degree to which no one seems to be very bothered by the misinformation circulating as fact, is more confounding to me than anything I have felt in a quarter century in these markets.

2. Another point is de-heding as a source of physical supply for gold. Bank analysts are publishing reports showing a source of physical supply of 11 - 18 million ounces of gold last year, and another 5 - 15 million ounces this year. Does anyone really think that bullion traders are buying physical gold in the market to unwind these hedges? I know that when my clients unwind forwards, it is a paper transaction. The same is true when they sell back puts.

We tried to elicit a response about this a year ago, when we circulated an “Open Letter on Gold Hedging,” and posted it on our website. The only response we got was a telephone call late at night from a bullion banker who said that we would never get an honest answer to our call for a rebuttal of our contention that the gold market has been off the mark regarding the role of physical gold in forwards and hedges. He pointed out that our fault was that we were approaching the issue from an intellectual perspective. Think instead, he said, from a legal perspective. Imagine that you are right, and that bullion banks are forced to admit that they have misrepresented what they were doing for (to?) their mining clients all of these years. In the post-Enron world of bank liabilities, he asked, do you honestly think that any bank would ever allow any of its dealers to admit that they have been misrepresenting this all these years.

Gold -- Sharefin, 21:08:42 03/18/03 Tue

Hedging decline “a seismic shift”

The amount of gold hedged by producers fell by 14.8 million ounces in 2002, more than offsetting sales by the European central banks. At the end of the year, producers had still hedged 80.9 million ounces, equivalent to 1.6 years of output. But this was a substantial drop from the total at the end of 2001 when hedging represented two years global production.

Gold -- Sharefin, 20:59:16 03/18/03 Tue

Average gold price seen at $344/oz - LBMA

The London Bullion Market Association (LBMA) is distributing the results of its annual poll of precious metals markets analysts - a poll that must be the biggest and most comprehensive exercise of its kind. No fewer than 24 analysts have contributed gold price forecasts.

To get straight to the bottom line of this year's results in which analysts were asked to provide an average price for 2003 as well as their forecasts about highs and lows for the year. The average of the gold price predictions is US$344.917/oz, emphasising the general bullishness among the analysts as this is more than 11 percent above last year's actual average of $309.677/oz.

Fiat vs Gold -- Sharefin, 20:55:18 03/18/03 Tue

In Germany and Japan, a new gold rush

Unlike people in the gold rush of the late 1970s and early 1980s,
Japanese and German investors are today buying gold futures, options,
certificates and warrants instead of physical gold coins and bars.
"It's a sign of maturity," says Andy Smith, a gold analyst with
Mitsui. "Japanese investors know that the only way to make money in
gold is to get in and get out quick. They are no longer following the
Japanese grandmother's strategy of buying physical gold and stuffing
it under the mattress."
Trading in gold futures on Tocom, the Tokyo futures exchange, hit a
record last month of about 181 tonnes a day. Mr Smith says Tocom gold
futures trading even topped 400 tonnes one day - equivalent to the
annual gold production of South Africa, the world's largest gold
producer. This compares with the average daily volume in Tocom gold
of less than 50 tonnes.
Japanese retail investors have also become big buyers of platinum,
helping to push the white precious metal to a 23-year high this week
of $707 an ounce. Mr Smith says Japanese investors took a cue from
President George W. Bush, who in his State of the Union address asked
for a funding increase in hydrogen fuel cell research - a rise that
would add to demand for platinum. "Rarely do you get a US president
talking about a precious metal in his State of the Union address," Mr
Smith says.
In Germany, investors have been diversifying from equities into
various gold-related investments. Wolfgang Wrzesniok, director of
precious metals at Dresdner Kleinwort Wasserstein in Frankfurt, says
one of the most popular investments is gold certificates, where an
investor can buy a tenth of an ounce of gold, giving leverage against
the underlying gold price.
Several German banks offer gold warrants and gold options, whereby
investors can buy call and put options with the strike price in US
These all add a foreign exchange risk to the German retail investor.
But those investors who want to eliminate the currency risk can buy a
capital-guaranteed product from ABN Amro in Germany, where the bank
hedges the currency risk. "You are seeing a different type of
investor in gold from the goldbugs of the late 1970s and 1980s, who
were mainly buying Krugerrands [South African gold bullion]. The
investors of 20 years ago are the ones selling back their coins to
the bank, whereas the investor in gold today tends to be younger and
looking for alternative investments to diversify away from equities,"
Mr Wrzesniok says.

