THE GOLDEN POT gold news & views - charts & more not so much a forum but rather a news archive

“What is my opinion of the current account deficit? Just to define the terms a little bit, the trade deficit is the excess of our imports of goods over our exports of goods. The current account deficit adds services and some other things in the balance of payments. It's a better measure of our trading relationship with the rest of the world. In college in the 1960s when you studied things like that the answer was that a fairly large and sustained current account deficit – if you have a floating exchange rate – will cause the exchange rate to decline until it brings about equilibrium.

The U.S. is a little bit of an exception to that, in that its dollar is used all over the world as a currency by a lot of people and it's held by central banks all over the world as a reserve currency. To some extent, the world has long been willing to hold the excess dollars that we put out by buying more than we sell to the rest of the world. And we get sort of a free ride. Sort of like we're in a poker game and we never have to cash in our chips. In the late nineties, when we were doing so, we had such a dynamic economy, particularly compared to the Eurosclerosis in Europe, there was a lot of funds floating to the United States from Europe that sort of artificially held up our dollar and made the current account deficit larger. In the 1960s you learned that trade was independent and capital flows were the financing mechanism – they were sort of passive.

But these days capital flows are kind of independent too, and one could almost argue, not that our capital inflow is financing our current account deficit, one could almost argue that our current account deficit is financing our capital inflows. So long as that is happening, and as long as we are regarded as the dynamic economy and the best place in the world to invest, our large current account deficit is not going to cause us any problem. The problem will come when people change their mind about all that and they've decided, maybe suddenly, that the world has too many excess dollars and they'd like to sell a lot of them all at once in the foreign exchange market. If they did that all at once, we would experience an exchange rate crisis. We'd do no telling what to react to it. I don't know exactly what would happen, but it wouldn't be good. But we've had the potential for that to happen for several years now and it hasn't. Most of the countries that own a lot of the dollar balances don't have any real incentive to trigger a crisis like that. They would perhaps be hurt as much as anybody else by such a crisis. What is it they say: 'If you owe the bank a little money, you've got a problem. If you owe it a lot of money, the bank's got a problem.' We might be in that situation.”

The IMF has NOTHING to do with the WA, not part of it. Never been the initiator, in fact, the WA is a pain in their a$$.
Where do I want to lead?

Speculation: 400 Tons sales per year was a special situation. A renegotiated agreement could be for far less, say 20 to 50 Tons/year.
Speculation: UK will never join the Euro.
Speculation: Central Bankers have been know to buy high and sell low. (Proven with the Swiss CB and England CB sales). The risk for the Euro is more ECB sales (as the gold reserve are 15% of total reserves in gold, higher POS can lead to CB sales, lower POG to a loss of confidence as I don't believe the ECB would buy gold back).
Speculation: Other CBs, not signatories of the WA might sign the next version.
Speculation: The US will be a signatory of such an agrement when the Dollar devaluation will have run it's course. (aka suppression of the 46% debt held by foreign nations). Better said, there will not sign as they will initiate a new financial system.
Speculation: the US Dollar will be at the bottom before the next joint statement on gold will expire.

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Another aspect that should be added in is the holdings of the CBs.
They claim to be holding 29,000-32,000 tonnes yet we all know much of this has been leased/swapped into the markets.

Therefore of the amount they have left how much will they be willing to sell into the markets.

The largest Central Bank gold holders are


US - not for sale
Germany - sell a bit - leased a lot
France - you can't have our gold at any cost
Switzerland - sell it lease it swap it - we're getting rid of it faster than we can find it - can't keep this up.
Italy - sold - leased swapped to the maximum
Netherlands - sold & leased all it can
Japan - we want to buy more?
Portugal - sold & leased all it can
UK - sold & leased all it can
Spain - sold & leased all it can
China - we want all we can get & more!!!

These countries control 80% (or 23,000 tonnes) of all CB holdings and as you can see there's not a lot of room for them to sell more. Some countries have been cleaned out & if one presumes that they've leased/swapped out approx 15,000 tonnes then they are only holding approx 8,000 tonnes which is what the US is Purported to be holding.

So when one adds up what they've got & what's left to sell & who would want to sell into a rising market you see this major problem.

Looking at the production/demand stats - also a looming problem as the CB's have been necessary to feed the deficit.

With little left to sell & burgeoning demand & lowering production the CB's have a major problem in keeping the perception alive that they have plenty to sell & will keep on deeding the deficit.
Gold Production/Demand

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Gold -- Sharefin, 21:21:54 09/30/03 Tue

Noted strategist sees gold bull market

Veneroso also sees near-term risks for gold equities

On gold stocks
"There is a huge dispersion of valuations in the gold equities market. The ones that are the household names tend to be discounting much higher gold prices. Many of these companies sell at large premiums to net present value. So gold can rise, but the percentage appreciation can be a lot less than what people are expecting," Veneroso told me.

"The gold bulls say valuations don't matter, that the market in these things will be like an Internet mania. But if value does matter, we have trouble ahead out there. Nonetheless, there are the companies that trade at a discount to their net present value. Now the stocks have had a huge run, from 50 on the HUI (Amex Gold Bugs Index) (HUI: news, chart, profile) a few years ago to 210. And a lot of the money that is in these shares doesn't know what it owns."

On stock market risk ...
"It took three years from 1997 to March 2000 to take gross margin debt from $5 billion to $21 billion on Nasdaq (QQQ: news, chart, profile). That margin debt fell back by 80 percent by the end of 2002 to $5 billion. And now, on a lousy 15 to 20 percent retracement back up on the Nasdaq, this gross margin debt has quintupled to $26 billion, a new high, by July. In every other market bubble I can think of, margin debt came down and stayed down after the bubble burst. Some of this money has been chasing gold equities. That's the retail market. You also have hedge funds. They are under enormous monthly performance pressure, and their performances are all down. So they have gone into the gold stocks without knowing anything about gold. There is this kind of market risk in the gold sector."

... and gold risk
"Then there is the more important risk in the underlying metal. Basically, the official data from the GFMS (Gold Fields Minerals Services) and others on gold supply and demand are all wrong. The price of gold (38099902: news, chart, profile) has been held down by large central bank supplies. Some day these supplies will abate and the price of gold will go much higher. For now, these supplies continue and they may continue for some time."

On a 'managed' gold market
"In The Gold Book (1998), I said there is no obvious reason why central banks and other official organizations would want to manage the price of gold. I described how the existence of large amounts of gold lending created an inadvertent corner in the gold market. I called it 'the prison of the shorts.' The short position in the gold derivatives market simply could not be covered in a short period of time at any price, and certainly not at a low price. I predicted that, when the shorts in the market tried to cover, there would be some kind of crisis followed by a negotiated settlement between the short sellers and the lending central banks. My guess is that the official sector had to intervene to diffuse such a crisis after the gold price spike that followed the Washington Accord in 1999. They appear to have succeeded, and this intervention in gold markets continues, although I am not sure why," Veneroso told me.

"How do I know this intervention continues? There are 500 or 600 metric tons of speculative long positions on the COMEX, but that is the tip of the iceberg. The big market is the over-the-counter market. The total net speculative position is probably many times what we see on the COMEX. Thousands of metric tons? Who is taking the other side of that trade? In the old days, it used to be the producers, setting up their hedge books and selling forward. Now, they're covering hedges. Who else? There are gold dealers, and a lot of the people think these are the short-sellers in the market. After the price spike in '99, they have closed such positions. So there is only one possible counterparty now, and that is the official sector. This is just like currency intervention."

Why central banks might want to depress gold
"Asset bubbles create private debt bubbles. When people feel wealthier, they are more likely to spend more out of their income. And so they have to borrow. We saw this in Japan in the '80s. We see it in the U.S. When the asset bubble bursts, wealth disappears but the debt burden does not go away. Price deflation is really dangerous when you have rising private debt. That's why the Federal Reserve is so concerned about price deflation. It becomes a crushing burden that sends the economy into a debt-deflation spiral. Faced with this, the central banks realize they have to employ unconventional methods -- helicopter money it's called, the electronic printing press. More and more investors are catching onto this and the threat of a deliberate debt-alleviation inflation that will confiscate their paper money, and they see in this positive implications for the price of gold."

On 'expectations management'
"The stakes are very high for the official sector. If gold goes up to $420 an ounce, it will go above a 10-year level and more speculation will occur. The price will explode. It would become apparent that the central banks have been selling their gold at lower prices and basically been misleading the market in their incessant claims that no such intervention has been going on. They would wind up with a loud clarion call from a gold market that is no longer ignored, and if it turned out they were managing the market, it would be a huge blow to central bankers' reputations," the strategist said.

On the future
"I think the central banks don't want an exploding gold market. I think there are a lot of weak hands in the gold market. So the odds favor a correction of gold prices. We here feel there is more of a bubble unwind ahead of us in the overall paper market, more relapse. Not Armageddon, mind you, but more of what we've seen in the past three years. There is no synchronized robust global recovery. There is a global output gap. So that means more disinflation in the intermediate term. A shift in market perceptions from imminent inflation to more disinflation could dislodge some of the short-term speculative longs in the gold market," Veneroso said.

"If there is a real inflation threat at some future time, which is likely, portfolio demands of all kinds for gold will be sufficient to overcome any official resistance in the market."

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Ponzi Correction -- $hifty, 01:45:12 09/29/03 Mon

Ponzi down 222.69 from last week.

$hifty

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Periodic Ponzi Update PPU -- $hifty, 01:39:52 09/29/03 Mon

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,792.07 + Dow 9,313.08 = 11,105.15 divide by 2 = 5,552.57 Ponzi

down 110.72 from last week!

Good to see you back RossL!

Thanks for the link

Go GATA !

Go GOLD !

Go Golden Comets !

$hifty

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Gold -- Sharefin, 23:57:32 09/28/03 Sun

Gold riding at over 7-year high

Gold jumped to its highest level in over seven years yesterday as the surprise decision by the Organisation of Petroleum Exporting Countries (Opec) to cut oil output combined with a weak US dollar to burnish the metal's allure as a safe-haven asset.

Share prices have fallen on concerns that higher oil prices could jeopardise an economic rebound in the United States, leading to a wave of short-covering that earlier pushed gold in Asia to the highest level since September 1996.

With speculators jumping onto the bandwagon in European trading, gold ran up to US$392 a troy ounce – its highest since mid-May 1996.

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Richard Russell -- Sharefin, 23:51:05 09/28/03 Sun

Russell On the Dollar & Gold Stocks

Of course, there's another plus in the precious metals or real money picture. The other plus is that the general public isn't aware of the gold bull market. The gold bull market is still in its early stages -- it's in the first or accumulation phase. Gold is still "cheap" and silver, if anything, is even "cheaper."

All the gold ever produced in the history of the world has a value of about $1.4 trillion. The Fed creates that much liquidity in a matter of 18 months -- or less if it wants. The value of all the gold mines in the world is around $150 billion. That's less than the market capitalization of most of the individual stocks in the Dow.

Bull markets end in high speculation and public frenzy. We saw that most recently during the year 2000 on the NYSE. I want to remind subscribers of the phrase that was prevalent during the late 1970's right into 1980. It runs, "There's no fever like gold fever."

Remember that phrase. You'll be hearing it again before this gold bull market is over. And by the way, I foresee this gold bull market ultimately dwarfing the gold bull market of the '70s.

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Gold -- Sharefin, 23:48:14 09/28/03 Sun

Rising gold prices surprise market watchers

Market watchers acknowledge that they've been surprised by gold's current strength.

For one thing, gold has largely been following the path of the euro, the currency representing 12 European nations that has been gaining against the U.S. dollar over the last year. But the euro weakened this past summer while the dollar strengthened, and gold prices surged higher.

And then this week, the dollar tumbled, but gold continued to climb.

There has also been a positive turn in the U.S. stock market and economy. Since gold is considered a safe-haven asset, investors historically have pulled out when those areas improve.

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Gold -- Sharefin, 23:18:00 09/28/03 Sun

Gold is in fine mettle

Denver forum bullish as prices surge on news of weak dollar, low interest rates, growing U.S. debt.

Gold prices rose Monday to a seven-year high, fueling bullish proclamations at the Denver Gold Forum investment symposium.

Gold futures that hit $388 an ounce Monday could be headed as high as $500 within the next year, speculated Martin Murenbeeld, a Victoria, British Columbia-based gold analyst and keynote speaker at the Denver forum.
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The surging gold market prompted Murenbeeld to joke that his conference forecast of higher prices was a foregone conclusion.

"Obviously I'm bullish," he said. "Nobody ever asks me to speak if I'm not."