Gold -- Sharefin, 20:51:42 03/18/03 Tue

Gold Is Still Solid

After Mar. 13, more near-term price declines are likely, but several key global factors should keep the yellow metal strong

We at Standard & Poor's see further near-term declines in gold prices and shares of gold-producing companies as the war premium fades rapidly. Nevertheless, S&P remains positive on shares of gold producers. The industry's long-term fundamentals are favorable. Erratic financial market returns should boost gold's attractiveness as an alternative investment. The U.S. dollar continue to be weak vs. other major currencies, making the dollar-denominated purchase of the metal attractive to non-U.S. investors. And the gap between global demand and production should widen, despite the higher prices seen recently.

Another factor working in the metal's favor: reduced hedge sales by major producers. A sharp decline in interest rates since January, 2001, has made short-selling by producers and market speculators less profitable. Short-selling has been a major negative for gold prices in the last several years.

GLOBAL EXPLOITS Rising commodity prices, reflecting consolidation in commodity-producing industries and a recovery in global economic growth, also augur well for the yellow metal. Through Mar. 13, the Bridge Commodity Research Bureau Commodity Price Index was up 2.5%, after a 23% rise in 2002. A rebound in the global economy and large increases in U.S. money supply should lift commodity prices in 2003. And that means inflation will still be a factor for investors to contend with -- playing to gold's traditional role as a hedge against rising prices for goods and services.

Fiat vs Gold -- Sharefin, 20:46:28 03/18/03 Tue

Beware of bubbleonians and dipsters

Fund manager Fleckenstein looks beyond gold's decline

It's no wonder they call William Fleckenstein a contrarian's contrarian.

The money manager and frequent commentator, known as a global bear for much of his investing career, isn't shorting the whole stock market right now. Yet he still believes stocks are headed for a heap of trouble, and Fleckenstein, president of Fleckenstein Capital in the Seattle area, likes prospects for gold, a metal whose spot price is sliding even as you read this article.
Fleckenstein, a long-haired and successful hedge-fund manager, has a theory about all this. "The gold market has gotten caught up in the geopolitical backdrop," he says. "I had this notion that the selling of gold that was going to take place when the war started has already started."

He figures most investors are mindlessly retracing the steps the markets took back in 1991, the first time America battled in Iraq. Back then, stocks soared and gold collapsed.
In his view, gold will replace the world's major currencies as central banks cheapen the value of their paper assets by borrowing, printing or buying securities that inflate their economies.

"The mania that we had in the 1990s that expressed itself was an expression of complete and total confidence in things that are paper," he says. "That pendulum has swung as far as it could when gold was $800 an ounce (more than 20 years ago). That pendulum will swing back the other direction as the world looks around for a place or a store of value."

Fleckenstein says he is not a gold "bug," someone who rabidly supports the metal or believes dark forces, like central banks, are conspiring to keep gold's price in the dumper.

"People will own gold because it is the only currency that is no one else's liability," he says. "I really thought the loss of extreme confidence in paper would tend to push people to own some sort of hard asset in their portfolio. After all, there are no real currencies left. The euro has a lot of issues, and so do the dollar and the yen. All of these countries are willing to debase their currencies."

Like many market watchers, Fleckenstein expects some kind of huge paper rally surrounding war developments. (He says he's shorting just one stock right now, but I neglected to ask him which one.)

"I suspect the paper market will have a big rally on the war, but I don't know if it will last five minutes or 90 days. Once we get past that, we start to look at the problems of debt ($31 trillion in all sectors of the American economy, or almost three times gross domestic product), none of these currencies are worth a damn thing. Why any foreigner would want to own dollars right now, I don't know."

Gold -- Sharefin, 20:39:09 03/18/03 Tue

World Gold Editor Cites 'Top 10' Undeveloped Projects

Many gold projects that have been accumulating dust on mining company shelves are starting to look promising again amid higher prices.

Paul Burton, London-based editor of the journal World Gold, presented his Top 10 list of undeveloped projects at a Canadian mining conference. With the flair of a beauty-pageant host, Burton introduced them one by one.

His top pick: the Target North & Sun project, north of the Target mine in South Africa, owned by Avgold Ltd. , with resources of 72.3 million ounces. The project is likely to produce 500,000 ounces a year, Burton said.

The others, from second to 10th:

-Russia's Sukhoi Log deposit, owned by the Russian government. Burton said he settled on a figure of 46 million ounces of resources (as there are a variety of estimates), and said it's likely to produce 1.4 million ounces a year.

-Telfer in Western Australia, owned by Newcrest Mining Ltd. . Burton said indications are that it'll produce 800,000 ounces a year. Construction has already started.

-Barrick Gold Corp.'s Pascua Lama deposit in Chile, with an estimated resource of 23.9 million ounces and indicated production of 800,000 ounces a year. Its estimated capital cost is expensive at $1.2 billion, Burton noted.

-Donlin Creek in Alaska, owned by Placer Dome Inc. and NovaGold Resources Inc. . It's likely to be producing at 1.1 million ounces a year or more, Burton said.

-Cerro Casale in Chile, owned by Placer Dome and Bema Gold Corp. , a project that was shelved years ago. It has forecast production of 900,000 ounces a year but high capital costs of $1.5 billion, Burton said.

-Boddington expansion project in Western Australia, owned by Newmont Mining Corp. , AngloGold Ltd. and Newcrest Mining. It's run by a committee of the three owners, "which probably explains why they haven't been able to reach a production decision for over a year now," Burton said. It has a resource of 20 million ounces and forecast production of more than 500,000 ounces a year, he said.

-Turquoise Hill (or Oyu Tolgoi) in Mongolia, owned by Ivanhoe Mines Ltd. . "It's very low-grade, but has huge copper resources," Burton said, adding that the project's size is growing daily.

-Burnstone property in South Africa, which was recently purchased by Great Basin Gold Ltd. of Vancouver. Indicated resources in one area of the property would indicate modest production of 144,000 ounces a year but Burton suggested that figure is likely to increase.

And squeezing into 10th place on Burton's list is Placer Dome's Pueblo Viejo project in the Dominican Republic, with an estimated 16.8 million ounces of resources and expected production of 530,000 ounces a year.

Burton noted that many of these deposits were found in the 1970s. Target North & Sun and Telfer were the most recent ones, found in 1998.

With gold at $350 an ounce, they are virtually all likely to show enough of a return to warrant a green light from their owners, he said. "Perhaps the only one with some doubt is Cerro Casale," Burton said.

Together, the 10 deposits' resources total 286 million ounces, "which is quite an inventory," Burton said.

Fiat -- Sharefin, 23:59:07 03/16/03 Sun

ALAN GREENSPAN: Enormously Overrated and totally political, anything to stay in office!

Fiat -- Sharefin, 23:53:14 03/16/03 Sun

Weapons of Mass Destruction

If you haven't done so already, read the Warren Buffett piece on derivatives in this month's Fortune. Those of you who have been with us for any length of time know just how vehement we have been on the dangers of derivatives for several years, covering the subject both here and in our newsletter. [check out our comments in our November 2002 report] Mr. Buffett claims that derivatives are weapons of mass destruction. We believe they are aimed right at the heart of the capitalist system. Buffett's perspective adds plenty of ammunition to the arguments that systemic risks have risen to intolerable levels. For several years, we have been unable to comprehend how our charts imply anything but monstrous risk to the financial system in its entirety. All financial contracts carry some inherent risk and in the case of derivatives, although risk is typically transferred elsewhere, the risk remains very much within the system. Risk is inviolable and cannot be removed from any closed system. Portfolio insurance proved this beyond any shadow of a doubt in 1987, taking us to the brink of a total financial collapse. And if you doubt that Long Term Capital Management was a threat to the entire financial system, picture the need for the nation's largest banks and brokers to meet at the Federal Reserve's office in New York at the "invitation" of the NY Fed President Bill McDonough in October 1998. A similar meeting was never held before nor has been held thereafter. But nothing much has really changed. In the case of JPMorgan/Chase, credit exposure is now equal to 6.2 times their risk based capital. Long Term Capital Management was leveraged far greater in 1998 when it imploded but we can no longer take comfort from academics who insisted it couldn't happen. That it did happen means it will happen again. Notional values covered by derivative contracts are two-thirds more than they were in October 1998. Perhaps the odds are even greater now for another derivative event. We were able to avoid a total collapse in 1987 and in 1998. We may not be as lucky next time.