In light of the weekend comments from the Group of Seven finance ministers, "the word is there's going to be a weaker U.S. dollar going forward; that has to be positive for gold," Ian Cockerill, chief executive of Gold Fields Ltd., the world's fourth-largest gold producer said at the Denver gold conference.

"We still are going to see a lot more legs" in gold's rally, he said.

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Gold -- Sharefin, 23:16:07 09/28/03 Sun

Gold prices up

New Delhi, Sept. 25. (PTI): Gold prices rose across the country today ahead of the festival season as stockists enlarged their positions to meet the demand, and closed higher by Rs 100 and Rs 35 per 10 gram.
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Buying by stockists ahead of 'Navratras', beginning tomorrow, was also supported by a steep hike in its prices in international markets where it touched a 8-year high of $ 400 an ounce.

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Gold -- Sharefin, 23:14:55 09/28/03 Sun

Gem, jewellery stocks fall as gold turns dearer

The stock prices of gem and jewellery manufacturers and exporters have declined in the last one month as international gold prices have hit a fresh seven-year high.

The stocks have been falling since August-end with a consistent rise in London gold prices: first owing to the declining dollar and later on the strengthening of the yen.
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India is wholly dependent on the imports of gold for its entire consumption and even export. Resistance for new gold jewellery increases with the rise in bullion price and household jewellery is recycled, leading to decline in jewellery demand.

Though exporters hedge their requirements and imports are made on consignment basis, the rising prices of bullion has dampened stock prices of jewellery companies.
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India continues to top the chart of gold consumers, surpassing the cumulative demand of the west Asian market, China and Japan.

Indians continued to buy gold despite the near 11 per cent rise in prices and in fact stepped up their purchases of the yellow metal in the quarter ended June 2003.

The rise in demand also defied the hardship caused by the poor monsoon of 2002, which curtailed disposable incomes in rural India.

According to the UK-based Gold Field Mineral Services, the official data channel of World Gold Council, Indians bought a total of 184 tonne of gold for jewellery during April-June quarter, up 36 per cent from 135.2 tonne in the last comparable quarter.

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Gold -- Sharefin, 23:12:51 09/28/03 Sun

Gold buying enters the busy season

Indian gold demand is expected to firm up in coming weeks as Hindus return to jewellery buying on Friday, which marked the begining of an auspicious period for gold buying according to Hindu mythology.

Experts believe the price of bullion will remain firm with gold anticipated to sustain its new 7-year highs in week ahead at major global markets.
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Analysts said bullion's overall uptrend — sparked by speculative buying — will continue, with the market recovering quickly in Europe from a knee-jerk drop earlier on Friday when the Swiss National Bank detailed its gold sales plans.
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Rhona O'Connell, market analyst manager at the world Gold Council, said in a report the SNB announcement was “an iteration of the bank's existing schedule for the disposal of 1,300 tonnes of gold over a five-year period and reflects no change in policy.”
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Analysts said the massive number of well-documented long positions on New York's COMEX futures market was weighing on investor sentiment, but the overall uptrend remained with a target of $400.00 an ounce still seen as achievable.

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Gold -- Sharefin, 01:47:25 09/26/03 Fri

China's gold rush

Prominent gold experts and officials are urrging the government to lift the ban on individual trading in the precious metal as soon as possible, as quoted prices at the Shanghai Gold Exchange (SGE) continually hit record highs this month amid a surge in buying enthusiasm.

The introduction of individual traders, they say, would kill four birds with one stone, by invigorating flagging consumption, slashing the foreign trade surplus, trimming conspicuous foreign exchange reserves and easing international pressures on China to appreciate its currency.

It is "safe and feasible" for China to spend part of its foreign exchange reserves on gold imports, as well as place such purchases on the domestic market and open the market to individual players at the earliest possible opportunity, said Xi Jianhua, Bank of China's gold business expert.

About 20 per cent of respondents to a recent national survey said they were willing to spend 10 to 30 per cent of their savings in gold investment, indicating a huge potential demand for gold.
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The money would create demand for about 3,000 tons of gold, he said. It would then only be natural for the country to expand imports as China currently has just 600 tons of gold reserves at its disposal, far from enough to cope with the potential gold rush.

In the initial stages, individual investors would create a market demand for 300 to 500 tons, according to analysts, and further growth would be gradual.

Spending on such a scale for gold imports would not have a significant impact on China's foreign exchange reserves, they said. Even if the anticipated 300 billion yuan worth of private investment was made right away, the country's US$356.5 billion worth of foreign exchange reserves at the end of July could cater for the demand with ease.

Using the reserves to purchase foreign gold would not only help withdraw billions of yuan now in circulation, but also boost the overall national import volume, Xi said, and thus "ease pressures on the appreciation of the yuan".

Xi's suggestions were echoed by Xu Shouxin, vice-director general of the China Gold Association.

Xu said the association has long proposed promoting individual ownership of gold, adding that the best way would be to allow commercial banks to start individual gold investment services at the earliest possible date.

He also stressed the need to spend part of the country's foreign exchange reserves on gold imports once the domestic market is opened to individual investors.

The time is now perfect for the government to make the move, say analysts, citing potential room for further hikes in gold prices, both in the domestic and international markets.
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Some SGE members have been increasing their stocks in anticipation of heightened demand once the market is open to individual investors, said an industry insider who declined to be identified. "These investors have been very active, taking every possible chance to buy in."

Short supply
As the world's third largest gold consumer and fourth largest gold producer, China is suffering from a long-term shortage of gold, said Li Xisheng.

The country's annual consumption is about 200 tons, while its production equals roughly 180 tons a year.
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Meanwhile, strong growth is expected in domestic gold demand over the long term, Li said, as individual incomes continue to increase.

-- First, per capita annual gold consumption in China is only 0.2 grams, far below that in Western and other Asian countries. The figure for India is one gram, while the United Arab Emirates averages the highest at 30 grams.

China is the largest potential jewellery market in the world, said Chu Xiangyin, an official with the China Council for the Promotion of International Trade. Consumption of ornamental objects topped 80 billion yuan (US$9.65 billion) in 2002 and has been growing by 15 per cent annually.

The market value should grow 10 times in 10 years, Chu said.

China is also on course to become a major manufacturer of gold jewellery in 2010 as a result of increased private spending power and lowered import tariffs, said Kang Xingzhou, vice-chairman of the China Gold Association.

Kang predicted that China's annual gold jewellery sales volume would reach 189 billion yuan (US$22.78 billion) by 2010, accounting for more than 10 per cent of the world's total.

-- Second, the demand for gold for industrial use will also increase rapidly as China becomes the world's manufacturing centre.

Currently, 90 per cent of the gold consumed in China is used to make jewellery.

-- Third, the potential for individual investment in gold as an option to currencies to maintain private wealth is almost unlimited.

Uncertainties about worldwide political stability and economic growth have strengthened this function of gold, Li said.
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For thousands of years, the Chinese have traditionally saved gold and worn gold ornaments, analysts reason. If the government does decide to allow individual investors into the sector, the landscape of the entire gold industry worldwide could change completely.

China's gold rush

The introduction of individual traders in the gold market will, according to gold experts and officials:

-- invigorate flagging consumption;

-- slash the foreign trade surplus;

-- trim conspicuous foreign exchange reserves;

-- ease international pressures on China to appreciate its currency.

As much as 300 billion yuan (US$36.15 billion) in private money is estimated to flow into the gold market, creating demand for about 3,000 tons of gold.

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Gold -- Sharefin, 22:38:02 09/24/03 Wed

Manager expects gold to jump further

RBC's Chris Beer says peak of cycle not reached yet

While gold has posted an impressive comeback over the past couple of years, Chris Beer sees more upside for the yellow metal ahead.

He co-manages the $303-million RBC Precious Metals Fund. He's the first to admit that gold, being inversely correlated to the S&P 500 index and U.S. dollar, is an asset class that defies typical equity analysis.

While gold stocks appear a little overbought in the short term, Mr. Beer believes the peak of the cycle hasn't been reached. To back his view, he cites several factors, such as the weakness in the U.S. dollar and low interest rates. Another key argument is the supply-demand situation: while the world produces about 2,500 tonnes of gold a year, the market consumes about 3,700 tonnes, he said.

A resurgence in the gold price has done wonders for the fund -- its three-year return is 55%.

While gold stocks can trade at "huge premiums," that's a function of the small size of the market, which creates a liquidity problem in the sector. Because gold stocks have a habit of taking off when the price of bullion spikes, the trick is determining how much investors have already priced into the stock, he said.

The main valuation criterion he uses for gold stocks is the price of a stock versus its net asset value, which is mostly determined by that price assumption. Assuming a certain gold price, he favours the companies that are able to increase their reserves, production and cash flow, as they will outperform the names with less or no growth.

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Gold -- Sharefin, 22:17:35 09/24/03 Wed

HOW TO PROTECT ONE'S PENSION WITH GOLD

But let's go back to my original story. I exercised my leaps, sold my Barrick stock, and looked for an alternative. I asked a number of stock-broker friends of mine if they could recommend gold-mining companies that have deliberately reduced or, better still, stopped production in the face of falling gold prices. To my amazement, in each case my friends said that they were unaware of the existence of any such company. They are still looking.

I find it obnoxious that practically all the advice available to gold investors today is of the "get rich quick" variety. What about people who just want "to live and let live"? What about the retired people who want to protect the modest pension they have earned during their working lives? What about those on wages and salaries who in planning their retirement realize that the government-sponsored "old age security" just won't be there for them when they will need it, so that they ought to provide their own? These people are not motivated by the thought of getting rich quick. They just want real protection, because they don't trust the phony protection loudly propagated by plans sponsored by governments and employers. These plans are all suspect, because the benefits are denominated in an irredeemable currency, such as the dollar that managed to lose a record of 90 percent of its purchasing power during the very first decade after it was "cut free" from gold in 1971. There is no reason to believe that the dollar may not repeat or even beat that record in the new century! The point of my article is that these people are not being well-served by investment advisors who advocate the ownership of gold mining stocks with a management hell-bent to push up share prices by producing and selling all the gold the traffic can bear at the expense of mine-life (and there are lots of "non-hedged" companies in this category). The trouble with these companies is that they are exhausting their gold reserves prematurely, and their policy to replenish them is likely to fail as they do not reinforce prospecting with forward purchases of gold (as explained above under the caption "hedging true").

Pensioners should be very selective, and they should only look at the most conservatively managed gold mines with a declared policy of cutting back production (or withholding produced gold from the market) in response to falling gold prices. Once invested in the stock of such a gold mine, there are several strategies that (prospective) pensioners may choose from. The simplest is to sit back and collect the ever-increasing dividends the company is expected to pay once the gold price makes sufficient advances, to supplement their shrinking pension.

Another strategy is to keep "exercising the perpetual option" as the price of gold waxes and the value of pensions wanes. After each major surge in the price of the conservatively managed gold mine the pensioner would sell part of his holdings and convert the proceeds into gold bullion. This play is based on the expectation that the price of the stock of a conservatively managed gold mine will go up much faster than the gold price. This expectation is well-grounded. There is a double bonanza at work. In addition to the value of payable ore reserves, the volume of those reserves has to increase, as sub-marginal reserves enter the payable range thanks to the higher gold price. In this way the pensioner acquires gold ever more advantageously. In spite of paying an ever higher dollar-price for each ounce, every subsequent share sold is buying him more ounces. The conservatively managed gold mine produces gold for him. If he owned the stock of a less conservatively managed gold mine, the company would be producing gold for others. Pensioners have no use for a gold mining operation that prefers to make a quick profit at the expense of the life expectancy of the mine. They are not suitable as protection for one's pension against inflation or deflation. Pensioners don't need additional income while their pension still has value. They will need additional income when their pension is cut because of deflation, or loses its purchasing power because of inflation.

A third strategy involves borrowing against the stock, rather than selling it, to get compensation for the decreased value of one's pension. This strategy is designed to address the problem of taxes. Since there is no selling, there are no capital gains to be taxed.


Conservatively managed gold mines are hard to find. They are not glamorous, they never hit the headlines. It is likely that they do not presently pay dividends or, worse still, they report losses as holding gold properties involves costs (such as providing security, keep renewing mining licenses, paying a skeleton crew, prospecting for new properties, etc.) On the other hand, the price of the stock of such conservatively managed gold mines tends to be low and, initially, it may not increase spectacularly as that of a glamorous gold stock would. However, the policy of postponing exploitation will pay rich dividends at the time when the glamorous companies approach the point of exhausting their mines and must get ready to shut them down, as a result of premature depletion of reserves.