At left below, the top 7 banks dealing in derivative contracts now have exposures that can only be termed fearsome. In the case of Wachovia, Citibank, Bank of America and JPMorgan, these exposures would wipe out all risk based capital. The smallest exposure is suffered by Banc One but is still in excess of half of their risk based capital. What we cannot show in our charts is the daisy chain of counterparties in these contracts. It is probably fair to assume that some of JPMorgan's contracts have one or more of the other banks shown as counterparties. What is not well understood is that in a worst case scenario, if one side of the contract cannot honor its obligations, the other side may suffer losses as well. In fact, derivatives have proliferated to such an extent, we may now fairly assume that all of the largest banks are tied together by a chain of contractual obligations and all are now weighed down by overall systemic risks that can no longer be reasonably measured or estimated. Can the chain function if the weakest link breaks? Long Term Capital Management's demise proved that a break of just one link can cause enough harm to take the system to its limit. Clearly, growth continues unchecked. At bottom right, the bubble in stocks was neatly matched by a bubble in derivative contracts until stock prices peaked. Since then, total notional values of derivative contracts continues to grow and is now more than five times the size of the U.S. stock market.

From $7.3 trillion in notional values in the fourth quarter of 1991 to $53.2 trillion in the third quarter of 2002, derivative growth has been incredibly rapid. An equivalent price increase in the Dow would have taken the Industrials to 23,093 last year! Can this rapid pace of growth be maintained without another "accident" like those suffered in 1987 and 1998? At this point, we are fearful that no one comprehends the magnitude of how the parties and counterparties interact and intertwine. No one can determine the depth or intensity of the manifold risks.

Should the worst case arise again, there are no guarantees a solution can or will be found in time.

And unlike most of the weapons of mass destruction the world must endure,
vis-a-vis derivatives,

the fuse is always lit.

Fiat -- Sharefin, 23:38:06 03/16/03 Sun

CEOs as Central Bankers

The U.S. Dollar: The Easy A

There may very well have been manipulation of the markets and things may have been done to keep the price of the dollar high. But we also should not underestimate the awesome power of a mania. America is where the action was. It was the place to put your money if you wanted to get rich. Foreigners plowed money into America in record numbers. It's status as the reserve currency only added to the Dollar's mystique. The more dollars that were printed up, the more people wanted them. The supply of dollars grew at unbelievable rates, but the demand grew even faster, so the price of the dollar went up.

But now we're on the other side of the mania. People are not so infatuated with the American economy anymore, and are becoming less so by the day. It will probably take a while, but at some point the demand for dollars may decrease so fast that it may not matter whether the money supply is increasing or decreasing -- the dollar may still go down in price.

This again is why I think it's so important not to equate inflation or deflation with prices. You could theoretically have deflation (money supply decreasing) and yet things that have a global and relatively inelastic demand (and which are priced in dollars) could go up partly because the currency is declining in price. And conversely, in the past several years we've had massive inflation and yet the prices of many consumer items went down, not up -- in part because the price of the "mania dollar" was going up.
Paper everywhere. The world is awash in paper assets; many of them created by the marketplace itself.

But when the mania in paper assets ends, participants will likely move to things that cannot be printed, and cannot be phonied-up to look better than they are. Paper assets will be avoided just like the cabbage patch dolls and the easy A's.

At the present time, nearly everyone is printing their own money. We have a financial system that is out of control. When and where it will end, nobody knows. But we can know one thing: it will end badly. Very badly.

Many paper assets that seem like money today may end up with little or no value in the years to come. And there will be a lot of pain in the process. But the sooner we take the pain, the better. The pain of discipline is relatively minor and brief. Thus far, we've chosen not to take the path of discipline. If we refuse to take the path of discipline, we ultimately will travel down the road of regret. And as we all know from regrets in our own lives, regret weighs tons . . . . and lasts a lifetime.

Periodic Ponzi Update PPU -- $hifty, 21:03:25 03/16/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,340.33 + Dow 7,859.04 = 9,200.02 divide by 2 = 4,600.02 Ponzi

Up 77.36 from last week

Thanks for the link RossL!

I see that Spot is a bit frisky tonight!




Fiat vs Gold -- Sharefin, 08:24:08 03/16/03 Sun

PPT or Efficient Markets? Gold drop on eve of war & Roger Arnold essay

Last Monday we had, according to Richard Russell, a
"90% down day" -- a flashing caution that the U.S.
markets were horribly stressed and on the verge of
panic. The just released current account deficit for
last quarter was, I think, 5.3% -- so we're officially
driving in the red "currency crisis" zone now. The
foreign markets had already panicked and the Japanese
market had broken to a new low below 9000. Something
would shortly give if something wasn't done about it
pronto. A crashing market or skyrocketing gold would
likely have been like a kick in the gonads to Bush
right now, as he tried to keep the focus on Iraq and
an "optimistic" quick win.

So what happened? Remember, just a few weeks ago, the
increasing possibility of war was sufficient to push
gold to the cusp of $390. At the beginning of last
week, you could smell the fear in the air as the Dow
was only a few hundred points from breeching the Oct
lows which would have obviated all the bullish
arguments about how a double bottom was already in
place. Wouldn't you have expected gold to rise or, at
least hold? Didn't happen.

Out of the blue and, as Roger notes, with really no
basis in new information, we saw gold *plummet*, the
dollar surge, and the markets take off.

Gold -- Sharefin, 00:10:27 03/13/03 Thu

Charter vagueness clouds investment climate - Placer

South Africa's biggest foreign mining investor, Placer Dome, did not mince its words yesterday (Monday) in conveying to the country's minerals and energy minister its frustration over what it called a lack of clarity on the content and application of certain parts of recently unveiled mining rules. Placer's criticism of aspects of the Mining Charter and the related Scorecard underlines a growing divide between local and foreign mining investors in South Africa: the former have mostly applauded the new rules while the latter have tended to be less enamoured.
Robert Franklin, chairman of Canadian-based Placer Dome, said his primary discomfort lay with the still-fuzzy ownership dictates of the Mining Charter and Scorecard, documents designed to redress the economic imbalances created by apartheid in the mining industry. The Charter and the Scorecard, which measures companies' progress on Charter requirements, demand that 15% of mining industry assets be transferred to black ownership within five years. This base rises to 26% after 10 years.

Gold -- Sharefin, 23:36:51 03/12/03 Wed

Gold hedging foe not friend, says Goldcorp

In one of the more controversial presentations at this year's PDAC conference, mid-tier Canadian gold producer, Goldcorp, came out blazing against the practice of gold hedging. North America's biggest non-hedger seized the opportunity presented by the annual Toronto mining talkshop to beat its well-worn anti-hedging drum, backing up its arguments with quotes from Warren Buffett -- a lately vociferous anti-hedger who has called derivative instruments “financial weapons of mass destruction”.
“Hedging is a bit like fashion. It starts out as a sensible practical idea. But then it gets a little bit more interesting and ultimately evolves into something increasingly exotic. It gets increasingly unstable and can be dangerous to your health,” said Chris Bradbrook, vice president of corporate development at Goldcorp.

To hedge or not to hedge has for many years been a hot potato in the gold market, with camps of ardent followers lined up on either side. Four of the world's five biggest gold companies are also the world's biggest hedgers. The “outsider” is South Africa's Goldfields, whose chief executive Ian Cockerill reiterated this week that the gold producer would remain a “hedging-free zone” over the next five years.

Reasons usually given by companies for hedging include removing gold price risk, the pursuit of predictable cash flow, the ability to finance new projects cheaply and the desire to increase returns. But the arguments against hedging are also strong: hedging removes the upside to the gold price or worse, depresses the gold price. It can also mask poor economics on projects and, in extreme cases, can risk shareholders' equity.