I am not getting paid for writing this article by anybody. In doing it I am trying to be helpful to my fellow pensioners facing the same problem that the value of their pension may evaporate due to deflation or inflation just at the time when they need it most. This should be considered as a thought provoking exercise to challenge conventional wisdom. Pensioners and prospective pensioners should do their own due diligence to find conservatively managed gold mines that would suit their needs best in protecting the value of their pension against the ravages of deflation or inflation.

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Gold -- Sharefin, 22:12:18 09/24/03 Wed

Barrick In Management Shake-Up

Profits fell to $88m from $105m in the first half, and earnings for both this year and next are expected to lag 2002 results. "I don't want that to happen again," said Greg Wilkins, president and chief executive, in an interview with the Financial Times. He said Barrick's management structure had not changed during its 20-year life span, during which time it had evolved from a sole North American producer to one with operations on four continents.

After seven months in the job, Mr Wilkins said changes were necessary to restore "the entire approach that had been the hallmark of the company from the beginning". That means more autonomy for regional operations so that Barrick can become "much more nimble". While he called the changes "a milestone event", Mr Wilkins said "the outside world will not know whether this has been a successful thing or an unsuccessful thing for three to five years".
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Investors have criticised Barrick for its hedging programme, which has left the company with a potential $1bn liability if the hedges were marked to market.

But Mr Wilkins said it was focusing on the additional $160m that a $10 gold price jump adds to Barrick's mark-to-market liability, and ignoring the increased $870m added to its reserves.

Barrick also has 10 years to deliver on the hedges, and the gold price will weaken at some point during that time.

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Fiat -- Sharefin, 21:54:18 09/24/03 Wed

U.S plays with currency fire

Although the turmoil it created has subsided somewhat, the statement by G7 finance ministers that global currencies should be free to fluctuate is an important one, one that will have far-reaching effects not just for the United States and Asia but for Canada as well. While the United States might like to think of itself as the puppet master, pulling strings in order to get certain currencies to do what it wants (including its own), currencies -- and those who trade them -- are notoriously fickle, and not inclined to take orders from anyone.
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As U.S. companies see it, China manipulates its currency in order to keep it artificially low, and this in turn makes its goods more competitive than those produced in the United States. The manipulation comes because the yuan (which is known inside China as the "renminbi" or "peoples' currency") is pegged at a rate of 8.28 to the U.S. dollar. For the past year or so, the United States has been putting pressure on China to let the yuan "float" or fluctuate, which economists believe would cause it to move higher relative to the dollar.

China, however, has shown no inclination to do so, primarily because keeping the yuan low has produced tremendous economic growth for the developing nation (as well as U.S., Canadian and European companies that have moved their manufacturing operations to China), and moving it higher solely to benefit the United States isn't a particularly attractive option. China also probably feels singled out, since Japan manipulates its currency too -- but doing so actually helps the United States, and therefore is seen as acceptable.

In order to keep the yen low relative to the U.S. dollar, Japan buys billions and billions of dollars worth of U.S.-denominated debt, which provides a ready market for U.S. government bonds -- and the United States is selling more and more of those as a result of its gigantic federal deficit, which will likely approach the $500-billion (U.S.) mark next year. Japan is the single largest holder of U.S. debt with about $445-billion worth, although China is moving up rapidly. It's currently the third largest with about $126-billion.

Some economists say the United States is playing a risky game by trying to get China and Japan to let their currencies fluctuate, in part because of the enormous U.S. debt position the two countries have. What if they no longer have to buy as many billions worth of T-bills to keep their currencies where they are? That would not only make it more difficult to finance the federal deficit, but it could lead to higher interest rates. "If interest rates go up too fast, that will put the brakes on the housing sector," said Rajeev Dhawan, an economist at Georgia State University. "That could mess up the whole recovery."

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Fiat -- Sharefin, 21:47:05 09/24/03 Wed

Germany and France open their coffers

France and Germany yesterday unveiled a Keynesian spending blitz to pull their economies out of slump and halt the "de-industrialisation" of Europe, deftly side-stepping the spending constraints of the Growth & Stability Pact.

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Fiat vs Gold -- Sharefin, 21:26:47 09/24/03 Wed

Readings from the Book of Barrick: the Sequel

A few weeks ago I was startled out of my afternoon reverie by an inquiry from Melissa Davis, an investigative journalist for TheStreet.com. She was gathering material for a piece on Barrick Gold Corp. and wanted to follow up on my essay, Readings from the Book of Barrick, posted back in May. Sure thing, I said, delighted to receive a little recognition from someone outside the Taliban Wing of the gold bugs. There was just one problem: I hadn't kept up with Barrick ever since it became clear that CEO Randall Oliphant was exactly right when he asserted that the rumors regarding a deal with Gold Fields, which had prompted my musings, had been dreamed up by some guy in his basement. So I had to do a little homework in order to respond to Melissa's thoughtful questions. In the process, I learned some things that may be of interest to fellow gold bugs, but which may be too technical for inclusion in an article geared to a broader audience. Accordingly, Melissa's questions and my responses are set forth below, modified slightly for this format.

We'll post a link here when Melissa's article comes out.

1. Has much changed at Barrick since you published your essay? If so, what?

Three developments strike me as noteworthy.

First, they committed to a serious reduction in their gold hedgebook exposure. This was announced in a press release on September 17, which also laid out a growth plan. The growth plan got top billing but it's pretty clear the point of the release was the hedge cutback, because the “growth plan” was mostly old news. The announced reduction would chop their gold forward exposure by a third, taking it down from about 18 million ounces to about 12 million ounces by the end of 2003. It would also slash their call option and variable price sales contract position by 1.5 million ounces over the same period, down from about 2.7 million ounces. The pledge is “based on market conditions,” whatever that means, but otherwise it's unequivocal. This is a big deal if it's real, but it was quickly overshadowed by the second development.

Second, they wrong-footed the market by lowering earnings guidance out of the blue. This was announced in another press release issued on September 26, just 9 days after the first one. The release attributed the miss to operating issues in Goldco: higher costs and lower output. What was weird about it was the timing. Why not combine the releases rather than stagger them so? It was like Goldco and Hedgebook were no longer on speaking terms. Anyway, the snafu clearly irked some of the bigger players. I happened to catch Randall Oliphant facing the music at the Mining Investment Forum in Denver a week later. I couldn't help feeling sorry for the guy -- seeing him fidget and glance furtively at his watch under some downright hostile questioning reminded me of Bart Simpson getting reamed by Principal Skinner. I think it's fair to say that the proffered explanation as to what happened and why was not enthusiastically embraced by a lot of the attendees at Denver.

Third, they have been unusually active with their silver shorts. At the end of the first quarter, they had 26 million ounces subject to spot deferred forward contracts, and about 21 million ounces subject to call options. At the end of the second quarter, they had put another 12 million ounces under the forwards, meaning they had sold short that many more ounces in just one quarter. So at June 30 they were short about 59 million ounces, which is about 10% of the total global annual production of silver. At September 30, they had taken it back down to about 50 million ounces. Now I don't follow the silver market that closely but their activity here has always struck me as curious. They don't break out silver separately except to note that Eskay Creek produced 15.5 million ounces of the stuff in 2001, and that they treat it as a byproduct and use it to reduce operating expense. I understand there has been a labor dispute at the Horne Smelter, reducing throughput this year. I suppose this may account for some of the cost increases at Eskay flagged in the September 26 press release. But the bigger issue seems to me to be twofold. First, why bother shorting such small potatoes so aggressively, particularly at historically low prices? Secondly, what provision do their models (and contracts) make for the non-linear event of war, which typically consumes a lot of silver? If there is a war with Iraq that doesn't end quickly, I guess we'll see, because there is no more U.S. strategic stockpile, and central banks don't hold a lot of silver anymore.

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Fiat vs Gold -- Sharefin, 21:20:53 09/24/03 Wed

Gold is the Cure for the Job-Drain

Falling (as opposed to low but stable) interest rates are lethal to the economy, especially if prolonged. They make the rate of marginal productivity decline. As it does, it prompts capital export. Migrating capital takes industrial jobs with it. This paper analyzes job-drain that is threatening America with de-industrialization. The process will continue as long as wild swings in the rate of interest do. The cure is to be found in the stabilization of interest rates. It can be effected by opening the U.S. Mint to the free and unlimited coinage of gold, as mandated by the U.S. Constitution.

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Gold -- Sharefin, 21:08:27 09/24/03 Wed

Newmont shares edge up on gold sales forecast

Newmont Mining Corp. , the world's biggest gold producer, said on Wednesday it expects annual gold sales to rise 5.5 percent by 2007, as its stock price climbed to its highest level in nearly six years.

Newmont, based in Denver, said it expects to increase annual gold sales to about 7.7 million ounces in 2007 from about 7.3 million ounces in 2003, if current projects go as planned, and added that it expects gold reserves in Ghana to double to about 10 million ounces by the end of the year.
~~~
A confluence of factors, including geopolitical uncertainty, war, global economic sluggishness and a weak U.S. dollar, have meant good times for gold companies like Newmont, which are safe havens in tough times.

The company also has won investors' attention as the only true U.S.-traded gold stock, the analyst Allan said. "That puts it in a league of its own," he said.

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Gold -- Sharefin, 21:06:27 09/24/03 Wed

Barrick Gold shuffles executives, organizes business into 3 regional groups

Barrick Gold Corp. plans to reorganize its business into three regional units and reassign several senior executives in a bid to improve its financial performance and operational efficiency, Barrick announced Tuesday.

Peter Kinver becomes Barrick's new chief operating officer effective Jan. 1, succeeding John Carrington, who has held the position since 1996 as the Toronto-based company grew to be the world's third-largest gold producer. Kinver's appointment and reorganization are the latest upper-management changes this year at Barrick, Canada's largest gold producer, which has admitted to disappointing performance in 2002 and earlier this year.
~~~
Last week, Barrick said overall production in 2004 is slated to fall by 10 per cent and costs will rise by the same amount due to low-grade ore at two of its key mines in the United States and Peru.

Earlier this year, Barrick shuffled management at its only producing mine in Africa after admitting production there had to be curtailed at the Tanzanian operation due to shortages of equipment and high costs.

And last year, three key Barrick directors - Carrington, chairman Peter Munk and then-CEO Randall Oliphant - received no bonuses due to lower than anticipated earnings and weak share price performance.

Despite missing its targets, Barrick remains in solid financial condition. In the second quarter, it reported a $59-million profit from $491 million US in revenues and nearly $1 billion US in cash.

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Gold -- Sharefin, 21:03:13 09/24/03 Wed

Unclear if Gold Is a Fail-Safe Investment

Gold investors think they've found a fail-safe bet. No matter what happens to the economy, stock market or anything else - good or bad - they count on seeing positive returns.

That's why investors have been pouring big money into gold and gold stocks, a big switch from the not-so-distant past when they shunned gold in favor of higher-flying investments.

In today's investing world, after three years of steep stock-market declines, they are looking for better insurance to make money. It's still unclear, though, if gold is really so safe.
~~~
So what's behind all this? Analysts say there is just enough uncertainty in the marketplace to tap investors' interest. They see some kind of protection in gold, thinking they can win no matter which side of the coin they get.

If the U.S. economy gets stuck in a deflationary grip that stalls the recovery, gold benefits.

If there's another terrorist act, gold is good.

If the U.S. government's aggressive monetary and fiscal policies - like low interest rates and tax cuts - overstimulate the economy and lead to a rise in inflation, the value of gold goes up.

If an improving global economy generates more gold jewelry demand, the price of gold increases.

"Are we in for deflation or inflation? We don't know. Are interest rates on their way up? We don't know. Is the economy really back on track? We don't know," said Lynn Russell, a fund analyst at Morningstar in Chicago. "Those unknowns make gold attractive."

Still, gold isn't without risks.

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Gold -- Sharefin, 21:01:24 09/24/03 Wed

Gold Does Grow On Trees

Overseas companies are showing interest in a New Zealand technique which uses plants to extract gold from the soil.

Dr Chris Anderson from Massey University has developed a technique which involves planting fast-growing herbs on gold-rich soil and letting them suck up the gold.

The gold is extracted from the plants using a complex process.

Chris Anderson says up to a kilogram can be extracted from five thousand tonnes of soil spread over a hectare of land.

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Gold -- Sharefin, 20:59:21 09/24/03 Wed

New gold securities the buzz at Denver conference

A new generation of securitized physical gold products is in the pipeline, which the gold industry believes will keep the price of bullion rising by making it easier for money managers to buy the cumbersome precious metal.

Exchange traded funds (ETFs) and other gold-backed securities were on the lips of all 400 mining executives, investors and analysts at the Denver Gold Group's annual 3-day forum, which started Sunday night.

Most of the excitement was aimed at a proposal by the World Gold Council (WGC), an industry group funded by mining companies, to list gold-backed securities on the London Stock Exchange.
~~~
The gold mining sector is tiny and would have a difficult time digesting the big portfolio shift it hopes for to sustain the momentum. If the ETFs take off, that would generate more demand for the gold they produce since the securities are like receipts for bullion stored in approved warehouses.