Gold -- Sharefin, 23:32:46 03/12/03 Wed

New Gold Rush Is the Big Buzz at Toronto Gathering

The gold rush of 2003 is on, sort of.

On the streets of Canada's gold capital this week, the industry was buzzing about higher prices unleashing venture capital for new exploration to counter a decline in world gold mine production, but some prospectors say investment has not yet reached the flood stage.

Indeed, excitement about the strong gold market was audible among the hundreds of mining and development companies gathered here for the annual Prospectors and Developers Association of Canada (PDAC) conference.

But experts say bullion prices, while heading in the right direction, remain too low to bring new mines on stream in time to make up for a looming supply shortfall, as established mining companies work through reserves in coming years.
Developers hope to secure a deal with a senior producer, who would then get rights to most of the gold if the project works out. Many will probably go home empty handed.

Some projects may not look viable no matter where the price of gold goes.

Nelson told Reuters there is a big shortage of advanced-stage projects around the world. "It's going to take three or four or five years before we start getting a crop of new mines coming out of exploration," he said.
According to Bruce Alway, an analyst with precious metals research firm Gold Fields Mineral Services (GFMS), gold has not yet appreciated enough to stop a projected decline in mine production after a slide in gold prices in the 1990s forced many uneconomical mines around the world to close.

In Sunday's opening presentations, Alway said his calculations showed that, even at an average price of $375 an ounce, gold mine output would drop 25 tonnes year to year. Gold at $325 could mean a 100 tonne drop.

GFMS says world gold production was about 2,600 tonnes in 2001 and an estimated 2,543 tonnes last year.

Everyone was asking how much of gold's run up was due to the Iraq crisis and how much was due to an improvement in longer-lasting economic fundamentals for the metal.

"I heard numbers like $25 an ounce related to Iraq," said Nelson of Gold Fields Ltd.

Bob Buchan, chief executive of Toronto's Kinross Gold Corp. said the gold price should go down the day the bombing starts.

But he predicted that gold would be higher in two months than its current price. "I believe the trend is up and believe most of the war premium is out of the metal price."

Fiat -- Sharefin, 23:26:47 03/12/03 Wed

Japan readies stock, intervention plan - Nikkei

The Japanese government is expected on Thursday to announce a market stabilization plan that expands official stock purchases and asks for joint intervention in the currency market, the Nihon Keizai Shimbun newspaper reported on Wednesday.
The Nikkei reported that Japan's Financial Services Agency will unveil a six-point plan to support stock prices, including calls on financial institutions to give consideration to market trends before selling their shareholdings.

The Nikkei report, monitored in New York, said Japan would announce its intention to call on U.S. and European monetary authorities to conduct large-scale, joint market interventions in the foreign exchange markets to support the dollar should it drop sharply following any U.S. military attack on Iraq.

Earlier on Wednesday, the FSA denied it had any plans to announce a package of measures on Thursday even though Finance Minister Masajuro Shiokawa had already said one was imminent.

A plunge in Tokyo stocks and escalating tensions over Iraq this week sent policy-makers scrambling to devise stock price support measures prior to March 31 corporate book-closings.

High-ranking officials from the Ministry of Finance, the FSA and the BOJ attended an emergency meeting on Wednesday where they agreed that measures to stabilize the foreign exchange and stock markets are crucial to stave off a possible financial crisis, the Nikkei said.

Following the meeting, the FSA started devising price support measures, the report said.

The Nikkei report said the FSA will ask the BOJ to raise the 2 trillion yen ceiling on the amount of shares that it can buy from commercial banks.

The BOJ plans to buy up to 2 trillion yen worth of shares from commercial banks by the end of September, with the amount of its share purchases expected to top 1 trillion yen at the end of March, which is the end of Japan's financial year.

The government considers it necessary for the BOJ to raise the upper limit as a way to absorb shares unloaded by banks more smoothly, the Nikkei said.

Some in the MOF and the FSA argue that the ceiling should be raised to 4 trillion yen in order to ease selling pressure, but the BOJ is sounding a cautious note about this idea due to fears about the deterioration of its own assets, the report said.

The price-supporting measures will include regulations on share-lending practices, which lead to a huge amount of sell orders, the Nikkei said.