Investors have few options to play gold. Most are intimidated by bullion because it is so heavy and expensive to transport, insure and store.

Gold stocks and stock indices are easy to buy and tend to outperform the underlying metal price. But they can perform worse than gold when prices are falling.

COMEX gold futures can be very volatile and require cash up front to maintain margin trading accounts with the exchange.

So the industry is looking to provide more investment outlets for mutual funds, pension funds and private investors to participate in the boom.

"One of the questions is will they compete with the equities, but I don't think so. In fact it will create a much bigger market," said Stanley Dempsey, chairman of Denver-based RoyalGold, a gold mining royalty company.

"If that will drive price, my shares will take care of themselves," Dempsey told Reuters on the sidelines of the conference. "To make something really happen in this space we need more product and I think the ETF does that."

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Gold -- Sharefin, 03:48:32 09/24/03 Wed

Russia and China to collaborate in banking and trade

Moscow, Russia, Sep 24, 2003 (RosBusinessConsulting via COMTEX) -- Russia and China made a number of bilateral agreements on banking and trade cooperation. In particular, a protocol was signed on holding consultations regarding some important goods traded among the two countries. According to Russian Prime Minister Mikhail Kasyanov, the implementation of the protocol will allow to identify possible legal disputes and ensure normal trade between the two countries. In addition, Vneshtorgbank (VTB) and CITIK Industrial bank made a cooperation agreement. VTB Deputy CEO Vladimir Dmitriyev spelled out that the agreement would allow financing investment projects and enable clients to settle accounts with both national and hard currencies. Dmitriyev emphasized that China was mainly interested in investments in the Russian telecommunication sector and gold production.

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Gold -- Sharefin, 21:23:43 09/23/03 Tue

The Roots of the Federal Debt

The following question is basic but hardly ever asked: given that this debt cannot be paid, and nobody really believes it can be, how is it that the federal government can continue to borrow so much even as taxes are marginally cut and spending expands at a record pace in the midst of a lackluster economy?

If individuals or corporations—or state governments, for that matter—were this much in debt, they would see the value of their existing debt on the market downgraded. They would no longer be credit worthy. They would default and be bankrupt. The profligacy would come to an end.

How is it that the federal government is able to accumulate all this debt and still market its notes all over the world? The answer to the riddle is understood by the Austrian School: the Fed, the agency of the federal government that enjoys the monopoly privilege to create out of thin air all the money it wants to create. Fed governor Ben Bernanke is right that the Fed is capable of bailing out even the worst debt crisis by merely creating unlimited supplies of dollars. Mises wrote about this as early as 1912, and he saw the grave costs for society.

What are those costs? An inflated money supply distorts the structure of production and leads to serious investment miscalculations. It drives down the value of the dollar on international exchange. It provokes a decline in the purchasing power of each individual unit, thereby gutting savings and discouraging thrift. It redistributes wealth from the productive to the government-connected. As the recent experience of Zimbabwe shows, inflation can literally turn a society and culture upsidedown.

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Gold -- Sharefin, 21:20:16 09/23/03 Tue

Expert says ignore gold's distractions

Addressing a luncheon at the Denver Gold Forum, keynote speaker Dr Martin Murenbeeld outlined a compelling case for gold to keep rising based on several macro factors and no conspiratorial ones.

Anticipating potentially bad news about official gold sales as the original Washington Agreement enters its twilight months, Murenbeeld, a Victoria econometrician, said that the impact of accelerated Central Bank liquidations would be relatively muted and did not detract from his continued bullish outlook for the metal.

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Gold -- Sharefin, 21:16:09 09/23/03 Tue

Gold off in Europe but analysts look for new highs

Gold fell back in Europe on Tuesday as the market's currency-fuelled rally paused, but analysts said the price would hit a seven-year high by the end of the week.

Gold surged nearly $6 on Monday after a weekend call by the G7 group of industrial nations for more flexible currency policies prompted a slide in the dollar.

"We are completely and utterly dominated by what is going on in the currency markets," one bullion trader said.
~~~
Analysts were also still closely monitoring the level of long positions held by large speculators in the New York Comex gold futures market.

Data showed speculators cut their long positions in the week to September 16, although analysts attributed that to small-scale profit-taking.

John Reade, analyst with UBS Investment Bank, said the figures were less useful than normally due to the large moves in the gold price.

Bullion has gained around $15 since September 16 and Reade estimated that speculative positions had probably gone back to a new all-time high.

Despite the ever-present prospect of aggressive long liquidation, analysts were on the whole confident that speculators would stick with gold for the time being.

"The key question remains how long the funds will be willing to run with - or even add to - current huge net long positions while physical demand remains soft," HSBC's Williamson said.

"Recent evidence suggests that while the gold market can continue to attract new money...that is unlikely to be a hindrance."

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Gold -- Sharefin, 21:13:45 09/23/03 Tue

Australian Gold Production To Surpass US

Within the next decade, Australia will overtake the U.S. and become the world's second largest gold-producing country, according to Harry Adams, Managing Director of mid-tier Australian producer Gympie Gold Ltd. (A.GPG).

Adams, who is also deputy chairman of the Australian Gold Council lobby group, made the prediction while speaking to delegates at the Denver Gold Forum, billed as North America's largest gathering of gold industry executives and investors.

In 2002, South Africa produced 395 tons of gold, followed by the U.S. at 299 tons, Adams said. Australia ranked third with 264 tons.

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Gold -- Sharefin, 00:02:30 09/22/03 Mon

G7 bankers in secret gold sale talks

Central bankers from the Group of Seven richest nations opened private discussions yesterday on a new deal that could see marked rises in sales of central bank gold.

The subject was left off the official agenda for the meetings - involving the likes of US Federal Reserve chairman Alan Greenspan and Bank of England Governor Mervyn King - but the Central Bank Gold Agreement, struck in Washington in 1999, expires next year.
~~~
A G7 source said a new deal would last for another five years. 'They did a market survey and the numbers were wide apart, so at best they'll get an incremental increase from 400 tonnes a year,' said the official in Dubai.

The Bundesbank is thought to have pushed for an increase in the quota to allow it to sell gold, but only in 'homeopathic amounts', according to Bundesbank president Ernst Welteke. With 3,440 tonnes, the Germans hold the most gold in Europe.

Central banks were tiptoe ing around the negotiations for fear of upsetting global commodity markets, which were anxiously awaiting details of the secretive negotiations.

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Gold -- Sharefin, 00:00:58 09/22/03 Mon

German Bundesbank chief says G7 may discuss gold pact

German Bundesbank President Ernst Welteke said on Saturday central bank governors from Group of Seven nations gathered in Dubai could discuss a pact limiting gold sales on the sidelines of a G7 finance chiefs' meeting.

"Every topic is possible, the gold accord included," Welteke told a breakfast briefing for journalists.

Central bankers agreed in Washington in 1999 that 15 European central banks would not sell gold on the market, with the exception of already planned gold sales, for five years -- a pact that expires in September 2004.

A G7 official, who spoke on condition he not be identified, told Reuters on Friday the G7 central bankers will on Saturday initiate talks on a new gold deal under which sales could rise in stages from 400 tonnes a year.

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Gold -- Sharefin, 23:54:47 09/21/03 Sun

New gold-backed securities on menu at Denver forum

With share prices of gold mining companies soaring, the industry is backing a range of innovative gold investments to keep capital flowing into the hottest market in decades.

These new bullion-backed securities are among the topics being addressed by some 400 mining executives and equity analysts registered for the Denver Gold Group's annual Gold Forum, which starts on Sunday.

The investor-oriented event opens with bullion prices near seven-year highs amid the most hype about gold in a generation.

Chris Bradbrook, vice president of corporate development at Goldcorp G.TO , a Toronto-based mining company, said the increasing interest in gold as a "macro-scale" investment parallels the growing perception that gold is in a secular bull market for the first time since the 1960-1980 period.

"A discussion on gold as an investment, I think that signals a sea change," Bradbrook said.

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Gold -- Sharefin, 23:52:11 09/21/03 Sun

Central bankers to forge new gold deal next year

Dubai - A new deal covering the sale of gold by central banks was discussed briefly during an International Monetary Fund (IMF) meeting in Dubai but would only be tackled properly early next year, Dutch central bank governor, Nout Wellink, said yesterday.

Weeks of speculation about the fate of the Washington accord, known formerly as the Central Bank Gold Agreement, have helped to push bullion to a six-and-a-half-year peak. Spot prices were trading at about $380 an ounce on Friday afternoon.

"We had a brief discussion on gold ... We will come back to this issue at the beginning of next year," Wellink said after attending a Group of 10 meeting of rich nations.

The old deal, limiting central bank gold sales to 400 tons a year for five years, expires in September 2004.

A London Bullion Market Association survey published last week said a rise in central bank gold sales to an average of 484 tons a year could be easily absorbed, thanks to the buoyant gold price.

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Gold -- Sharefin, 23:50:59 09/21/03 Sun

Gold price could exceed $400/oz in 2003 - GFMS

In its Gold Survey 2003 – Update 1, released last week, Gold Fields Mineral Services (GFMS) forecast that gold prices could well post a high in the mid-$390s and possibly breach the $400 mark before the year is out.

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Gold -- Sharefin, 23:49:11 09/21/03 Sun

Traders Take Advantage Of Rising Gold Prices

Scintillating gold is hot these days and could see a larger hole in the pockets of retail gold buyers this festive season. Thanks to continued bullishness in the global gold market where a section of institutional investment bulls seem to be shifting out from the weak US-dollar and greenback-linked stocks and converging once again to gold.

The rising gold prices on Friday crossed the high of $384 per troy oz with some correction on Saturday. Now that the yellow metal has pierced the $380 per troy oz levels, reports indicated that the rising trend would see gold pierce the magic level of $400 by the end of this month, and may even gallop to touch $415 levels, which is seen as the next support levels.
~~~
At this price levels, the overall retail business in gold would be down substantially this festive season, said Suresh Hundia, president, Bombay Bullion Association (BBA). “It is but natural that the buyers would adopt wait and watch policy and may buy gold only if necessary,” he added.
~~~
In contrast, Mr Vaidya said the base demand for gold would remain the same.

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Gold -- Sharefin, 23:43:51 09/21/03 Sun

Central bankers briefly discuss new gold sales deal

"It was very brief and that was all," Dodge said, in response to a question on whether there had been any kind of talk among central bankers about gold sales.

Central bankers agreed in Washington in 1999 that 15 European central banks would not sell gold on the market, with the exception of already planned gold sales.

But central bankers did not discuss ramping up levels of gold sales in any potential new agreement or whether the number of institutions involved would be expanded, Dodge added.
~~~
One G7 source on Friday said central bankers would initiate talks on a new gold deal where sales could rise in stages from 400 tonnes a year -- the existing top annual threshold -- and that the magnitude of the incremental increase would depend on the number of new signatories to the potential new deal.

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Gold -- Sharefin, 23:38:10 09/21/03 Sun

Russia wants to boost gold reserves-Central Bank

DUBAI, Sept 21 (Reuters) - Russia would like to increase the percentage of foreign exchange reserves it holds in gold but it is not in a position to do any buying at the moment, first deputy governor of the central bank said on Sunday.
Oleg Vyugin also said the central bank cannot move to a more flexible currency regime until an oil stabilisation fund has been set up by the government.

"Our gold reserves... are around seven to eight percent of our total international reserves and actually we think that we have to get at least 10 percent of international reserves," Vyugin told Reuters on the sidelines of a conference in Dubai.

"We are not in a position to buy at the moment but generally we would like to increase (the gold)... At this moment we are limited because we also have to manage monetary policy."

The central bank said last week that Russia's gold and foreign exchange reserves rose to $62.1 billion from $62.0 billion as of September 12.

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Periodic Ponzi Update PPU -- $hifty, 22:36:23 09/21/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,905.7 + 9,644.82 = 11,550.52 divide by 2 = 5,775.26 Ponzi

up 111.97 from last week.

Thanks for the link RossL!

Hope you get everything dried out and back up and running soon!

Go GATA !

Go GOLD !

Go Golden Comets!

$hifty

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Gold -- Sharefin, 19:17:55 09/20/03 Sat

Central bankers briefly discuss new gold sales deal

Central bankers meeting in Dubai briefly discussed a new gold sales deal on Saturday to replace an existing one that expires next September, Bank of Canada Governor David Dodge said.
"It was very brief and that was all," Dodge said, in response to a question on whether there had been any kind of talk among central bankers about gold sales.

Central bankers agreed in Washington in 1999 that 15 European central banks would not sell gold on the market, with the exception of already planned gold sales.

But central bankers did not discuss ramping up levels of gold sales in any potential new agreement or whether the number of institutions involved would be expanded, Dodge added.

Bank of France's Jean-Claude Trichet and Treasury Director Jean-Pierre Jouyet both said there had been strictly no discussion on gold at Saturday's G7 meeting and declined to comment further at a briefing held at the same time as the Canadian press conference.

One G7 source on Friday said central bankers would initiate talks on a new gold deal where sales could rise in stages from 400 tonnes a year -- the existing top annual threshold -- and that the magnitude of the incremental increase would depend on the number of new signatories to the potential new deal.

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Richard Russell -- Sharefin, 18:37:42 09/20/03 Sat

Richard Russell On the Markets & Gold

The Russell opinion is that following the greatest and most speculative bull market in history, we could have expected a severe and costly bear market which would have taken stocks back to great values. But because of the drastic, almost insane measures taken by the Greenspan Fed to battle the bear, this bear market will end with the death of the dollar as a reserve currency and most likely with the end to the US as the world's sole superpower.

Before this bear market is over, I foresee paper money being distrusted and discredited and the institution of the Federal Reserve not only despised but rejected. The US, today the world's greatest debtor, will no long be the world's leader, and I foresee US stocks smashed to levels not dreamed of even by the leading pessimists of today.

All the above may sound harsh, but it is what I believe lies ahead. When the normal and natural forces of the market are man-handled as they have been under the Greenspan Fed, other normal and natural corrective forces will ultimately take over. In the history of markets, the greater the speculation, the greater the ultimate correction. And the world has seen nothing like the speculation of the last eight years.

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Gold -- Sharefin, 18:27:41 09/20/03 Sat

Meaningful Progress - With More to Come

Since breaking above $366 resistance on August 27th, gold's ascent appears slow. Here we are three weeks later, and gold is 'only' $8.30 above its August 27th close and 'only'$15.80 above $366 resistance. I say 'only', but the annualized rate of return for these two gains are 52.6% and 100.1% respectively. Not bad by any measurement, which is the point of this alert. Although gold's climb may not look impressive, it is. Gold is doing very well indeed, as is clear from the following chart.



~~
Who knows, but it is clear that the bears are frantic. Not only have they been 'painting the tape' by selling each close, trying to make the closing price look lower, but now they are working the news wires. This weekend we have already been hit by a barrage of reports from Reuters about the G7 meeting taking place in Dubai.

"DUBAI, Sept. 19 (Reuters) - Central bankers from Group of Seven industrialized nations meeting in Dubai will on Saturday initiate talks on a new gold deal under which sales could rise in stages from 400 tonnes a year, a G7 official said on Friday."

Planted news stories like this one are designed to shakeout the weak hands. They try to play to people's fears, and ignore reason and the facts. Some of the more important facts are:

Fact #1 - Gold is in a primary bull market. It will end when it is ready to end, not when central bankers would like it to end.

Fact #2 - Central bankers only tell you what they want you to hear. When they have a mindset to achieve some specific purpose, truth to them becomes an irrelevant concept.

Fact #3 - There is an ocean of fiat currency floating around, and billions of this fiat currency is subject to the hair-trigger judgement of money managers and others. When/if they act, it could send gold soaring.

Most importantly, as I said in my September 15th alert: "There is only one relevant fact at the moment. It is that gold is in an uptrend. Nothing else matters."

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Gold -- Sharefin, 22:05:37 09/19/03 Fri

Central bankers to discuss new gold sales agreement

Central bankers at a Group of Seven industrialized nations meeting in Dubai will initiate talks on a new gold deal on Saturday under which sales could rise in stages from 400 tonnes a year, a G7 official said on Friday.

"It would be for another five years and they will discuss it tomorrow (Saturday). They did a market survey and the numbers were wide apart, so at best, they'll get an incremental increase from 400 tonnes a year," the official said on condition of anonymity.

Central bankers agreed in Washington in 1999 that 15 European central banks would not sell gold on the market, with the exception of already planned gold sales, for five years -- a pact that expires in September 2004.

Total world gold holdings in central banks were more than 32,000 tonnes at the end of last year -- roughly equal to 12-1/2 years of global mining output.

News of the planned talks came moments after the New York gold market closed on Friday, in a week when talk circulated of a new deal that could set the annual gold sale limit at 460 to 480 tonnes.

Those rumoured levels, however, were considered too high unless a large number of new central banks sign on to a fresh agreement, the official said.

"The Swiss and the UK have used up their interests (gold) but if you get a lot of new entrants, like the Eastern Europeans, the rise could be bigger," said the official, who had first-hand knowledge of the central bankers' market survey ahead of Saturday's talks on a renewed five-year pact.

"The United States may not choose to sign (a new deal) because they don't want to sell," the official added.

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Gold -- Sharefin, 21:53:21 09/19/03 Fri

COMEX gold jumps as new cen bank deal nticipated

COMEX gold surged on Friday amid dollar weakness and anticipation of a renewal of the Washington Agreement curbing central bank sales at this weekend's International Monetary Fund Meeting in Dubai.

Minutes after New York metals trade wrapped up for the weekend, a Group of Seven official helped lay to rest weeks of speculation, saying G7 central bankers will begin talks on a new 5-year gold deal on Saturday, adding that the new agreement could raise the limits for official sales incrementally.
~~~
"It's high up on the topic list for the gold market, so of course they are going to discuss it," Bernard Hunter, a vice president at bullion dealer ScotiaMocatta in Toronto, said after the close.

"The market is split on this, whether there is going to be a formal announcement or not. I expect it might be a little premature," he added.
~~~
But the market dwelt on whether the Washington Agreement, which limited European government sales to 400 tonnes a year through September 2004, would be rolled over.

While European finance officials suggested this week that gold will be discussed on the sidelines of the Dubai meeting, Friday's statement by the unnamed G7 official was the first suggesting that the sales limits could be increased, if only in stages, as some had been betting.

----
Isn't the agreement due next Sept 2004 - a full year away?
And already I've seen reports highlighting raising the limit from 400 tonnes to a possible 500 tonnes with the comments that the extra 100 tonnes would not cover the additional demand.

Seems like another weak attempt to talk the price down.

They could raise the limit to 600 tonnes & the market would lap it up.
--
Also note that there's no COTs this week.
So the last mega reading was taken from Tuesday the 9th Sept & there's been huge interest since then.

I await Monday with interest to see what the new COTs show.

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Gold -- Sharefin, 09:41:23 09/19/03 Fri

Snow in Beijing and What it Means for Gold

All of the above leads us to the question what full RMB convertibility eventually means for gold prices.

China can press onward toward convertibility on the capital account, which would allow Chinese people more freedom to move their savings abroad, counterbalancing the inflow of U.S. dollars. In many ways that is the best option and it is already being implemented, but it would threaten the steady increase of savings put in low interest accounts at the state banks. This is the one thing that keeps China's financial system stable at the moment. Historically, the less trust there is in the financial system the more demand there is for gold.

In addition, strong capital inflows and rising Forex reserves are already sharply boosting official demand for gold in China. This is because if the PBC is to retain its proportion of gold holdings at the current 2.4% of total reserves (European Central Bank standard: 15%), it would need to increase its gold holdings by an estimated 120 tons or 60% of gold consumption in China in 2002.

China already enjoys with 40% one of the highest savings rates in the world. The closer we get to revaluation, the more USD dollar savings will be converted into gold.

In order to pave the way, the PBC last year relinquished its monopoly on imports and exports of gold, the Shanghai Gold Exchange was established and many Chinese commercial banks are planning to launch personal gold investment businesses.

The way forward for China's central bank and savers in the coming years is, surely, to diversify out of their huge dollar holdings and move to back its currency by gold as it heads slowly but surely towards convertibility on the capital account.

After the Beijing Olympics when the snow falls in the winter of 2008, gold might truly glitter.

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Gold -- Sharefin, 22:00:41 09/18/03 Thu

Swiss bank puts wealthy clients in gold

GENEVA (Reuters) - Swiss private bank Lombard Odier Darier Hentsch has said it is luring wealthy clients back to gold, plugging the diversification, protection and potential growth benefits of the asset.

"Against a background of geopolitical uncertainty and very turbulent equity and bond markets, investing in gold is a good way to protect and diversify assets while still aiming to achieve an absolute performance," the bank said.

Its multi-manager "World Gold Expertise Fund" which it launched on August 7, has already attracted over $150 million and LODH believes it could double by the end of this year.

"We've no specific target but we think we could double the size of the fund within a couple of months," Cyrille Urfer, head of fund research and multi-management at LODH told Reuters on the sidelines of an investor briefing.

The fund invests in four fund managers each with a slightly different perspective on the gold market but all with a focus on gold mines. It has two reference currencies -- the euro and the dollar, and carries an annual management fee of two percent.
~~~~
LODH recommends that private investors put at least five percent of their portfolio into gold and believes that, despite recent strong gains posted by many gold funds, there are still opportunities for appreciation.

"We strongly believe that the gold theme is not just for six months or a year. It's long term," Urfer said.

Joseph Foster, a geologist and fund manager at Van Eck Global, where LODH invests 35 percent of its fund, believes gold can break through the $400/oz barrier as the supply from mines declines. Gold was trading at around $372.90 on Wednesday.

"We're in a bull market for gold that's going to go on for quite some time," he told the briefing. "We'll test $400 between now and the year-end. Whether we'll get through it this year or next year, I don't know, but ultimately we'll get through it."

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Silver........Boatloads or Bullships? -- auspec, 19:24:54 09/18/03 Thu

Out of tonight's MIDAS of which I have permission to use snippets sparingly:

"Something very odd is going on in the silver market. If you check yesterday's MIDAS, you will note that SEP silver closed 4.7 cents over spot. At this stage of the delivery period and with the silver market in a slight backwardization, they should have been the same price. The Bullion Desk spot price matched Kitco, or was even a bit lower. I tried to make sense of it yesterday, but couldn't, so I said nothing. Then, this morning from Mitsui:"

""Good Morning. "Silver is being squeezed". Why aren't lease rates exorbitantly high? And why can you sell December futures 6 cents higher than spot but sell OTC forward to December at a discount? It appears there is a speculative long position on COMEX who is taking physical delivery of September contracts. Hence, there is a flow of metal from London to New York vaults. Reasons why London OTC forwards won't tighten significantly: Position limits on COMEX, poor industrial demand, restriction of certain funds on taking physical positions and abundance of silver in London. Spot silver might target 5.40 amid the current uncertainty.""

"A highly regarded bullion dealer responded as silver was breaking late morning:"

""I was just speaking to the transport people and they confirm the market is awash with silver. The game is, you take the silver off Comex receipt and see if you can squeeze the market. The trader who is trying to squeeze the market tried to get out today and the market would not let him."

""I do not see a physical shortage. All the gold producers are lurking around the market trying to sell silver. All the new mines projects have a large silver component.""

Is the silver market as tight as the futures market suggests? Could it be squeezed? Or, is the market awash with silver and it is going to collapse?

"Yesterday, the SEP silver open interest ROSE to 1093, up another 305 contracts. The total open interest gained another 1740 contracts to 117, 250. It would appear someone IS going after silver, or wants it to appear that way. We shall see. The floor is bearish, looking for silver to retreat to the $5/ $5.08 area."

"What I do know for a fact is the biggest commodity moves of all come with the trade, or commercials, BEARISH, saying there is plenty of supply around. I have been on the right side of that action over the past 25 years in copper, soybeans, cattle, pork bellies, hogs, and silver. The trade will be the last to know if a serious material change has occurred in the supply/demand balance, even if it's of a short-term nature. This is what produces a Commercial Signal Failure."

"Gold is my game these days, but I am doing what I can to stay on the silver case. Will keep my eyes and ears open."