The FSA will also encourage companies to buy back their own shares by relaxing the relevant rules, hoping to boost the trading volume in the stock market.

As for fiscal policy, the government is considering no specific measures other than the front-loading of public works projects in the first half of fiscal 2003. But the government will consider additional measures if the U.S. actually goes to war with Iraq, the Nikkei reported.

Gold -- Sharefin, 21:23:36 03/12/03 Wed

DJ. Sprott Asset Mgmt: 13% Of Portfolios In Physical Gold

)--"Almost all" accounts at Sprott Asset Management Inc. have about 13% of assets in physical gold because the precious metal is viewed as better than currency, chief executive Eric Sprott said Tuesday.

"I've been buying a lot of physical gold," he told Dow Jones. "We're treating it as a cash equivalent."

Privately held Sprott Asset Management manages C$1.3 billion primarily for institutions, endowments and high-net-worth individuals. It manages gold, equities and hedge funds and is bullish on the gold-price outlook.

Sprott said the firm will probably keep the percentage of physical gold in accounts at about 13% and might move into physical silver, although he noted that silver poses more of a storage problem.
Sprott Asset Management has said it wants to encourage Canadians to increase their exposure to the precious metals sector by investing in equities and in physical precious metals and minerals.

The money-management firm isn't alone in keeping stashes of physical gold.

Producer Goldcorp - which used to employ the slogan "Gold is Money" but now trumpets the phrase "Gold is Better Than Money" - had about 200,000 ounces of gold on its balance sheet at the end of 2002, some of it produced and some of it purchased. Company president Robert McEwen said he'd like to amass more gold than the Bank of Canada, noting that the Canadian central bank, which has about 500,000 ounces, is making that goal easier by selling gold.

McEwen said the opportunity costs of holding gold are low, given current interest rates, and the company's gold position is "nicely in the money." He sees a six-year to eight-year uptrend in gold, and expects the precious metal to take a run at its old highs in the $800-an-ounce area.

Gold -- Sharefin, 21:19:35 03/12/03 Wed

Gold prices still have war premium

Newmont Mining Corp.'s chief executive Wayne Murdy said on Tuesday gold prices might slide further, contrary to the opinion of some analysts, after already falling about 10 percent from 6-1/2 year highs reached in February.

"There is something still in the war premium ... maybe $10 or $15 dollars an ounce, but it is probably less than it was a couple of weeks-ago ," Murdy, head of the world's largest gold producer, told Reuters in an interview.

Murdy said there may be some correction in gold prices after a resolution of the Iraq crisis, but he does not expect prices to fall much more because of strong industry fundamentals.
Murdy, who has been CEO since 2001, is bullish on the long term prospects of gold because of low interest rates, the weak U.S. dollar, economic uncertainty, and declining global gold production levels.
Newmont, which was founded in 1921 in New York by Colonel William Boyce Thompson, leapfrogged its way to the top of the gold industry last year after an acquisition spree that included buying Australia's Normandy Mining Ltd. and Canada's Franco-Nevada Mining Corp.

Murdy said Newmont, based in Denver, Colorado, continues to look at additional acquisitions, adding that the industry needs to consolidate further because of cost pressures.

A committed non-hedger, which means the company stays away from locking in forward gold sales contracts, Newmont is now trying to unwind Normandy's hedge book. Many mining companies have used these forward sales to lock in prices for gold still in the ground and to generate revenue when gold prices are weak.

"Hedging is not our game. We are very opposed to hedging. I want to be out of that hedge book as soon as we reasonably can" said Murdy.

Murdy expects the company overall to deliver about 1.1 million ounces of committed ounces this year and is looking for additional opportunities to reduce this position.

Gold -- Sharefin, 21:17:18 03/12/03 Wed

South Africa On Gold Hunting Trip

What could South Africa, the world's largest producer of gold, seek to learn from India - the world's largest market for gold jewellery? How about the business of jewellery making by leveraging the unorganised sector and the creation of employment among its impoverished sections of society - mainly women - for starters.
“Though South Africa is a world leader in gold production, they do not have much of a jewellery making business to speak of. India on the other hand is very vibrant on this front besides also being the world's largest gold consuming market. The South African ministry of mines got in touch with us through Tata Africa Holdings and visited Tanishq and saw all the work we were doing,” said Tanishq COO Jacob Kurien.