END
*******************************

Comments:

KEY WORDS..........Connections, London, Mitsui, Andy Smith, HSBC, Victor Flores, Martin Weiss, Silver

Is silver being squeezed or is it in "abundance"? Folks, I'm just a plodder who wonders about all these CONNECTIONS that keep coming up. These are not likely simple coincidences. I will explain how all of the above named entities and folks relate to each other.

Let's start w Victor Flores.........He used to and possible still does write the gold and silver portions of Martin Weiss' newsletter. I long since gave up my subscription. He's the one who claimed, a couple years back, that there were "boatloads" of silver in places such as Dubai, just waiting to come to market. He also was a MAJOR gold bear when gold was in the mid $200's, projecting gold to go UNDER $200. He's also the man who practices NOT returning e-mails from sincere precious metals investors. Flores was scheduled to speak at the London Gold Conference a little over two years ago and pulled a no show..........allowing a lackey to fill in in his stead. I intended to spend a little time talking w VF, but was sorely disappointed. If I'm not mistaken.....Flores was supposed to represent HSBC at this conference.

If I have learned anything along this long and winding trail {w no guide lately.......smile} it is that honest and sincere people almost always respond to ligitimate questions. Maybe Flores is an exception to this rule, but I doubt it.

HSBC......... All one needs to do w this group is think "shady" banking. Most anywhere one looks in the parallel world of finance and banking one will continually turn up HSBC.

Andy Smith..........Mitsui connections and HSBC if I'm not totally lost @ sea. The perenneal gold bear, the wise guy Harpo Marx look alike. The man who MANY wonder exactly what he KNOWS as it relates to the gold and silver markets. Big time connected. This is a man who follows the various internet discussions as they relate to silver and gold. How do I know? During the London Gold Conference he flashed a slide on the screen that contained about 15 or more various internet links that referred to precious metals. One of them was my old essay about "When Silver Hits the Wall". Maybe that's simply serendipity, but maybe not. He knows these issues inside and out, imho.

Martin Weiss........Obviously closely associated w V. Flores as the appear in the same newsletter. Just happens to be the "guru" that pulled the plug on gold in this last week, inciting his readers/followers to bail out and quash a budding gold threat. See James Sinclair's site for verification of this happening. I don't trust ANYONE who has anything to do with HSBC or Victor Flores. I have long believed that various "gurus" with widespread market followings have insider connections. Weiss. Wall Street Underground, etc.

London......That's where the LBMA trades, no? Have stated in the past that all roads lead to London, no? look into "Black Gold" issues to any degree and you'll find London everywhere you look. Same w the various atheistic elitist global collectivists groups. LONDON!! Look deep. London Gold Pool. British Gold auctions. Etcetera. Buffet buying silver and moving it to London. Silver flowing from London to CRIMEX. Hello!

So, are those who claim silver flows in abundance perps or knowledgeable insiders? Frankly, they could be either one. In the long run they're toast or English muffins or whatever. If there actually is abundant silver they will have to expend it in fairly short order. It may be abundant but it's not unlimited. Ha. If they really had so much of it that they could quash a market for YEARS they wouldn't need to threaten to do the same. If they're close to the silver "wall" they would broadcast numerous messages just like the one included in tonight's MIDAS in order to bluff the markets. Frankly, my dear, I no longer give a damn.........either way they'll be a Christmas goose in the next couple years.

How about this recent Weiss call on gold, throwing a wrench into a budding and threatening market? Nick Guarino of Wall Street Underground did EXACTLY the same thing within the last year, when gold was in the high $300's and threatening to soar. Not one of us, myself included, came up with this type of ploy when trying to decipher what options were likely coming via gold "charade" issues, i.e., how do they put out the current fire? OF COURSE, have a connected "guru" pull the plug at the very worst {best} time for gold/silver. Look who shows up.........???
I have heard Martin Weiss rant and rave at a Gold Conference and receive standing ovations for speaking up for the little guy, David, against the Establishment, Goliath. It is impressive. One must, however, decide if he is a pawn, for whatever reason, for the gold and silver collectivists {smile}. I have made up my mind. Too many connections or coincidences for my comfort.

Do I trust Smith, Flores, Weiss or Guarino? What do U think?

Ah, the sweet aroma of desperation..........nothing quite like it!

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Gold -- Sharefin, 07:15:58 09/18/03 Thu

No Deal On Mining of Reserves

Mining companies and conservationists have again failed to reconcile their differences in dealing with the world's protected and ecologically sensitive areas, rendering no conclusive agreement on the way forward.

Releasing the Durban accord at the Fifth World Parks Congress yesterday, the working group tackling the contentious issue conceded that there remained "considerable areas of disagreement".

This could signal future resistance from various extractive industries to reduce the impact of their operations on biodiversity hotspots identified at the congress as a key social and economic tool for poverty alleviation.

The stalemate in talks has also prohibited the relevant parties from formulating precise policies to protect natural treasures from being developed and destroyed beyond rehabilitation.

While the accord called for further dialogue around the issue, it also recognised the role minerals and natural gas played in modern industry, farming and lifestyles.

Delegates welcomed commitments by Shell and the International Council on Mining and Metals comprising 15 of the world's major mining companies to treat world heritage sites as "no-go areas".

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Gold -- Sharefin, 07:12:21 09/18/03 Thu

Big rise in bank sales would hurt gold price - JP Morgan

World gold prices would be pressured lower if leading European central banks agree to increase the amount of gold they sell each year to more than 480 tonnes, JP Morgan said on Thursday.

The banks are currently limited under the Washington Agreement to sales of 400 tonnes a year, but the five-year agreement expires in September 2004 and traders are speculating they are about to thrash out a new gold sales pact.

"The consensus is that anything more than 480 tonnes would hurt the gold price," JP Morgan gold analyst Geoff Breen told Reuters.

But any downward slide in bullion prices would probably be short-lived, as investors focus longer-term on a weak U.S. dollar, low interest rates and falling mine production as reasons to buy the precious metal, Breen said.
~~~
Commodity market traders have speculated central bankers might thrash out a new sales-limiting agreement during a policymakers meeting in Dubai this weekend.

Breen said any new agreement that included Germany's Bundesbank, which is not part of the existing agreement, would likely raise the amount the banks collectively could sell each year.
~~~
European central banks hold about 14,000 tonnes of gold in their reserves, or about half the gold owned by the world's central banks.....^o-o^....
~~~~
Austria and the UK have completed their sales under the agreement, while Switzerland and the Netherlands have also sold some of the precious metal. Other signatories to the accord are Belgium, Finland, France, Italy, Ireland, Luxembourg, Portugal, Spain, Sweden and the European Central Bank.

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Gold -- Sharefin, 07:07:11 09/18/03 Thu

Mahathir Was Right, Says IMF

The IMF supported the proposed use of the gold dinar as an international currency but required more information on its workings, he said.

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Gold -- Sharefin, 21:50:24 09/16/03 Tue

Newmont sees "substantial" gold price potential

Mining Corp sees a substantial possibility of higher gold prices but will continue to develop low-cost mines and cut debt to hedge against any future price fall, its chairman said on Tuesday.

Wayne Murdy also said Newmont, the world's largest gold producer, expects to make some announcements next week on "exciting" capital investment projects in the pipeline.

"We think the environment is very good for a strong gold price," Murdy told Reuters in an interview at a mining conference in this southern Peruvian city.

Asked if he shared the view of Newmont President Pierre Lassonde that gold would hit $450 an ounce over the next year, Murdy said: "I don't predict prices but we feel the trend is that there's still substantial upward possibilities" for the price.
~~~
Murdy said continuing declines in output worldwide and an extended dearth of exploration were among factors that bode well for higher prices. Low interest rates and a weaker dollar were also boosting prospects for the price, he said.

Murdy said that despite the upward trend in the price, producers should try to develop low-cost operations, maintain a strong balance sheet and invest in projects with a good rate of return to protect profits in times of depressed gold prices.

Newmont was paying down debt aggressively in order to reach its goal of a 10 percent debt-to-capitalization ratio, he said.

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Gold -- Sharefin, 21:48:46 09/16/03 Tue

Gold regains top export-earning spot in 2002

The South African gold industry regained its top export-earning spot from the platinum sector in 2002, a newly-released report shows.

The latest MB Bulletin, produced by the Department of Minerals and Energy's Minerals Bureau, reports mixed results for South African mineral commodity exports in dollar terms during 2002.

However, it reveals that the value of sales for gold and processed minerals was considerably higher for the period.

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Gold -- Sharefin, 21:38:57 09/16/03 Tue

‘Gold heading for $400/oz' – GFMS

Gold Fields Mineral Services (GFMS), the London-based metals consultancy, says gold is likely to breach the key $400/oz level – albeit briefly – by the end of the year, as soaring investment demand stokes prices.
“GFMS is cautiously optimistic that investment demand will increase and that this will eventually lift the price to peaks in the $390s (and possibly even over the $400 mark briefly) before the end of the year),” GFMS said in a statement today, as it released its 2003 Gold Survey.
~~~
Gold's position as legitimate investment class, GFMS says, will continue to be reinforced by a raft of strong fundamentals; a weak dollar, falling bond prices, overblown stock valuations and low short-term interest rates.

The consultancy still hopes, despite little generalist interest in the past, that the floundering global economy will result in a flurry of buying interest from funds looking to exploit gold's attribute as a portfolio hedge. GFMS said implied net investment – which calculates Western Investment Demand - over the half-year climbed a record 55 percent to 140 tons. Bar Hoarding, meanwhile, dropped 43 percent as fears of a banking meltdown in Japan dissipated.

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Gold -- Sharefin, 21:33:17 09/16/03 Tue

As good as gold

Gold and governments arc in competition, which is why they will always make it hard for you to buy it. Its value docs not depend on ministers' promises or central bankers' signatures. Gordon Brown did his best to bomb it, selling off half the nation's reserves on bargain-basement terms. Not long ago you could have been arrested for buying gold, and even now you would set off the alarm which, in theory, is set to catch money-laundrymen. No wonder that the banks cannot be bothered to stock it. They will happily arrange to sell you almost any other store of value, but try asking them for an ingot and see what you get. With a bit of luck they will soon offer you the next best thing: shares in gold bullion. The World Gold Council is launching a fund, backed by gold tucked away in HSBC's vaults. If you would prefer to tuck it away in your own vaults, you might want to know that in Wembley and Southall gold bangles are sold by weight and, because they sometimes help to pay the fare to India, are known as tickets. Indians like to have their gold, or some of it, where they can see it. Promises to pay are not in the same class.

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Gold -- Sharefin, 21:31:00 09/16/03 Tue

Keep the insurance policy in force, Grant advises, "Buy gold."

"The Fed's pro-inflation campaign is also exerting a favorable influence over the gold price. A little bit of inflation - like a little wildfire - is a difficult thing to contain. And the gold market seems to have caught a whiff of inflationary smoke.
- "Gold is not an 'investment' per se," your New York editor opined last week, "It is insurance." James Grant agrees. The editor of Grant's Interest Rate Observer not only considers gold to be a terrific insurance against monetary calamity, but darn cheap insurance at that. "If gold isn't a bargain, what is it? It is a hedge," Grant explains. "However, in my opinion, it is a hedge bargain. The value of a hedge should vary according to the cost and evidence of the risks being hedged against. In the case of gold, the risks are monetary. They are potentially very costly, and they are more than imminent. They are upon us in the shape of burgeoning deficits and a radically reflationary policy stance. Owning gold, you are insuring not against what may be but against what already is..."

- In other words, says Grant, the dollar's value is already slipping away, and yet, gold at $375 an ounce remains a relatively inexpensive insurance policy against continuing, perhaps calamitous, dollar depreciation. "The price of fire insurance would be out of reach if the homeowner started shopping for it after his house was billowing smoke. Yet, in my opinion, the price of monetary insurance is still reasonable in view of the risks posed to the purchasing power of the dollar by the dollar's own stewards...

- "I have been bullish at long, unprofitable intervals during the gold bear market that began before the birth of Britney Spears," Grant concludes. "[But] I wake up every morning in the belief that the international monetary system is one day closer to breakdown. I am certain that posterity will look back at this episode in monetary history with a mixture of mirth and amazement..."

- Keep the insurance policy in force, Grant advises. "Buy gold."

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Gold -- Sharefin, 21:02:25 09/16/03 Tue

Omens Good For India Gold Futures Mkt To Take On Majors

Launching the trading of gold futures in India during October's festival worshipping the Hindu goddess of wealth could be fortuitous. Traders here hope that in time Mumbai - India's commercial hub - will give London and other bullion centers a run for their money in cornering a share of this market.

After all, India is the biggest consumer of the yellow metal, with jewelers and traders buying a third of the world's annual gold output, estimated at $24 billion last year.

The sheer size of India's physical gold market alone should ensure that the volume of gold futures traded in Mumbai are significant, says Stephen White, an analyst at N.M. Rothschild & Sons, the London bank that has been setting global benchmarks for gold prices at its St. Swithin's Lane office since 1919.

Some traders believe Mumbai's gold futures market, which will be run by the National Commodities and Derivatives Exchange, or NCDEX, could eventually become a regional benchmark for prices.

"India is starting out just at the right time as global interest in gold appears to be very strong," says Andrew Driscoll, a gold analyst at Perth-based brokerage Paterson Ord Minnett.

"With good futures volume, India will influence gold prices across the world," affirms Driscoll.
~~~
Unlike small investors in developed countries, Indians have long held a sizable portion of their liquid assets in gold. The country's private and public sector gold holdings are estimated 13,000 tons, or 9% of the world's total, according to Indian government data.

India also imports daily around three tons of gold bars, most of which goes to the jewelry trade, one of the country's biggest export earners. Gold futures are being launched here to enable this sector to hedge against any price volatility in the major gold shipment centers of London and Zurich.
~~~
Mumbai bullion trader Suresh Hundia expects the daily volume of gold futures at around $450 million at the outset. That's about a quarter of the daily average on London Bullion Market spot trade and half of the turnover on the Tokyo Commodities Exchange.

One drawcard that Mumbai does have in its favor is its position in the international trading day. London's gold trading hours partially overlap those in Tokyo and New York. But India could plug a key gap in the around-the-clock trading of gold due to its proximity to large gold buyers in the Middle East.

"The time difference between London and Asian markets makes India an attractive alternative," says Ian Ballington, a Johannesburg-based bullion analyst with Rice Rinaldi Securities. "With increased trading of gold in the futures market, India is sure to exert more influence in global bullion trade."

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Gold -- Sharefin, 00:07:08 09/16/03 Tue

Look beneath the golden gleam

By Tim Lee
Financial Times
September 14, 2003

Optimism is stirring in financial markets and the U.S.
economy. Recent indicators have suggested that
enormous fiscal and monetary stimulus is having an
impact.

Stock markets have held on to substantial gains and
bond yields have risen as forecasts for growth have
been revised upwards. Supply-side arguments revolving
round strong productivity trends are back in vogue, as
is a tendency among analysts and market participants
to ignore the implications of persisting global imbalances.

However, there is at least one warning sign that all is not
well and that problems lie ahead for financial markets
and the global economy.

This is the underlying strength of the gold markets, both
bullion itself and gold mining shares. The gold price has
risen from lows of close to $250 an ounce early in 2001
to almost $380 now. The increase has been prolonged
enough to suggest the end of the previous long downward
trend.

The increase in the price of gold has certainly not gone
unnoticed but it has not been satisfactorily analysed.

Some commentators have seen it as a symptom of the
risks posed to the financial system by the supposed
threat of deflation, while others ascribe it purely to dollar
weakness. Very few observers have taken the traditional
view that the upturn in gold is a sign of nascent inflation
pressures.

Most market participants seem to view gold's strength
as having no longer-term significance, being merely the
result of diversification by investors and accompanying
speculative activity by hedge funds.

The conventional wisdom is likely to prove mistaken.
The gold market may be relatively small but gold retains
its significance as a longer-term monetary indicator.
Contrary to a popular view, this importance does not
depend on the whims of a few central bank governors
and finance ministers but, rather, on the characteristics
that have historically made gold a money, and that lie
behind its long history as a monetary asset.

Looking back, the medium- and longer-term movements
in the real gold price have contained information about
the forces shaping the economy and financial markets.
The difficulty, as always in economics, has been in
understanding and correctly analysing those influences
as they are occurring, rather than after the event.

For more than 100 years gold has experienced very
long cycles in its real value (that is, its price relative
to goods and services), but these long cycles have
occurred around a constant level. That is, in a
long-term sense the real gold price has tended to
remain stable. (This was not true longer ago in history,
when large gold discoveries had an impact). Around
this stable real value there have been three extended
periods of depressed real gold prices: the first from
1920 to 1933; the second in 1952-70; and the third
the period that began in the mid-1990s.

The first of these coincides roughly with the monetary
regime of the gold exchange standard and the second
with the era of the Bretton Woods system of fixed
exchange rates. In both these periods, the price of
gold was fixed by central banks and governments.

The difference between the two was that under the
gold exchange, standard price levels in the economy
were forced into alignment with the low fixed price for
gold -- meaning deflation -- while under Bretton Woods,
ultimately they were not. Central banks pursued
expansionary monetary policies in the 1960s and early
1970s that were incompatible with the low price fixed
for gold, until the system inevitably broke down, with
inflationary consequences.

The third period of low real gold prices, which continues
today, can also be attributed to the actions of central
banks and governments; but the forces at work are
more complex. Beginning in the mid-1990s, central
banks and governments not only sold gold heavily
from reserves and lent gold to short-sellers but their
wider activities also encouraged excessive speculation
in financial assets that further discouraged investment
in gold. In the bubble environment of the 1990s, this
helped create many of the "feedback loops" that
sustained the financial bubble. For instance, low gold
prices played a role in helping to suppress inflation
expectations, which further encouraged the financial
markets.

Arguably, the downward trend in the price of gold also
helped to cement the dominance of the dollar as the
world's reserve currency and store of value. The
strength of the dollar, in turn, was a further force
keeping U.S. inflation low even as the Federal Reserve
implemented an increasingly loose policy. The weakness
of gold until the end of the 1990s was therefore integral
to the financial bubble environment, both as a cause and
an effect of the inflation of financial asset prices.

This perspective leads to two main conclusions. First,
the new upward trend in the gold price may well point to
the fact that the post-bubble adjustment process still has
some way to go. Second, particularly if it continues, it
will be an indicator that Fed policy has indeed been too
lax and ultimately inflationary. This implies that the Fed's
latitude for policy action is becoming much narrower.

When these conclusions are added together, they
suggest an outlook for the global economy, and both
bond and stock markets, that is much less benign than
the optimists would have us believe. Investors would do
well to look more closely at gold's steady rise.

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Gold -- Sharefin, 00:04:56 09/16/03 Tue

Hard-asset bugs keep the faith

Fund managers search for market alternatives
Asset managers are more paranoid about their holdings than ever.

Most of the folks who handle paper investments on behalf of their clients are agog at the 40 percent gains in America's smallest companies these past six months. The gains in small stocks stack against a 25 percent return for the Dow Jones Industrial Average and other earth-mover stocks. See the chart.

Professional money managers, grateful for this reprieve, are sure to hit the "sell" button at any sign of a tipsy balance sheet, a hiccup in sales, stale profit margins or lull in new contract signings. As Market Semiotics' Woody Dorsey told The Calandra Report in an interview this week that will come to define both the looming meltdown in paper assets and the building momentum of the commodities rally, "Most portfolio managers have no faith in what they own, except for the commodities crowd."

This hit home with me two months ago, when I was at breakfast with a $1 billion asset manager, a $300 million asset manager and the chief executive of a commodities miner whose shares in the weeks that followed doubled in price. Both managers said they were desperate to lighten up on the small-cap technology stocks they owned and wanted a foot into the world of hard assets, be they copper, gold, platinum, nickel, zinc or iron ore.

Says Dorsey, "The day is coming when a Hecla Mining, lots of these (gold, silver and copper mining) names, can trade like an EBay and triple in three years."

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Gold -- Sharefin, 00:02:29 09/16/03 Tue

Barrick output to decline next year
By WENDY STUECK
00:00 EDT Friday, September 12, 2003
VANCOUVER -- Barrick Gold Corp. says its production will drop about
10 per cent and costs will climb by the same amount next year as a
result of mining lower-grade ore at two of its mines.The Pierina
mine produced a record amount of gold last year -- 898,228 ounces at
a cost of $80 an ounce -- but operations are now moving into a lower-
grade part of the 3.6-million-ounce ore body.At an investment
conference yesterday, president and chief executive officer Greg
Wilkins said changes at Pierina,along with lower grades being mined
at Goldstrike in Nevada, would result in lower production and
increased costs next year. Barrick expects to reverse that trend by
2005, when the first of four new mines now being developed comes
into production."Barrick's board has just approved our Alto Chicama
project in Peru, and we're also pushing ahead at Veladero," Mr.
Wilkins said yesterday at a conference in Toronto.The $350-million
Alto Chicama mine is expected to begin production in 2005. It
contains an estimated 6.5 million ounces of gold reserves and is
expected to produce about 500,000 ounces a year.Veladero, a $425-
million mine in Argentina, is expected to start production in 2006,
and to produce 530,000 ounces a year.
Barrick is also developing Pascua Lama, on the border between Chile
and Argentina, and Cowal in Australia in a five-year, $2-billion
development plan.The company planned to begin work on Cowal this
month but will delay that until the first quarter so it can address
concerns raised by environmentalists and aboriginals, Mr. Wilkins
said. A stronger Australian dollar, which has climbed 17 per cent
against the U.S. dollar, has also made the project more expensive
for Barrick, he said.The company has also revved up its exploration
program, and says it intends to spend about $100-million on
exploration and development next year.Mr. Wilkins said Barrick was
on track to meet its earlier guidance of producing between 5.4
million and 5.5 million ounces of gold in 2003 at an average cost of
between $190 (U.S.) and $195 an ounce.The company, Canada's largest
gold producer, last year produced 5.7 million ounces of gold at a
cost of $177 an ounce.Barrick shares fell 40 cents (Canadian) to
close at $27.86 yesterday on the Toronto Stock Exchange

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Gold -- Sharefin, 23:59:04 09/15/03 Mon

J.P. Morgan, Barrick gold conspiracy to get day in court

Louisiana anti-trust suit

Gold conspiracy theorists have finally found a receptive court to hear allegations that J.P. Morgan Chase & Co. and Barrick Gold Corp. conspired to manipulate gold prices.

Gold coin and bullion dealer Blanchard & Co. convinced the Louisiana District Court yesterday that its anti-trust lawsuit had sufficient merit to enter the discovery process, despite Barrick's contention the lawsuit is "ludicrous."

"I think this is a very significant development getting this thing into a court of law, and into the discovery process, because some difficult questions might be asked," said John Embry, portfolio manager at Sprott Asset Management in Toronto.

At the crux of the lawsuit are allegations that Barrick and J.P. Morgan concocted a scheme to depress gold prices through a complex system of derivative trades and off-balance sheet deals.

"The court finds that the complaint adequately states a claim for Barrick's acquisition or attempted acquisition of monopoly power in the gold-mining market and Morgan's acquisition, or attempted acquisition, of monopoly power in the gold derivatives market," wrote Judge Helen Berrigan.
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Barrick and J.P. Morgan's motives are alleged to be twofold and far-reaching in that Barrick is accused of cherry-picking competitors via acquisitions thanks to depressed gold prices, which enabled it to morph into the world's second-largest gold producer in only 20 years.

Contrary to popular wisdom, falling gold prices have proved lucrative to Barrick, earning the company US$1.7-billion in a five-year period as it locked in gold sales at higher prices.

Unlike most of its competitors, Barrick proved correct in its bet that gold prices were on the decline.

Furthermore, the suit's supporters say a low gold price lent support to a strong U.S. dollar, erased fears of inflation and allowed interest rates to stay artificially low, thereby giving rise to an over-inflated stock market.

The allegations have circulated on the Internet and in select circles for years, but have generally been dismissed as unsubstantiated claims from fanatical gold bugs. If the case is not scuttled by an appeal, it may finally put to bed what is one of the most enduring controversies in the public markets.

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Gold -- Sharefin, 23:56:07 09/15/03 Mon

Blanchard and Company Gold Manipulation Lawsuit Versus Barrick Gold Corporation and J.P. Morgan Chase & Co. Moves Into Discovery Phase

Blanchard and Company, Inc., the largest retail dealer in physical gold in the United States, received word today from the U.S. District Court for the Eastern District of Louisiana that its case against Barrick Gold Corporation and J.P. Morgan Chase & Co. may now move into the discovery phase of the lawsuit. The Court denied Defendants' Motions to Dismiss Blanchard's Complaint that Barrick and Morgan have violated U.S. antitrust laws by unlawfully combining to manipulate the price of gold and to monopolize the market in gold. The antitrust lawsuit was originally brought in December of 2002.

In denying Defendants' Motions, the Court stated that, "Here, in the extraordinary market for gold and gold derivatives, consumers/investors are readily injured by market participants with sufficient market power to depress price."

Blanchard's CEO, Donald W. Doyle, Jr., stated that, "the Court's decision brings us one step closer to obtaining justice for our clients, and for all gold investors, who have been damaged by Barrick and Morgan." Having already served J.P. Morgan and Barrick with its requests for production, Blanchard expects to move into the discovery process immediately.

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Gold -- Sharefin, 23:54:37 09/15/03 Mon

$375 gold still cheap – Hathaway

While the cynics wait for gold to come crashing down once record long positions on Comex are liquidated, at least one fund manager is sticking to his prediction that gold's current rally is only in its formative stages.