The objectives of the visit were three fold - to understand how to create a jewellery manufacturing business/industry in South Africa, to see how employment could be generated through jewellery making (which would particularly enable people from a number of impoverished towns surrounding mines build a livelihood for themselves) and finally (but interestingly) to learn and see how low skilled workers and particularly women could be trained and initiated into jewellery making.

Gold -- Sharefin, 21:11:35 03/12/03 Wed

Economist Sees $364/Oz Gold In 2003, Then $380/Oz In 2004

Economist Martin Murenbeeld said Wednesday that
he expects to see the gold price average $364 an ounce in 2003 and
$380 an ounce in 2004.
His forecasts are based on various probabilities. For 2003, he
assigns a 50% probability to gold averaging $355 an ounce; a 40%
probability of $388 an ounce; and a 10% probability of $310 an
ounce.Murenbeeld, head of the Victoria, B.C.-based consultancy M.
Murenbeeld & Associates Inc., said he thinks gold is in a multi-year
uptrend that will last at least through 2004.
He outlined many factors of a "reflation package" that should support
gold, including a difficult economic period, poor stock markets, a
rising money supply, negative real U.S. interest rates, and a falling
U.S. dollar due to the U.S. current account deficit, which amounts to
4% to 5% of U.S. gross domestic product.The U.S. dollar was driven
higher by capital flows, which are starting to wane, Murenbeeld
noted. "We're looking at a multi-year period of weakness for the U.S.
dollar," he said.
Gold supply from mines is declining and producer "de-hedging" is also
reducing supply, but European central banks will likely increase the
amount of gold reserves they sell, Murenbeeld said. Some central
banks such as China are adding to gold reserves, and Murenbeeld said
that in his opinion, it's a "slam-dunk" that Japan should also buy
He spoke at the Prospectors & Developers Association of Canada
convention, which ends Wednesday.

Gold -- Sharefin, 21:08:51 03/12/03 Wed

Post-war retreat tipped for gold

While currently bullish about the gold price, a leading global gold analyst and the Australian Bureau of Agriculture and Resource Economics (ABARE) don't see bullion maintaining an upward trajectory in 2004.

Gold -- Sharefin, 21:02:58 03/12/03 Wed

Latest Research From RBC Capital Markets On Barrick Gold Is Hardly Effusive.

Interesting to see a Research Comment from brokers RBC Capital Markets on Barrick Gold as this major producer has lagged the performance of its peers due to its hedging programme and has recently brought in a new CEO, Gregory Wilkins. Statements from the company in recent months have indicated a change in the hedging policy and Barrick reduced its spot deferred contracts from 16.9 to 15.9 million ounces in the 4th quarter of 2002. This is hardly dramatic, however, and the variable price gold sales and options have not changed from the level in the previous quarter of 2.2 million ounces. The spot deferred forwards are deliverable over the next 15 years at an average price of US$341/ounce and currently represent 18 per cent of reserves. More pertinent is the fact that they represent nearly three years of production at the current rate of 5.7 million tonnes a year.

RBC Capital Markets views the reduction in the size of the hedge book as positive, but it can hardly say otherwise. The fact is that the mark-to-market value based on a gold price of US$347/ounce was a negative US$639 million as at the end of December and the breakeven price of gold was US311/ounce. The company now wants to reduce its spot deferred contracts to 12 million ounces by the end of this year which means that it has to sell just over 70 per cent of production at US$341, or sell half its production at this price and buy back 1.2 million ounces. Either way it is not a very inspiring picture for investors, though the company has its revenue underpinned at a time when it is committed to US$2 billion in capital expenditure.

During the conference call on these quarterly results Gregory Wilkins was introduced to analysts. He is an old Barrick hand having been CFO until ten years ago and a non-executive director since then. Drastic changes are therefore unlikely thought it would be interesting to hear his reaction to Warren Buffet's warning on the ticking time bomb of derivatives which has been commented on as follows by the Financial Times. “The concentration of risk in a few institutions and the involvement of organisations not experienced in the credit market could still trigger systemic problems. As so often in the past Mr Buffett has sounded a timely warning.”

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