“It's very early days yet,” says John Hathaway, manager of the $500 million Tocqueville Gold Fund. If gold fund inflows are anything to go by, he might just be right – alternatively, a growing number of retail investors and institutions are getting it wrong, again.

Hathaway says fund flows are encouraging for Tocqueville, with retail investors leading the early charge, while all the while enquiries from large institutions are gaining momentum.

Hathaway is aware of the growing unease among gold bulls, created by the rapidly increasing speculative overhang of long positions on Comex. His bullish outlook for gold is similarly unaltered by the improving fortunes of US equity markets this year.

“It's a suckers' rally,” says Hathaway. “Japan had four of them during the nineties and at the end of the decade, the Nikkei Dow was 80 percent off its peak.”

The view is underpinned by his forecast of a four digit gold price inside of 10 years. The rise, he says, will come from a number of bearish macroeconomic fundamentals for the US and the broader global economy in general: the Chinese currency remains undervalued, allowing the world's fastest growing major economy to export deflation to the US; interest rates are mired at record lows, discouraging new hedging; and mushrooming US deficits all bode well for gold.

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Gold -- Sharefin, 23:53:12 09/15/03 Mon

Standing room only at New York gold show

With 3,000 people registered for the New York Institutional Gold Show that got under way today (Monday), there was some trepidation that the crowds could portend a market top. Not likely say many.
This is the frothiest mining money show that Mineweb has covered in five years; standing room only at many of the speaker events, whilst company booths took up every available inch of floor space with many unable to be accommodated.

Also notable was a generational shift. Even last year's show, which was well thronged, was still dominated by an older set. This year's crowd was, anecdotally, considerably younger and there were more professional investor faces than we've seen in a long time.

One Canadian company executive mused that the higher gold price had produced more “prey than predators” – a reference to a still strong market for financings as companies take advantage of renewed inflows to the sector. Similarly, another executive told us that fund managers were “crying” for something to put their money into. “There is literally nothing they won't finance right now.”

Those are often warning signs that things might be overheating, but not to some key insiders. Chris Bradbrook, Vice President for Corporate Development at Goldcorp [GG], said that, unlike the tech stock boom, he still hadn't heard a cab driver dispensing advice and tips about gold. “We've come to believe [in the industry] that any bit of good news will be followed by bad news,” he added, summing up a fatalistic attitude that has gripped companies since 1997.

Little of that reticence was on show. The mood was ebullient rather than just bullish as investors and companies alike bask in a higher gold price. However, it would be remiss not to point out that many pundits were predicting a gold price much higher than we have this year – the explosive catapult that has been spoken about for years and which is still popular; if somewhat delayed.

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Gold -- Sharefin, 23:51:18 09/15/03 Mon

THE GOLD-DEMONETIZATION HOAX

Gary North is wrong on gold

According to official doctrine gold was demonetized in 1971 by the "Group of Seven", governments of the most important trading countries of the world. Demonetization was meted out as a punishment for "bad behavior". In the words of Paul A. Volcker gold has been tolerated as long as it was content to act as a constitutional monarch. No sooner had gold asserted itself as an absolute monarch than it was dethroned. Indeed, by a stroke of the pen the 5000 year old monetary reign of gold was unceremoniously terminated over the entire globe, never again to return.

But was it really? This is the question that Gary North is grappling with in his paper "The Remonetization of Gold" (www.LewRockwell.com, August 14, 2003). North is happy to accept the official doctrine that gold is no longer money. Moreover, he doubts that it ever again will be - short of an economic cataclysm. Even though the world needs gold as money, he contends, the transition costs would be astronomical. "Everybody wants to go to heaven, but nobody wants to die." North blames the consumer, not the government. He asserts that there has been a huge, historically unprecedented collapse of demand for gold since 1914. "Demand for gold today is for industrial and ornamental uses, not monetary uses."

In this rejoinder I take issue with North and show that no combination of governments or consumers has the power to eliminate gold as money, any more than they can eliminate nature. The dictum of Horace applies: "Naturam expellas furca, tamen usque recurret" (Expel nature with a club, return how it will). I also reject North's simile that the pill of gold circulation is a pill of suicide. In reality going to heaven would take nothing more drastic than opening the Mint to the unlimited and free coinage of gold, as mandated by Constitution of the United States of America.

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Gold -- Sharefin, 23:41:11 09/15/03 Mon

From Canada, new roads to gold for U.S. investors

Sensing a renewed appetite among Americans, a small army of foreigners is invading the United States with new kinds of gold investments.

Ten small and midsized Canadian gold producers have been listed on the American Stock Exchange in the past year.
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"When gold gets moving, there's nothing like it," said Ilja Graulich, general manager for investor relations at Durban Roodepoort Deep, a South African gold producer that also has interests in Australia and Papua New Guinea and is listed on the Nasdaq. "It's very easy to get hold of money at the moment," he said.
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With the boom, U.S. gold funds are reporting substantial inflows. "We're having our best year in quite some time," said Joe Foster, who manages the Van Eck International Investors Gold fund. The fund's assets have grown by 60 percent so far this year, to $250 million, with inflows from investors accounting for about three-quarters of the increase.

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Gold -- Sharefin, 23:39:30 09/15/03 Mon

WGC gold fund clears legal hurdle

Senior gold industry sources tell Mineweb that the Bank of New York has agreed to waive its claim against the World Gold Council's stalled exchange traded gold fund, Equity Gold. The settlement clears the way for the imminent launch of Equity Gold which is backed to absorb tonnes of gold as the WGC works to improve demand for the metal.

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Gold -- Sharefin, 23:37:32 09/15/03 Mon

Canadian gold reserves dwindling fast

Canadian reserves of gold, once a safe-haven store of value, have fallen to 1 percent of the level Ottawa held when it decided to start selling off its bullion in 1980, according to figures released on Thursday.

The sale of 135,700 ounces of gold last month, announced by the Finance Department, means gold reserves fell to about 200,000 ounces on Aug. 31 from 21 million ounces in 1980.

Gold reserves were worth some $65 million at the end of August -- a tiny fraction of the $35.29 billion in overall Canadian foreign reserves.

Ottawa has been gradually selling off its reserves of gold and replacing them with interest-bearing instruments like U.S. Treasury bills.

Government data shows Canadian gold reserves stood at about 800,000 ounces 12 months ago, while two years ago they totaled 1.1 million ounces.

At that pace of sales, the central bank could sell the last of the precious metal by year's end, although the Finance Department declined to comment on the government's future gold sale plans.

Canada first pegged its currency to gold from 1854 through to 1914 and again from 1926 to 1931, a Bank of Canada spokeswoman said.

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Gold -- Sharefin, 23:33:06 09/15/03 Mon

THE IMPORTANCE OF GOLD

It's real, while other financial assets are created with computer keystrokes

THIS COLUMN should interest four kinds of readers. Type One invests in a precious metals fund as well as some leading gold mines. Type Two's only gold holding is on her finger. She hasn't owned shares in a gold company since she lost money years ago on a sure thing that turned out to be moose pasture. Type Three is an economist with the federal government who is delighted that Canada is beginning to sell what remains of the nation's gold, replacing it with U.S. Treasury bonds. Those bonds pay interest, and they aren't a nuisance to hold. When the economist talks to her counterparts abroad, she is proud of the respect they show for her sophistication. Type Four is sick and tired of discussions on gold and just wants to read about something real.


All four types should be paying close attention to the behaviour of gold prices this summer. Type One is pleased with the big gains in his portfolio. Gold mining stocks have been standout performers in a sideways stock market, reflecting rising gold prices.

But why should others care?

Because, in a word, gold is real. Other financial assets can be -- and are -- created with computer keystrokes. Most of the gold mined since prehistoric times still exists, either in jewellery, teeth, coins or bars. It doesn't rust, and the amount of newly mined gold in a year is insignificant in relation to what's already out there. Somewhere.

Because of gold's uniqueness, its price action tells us a lot about what's happening in the economy. When gold prices soared from US$35 an ounce in 1968 to a high of US$850 in 1980, the run-up told us that most people didn't believe their politicians and central bankers who pledged they would control inflation.

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Gold -- Sharefin, 23:30:33 09/15/03 Mon

Islamic gold dinar seminar tomorrow

A public seminar on "The Islamic Gold Dinar" is scheduled to take place on September 16 at the Chancellor's Hall of Universiti Brunei Darussalam (UBD).
CIBFM - the Centre for Islamic Banking, Finance and Management, will be organising the half-day event beginning at 8am.

Hj Abdalhamid Evan, who specialises in Research and Development in the Development of Gold Dinar and Training, is going to be speaking at the seminar.

He has been involved in the analysis of usury and the promotion of the Gold Dinar since 1987 whilst working in Europe, UAE and Malaysia.

Dr Hj Umar Azmon Amir Hassan is also set to speak, as he is well known for articles, papers and television appearances related to the subject.

The Islamic Gold Dinar seminar hopes to widen the scope of knowledge on the prospective role of the Gold Dinar as a means of trade settlement among nations, Muslims and non-Muslims.

Among the many objectives of the seminar will be to determine whether the time has come for the Dinar and Dirham to replace the paper currency.

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Gold -- Sharefin, 23:28:43 09/15/03 Mon

There is a growing belief among players in the gold market that
the "Washington Accord", where primarily European Central Banks four
years ago announced their decision to limit both sales and leasing
into the market, may be resigned, and perhaps an announcement made
by even the end of the month. Much conjecture and thought has been
expended in this matter, trying to fathom if there will be new
participants in the agreement, if the current quota of sales
(currently 400 tons per annum) will be held as such or expanded, and
which nations might participate in such sales. But, at the end of
the day, it is now thoroughly expected that it will be signed again,
and the renewal of such vows is considered to be bullish, even if
the quotas are expanded somewhat. But, since this news is already
being factored into the current market, it remains a possibility
that if the accord if not signed, if the selling quantities are
greatly expanded, it could be taken as quite bearish. This has the
earmark of the old market saw, "buy the rumor and sell the fact".

Another bullish potential for the gold market is the possibility
that the Chinese, under severe pressure from the West, may decide to
decouple their currency from a direct tie to the USD. Odds favor
that if any progress is made convincing the Chinese government to
liberalize, it might entail that the Yuan could be "fixed" against a
basket of currencies, and not just against the USD. If this occurs,
and if the Chinese allocation of currencies in their "basket" is
judged against their level of trade, then it stands to reason that
the Euro would benefit, and perhaps significantly. If so, then any
rally in the Euro might have a decided effect on the gold price, as
that correlation tends to be rather reliable. Now, truth be told,
there are a lot of "ifs" in such reasoning, and there is no reason,
at present, to be optimistic. While hope does indeed spring eternal,
it is the enemy of the investor or trader who must rely solely upon
hard evidence and logical thought.

J.P. Morgan recently raised their forecasts for gold prices over the
next three years, as the markets have already far surpassed their
previous prognostications. Their price forecast was raised by 6.5%
for 2003 to $362 per ounce, $376 for 2004, and $368 in 2005. I have
full confidence that the gold market will continue to rally, will
continue to show them to be way too conservative in their estimates.
History has shown them to be trailing the price action and not
really forecasting it. But, as the gold market has already spent
most of this year under the $362 price level, in order to achieve
their forecasted average of $362, we will have to move pretty
sharply higher for the rest of the year.

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Gold -- Sharefin, 23:22:51 09/15/03 Mon

Gold & Silver Blog

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Gold -- Sharefin, 23:14:16 09/15/03 Mon

Believe it or not, gold is not all that glisters

There may be an announcement of a big de-hedging programme by a leading gold mining company at the Denver mining conference that starts on September 24. I am not able to name names (such as, say, Barrick), but that's the talk in the gold derivatives world.

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Forum archived -- Sharefin, 23:11:11 09/15/03 Mon

The Forum has just archived itself & prior posts can be viewed here.