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FORUMS Eagle Ranch Gold Is Money Gold-Eagle Kitco SI Gold USA Gold . HOW TO LINK AN URL THE GOLDEN POT gold news archive this forum is strongly moderated SITES Bullion Desk Gata Gold-Eagle Le Metropole Mineset ShareLynx . NEWS GATA -- Sharefin, 19:50:42 01/18/04 Sun A SUMMARY OF GATA'S WORK The Gold Anti-Trust Action Committee (GATA) believes that central banks, acting through certain investment banks, have surreptitiously manipulated the price of gold. Such activity appears to have started in the mid-1990s and continues to this day. Prominent entities involved include J.P. Morgan Chase, Goldman Sachs, Deutsche Bank, the Federal Reserve, the Bank of England, and the Bank for International Settlements. GATA specifically alleges that the U.S. Treasury’s Exchange Stabilization Fund has been used, contrary to official denials, for gold market interventions. Furthermore, GATA believes that the official sector intervened in the late 1990s to prevent an impending gold derivative crisis, the result of excessive short positions accumulated over many years. These claims are based on analyses of publicly available government documents and statistics, trading abnormalities, and material presented in a GATA-backed lawsuit. Howe vs. Bank for International Settlements et al. accused the BIS, Federal Reserve, U.S. Treasury, and four bullion banks of gold market manipulation. Though the suit was dismissed in 2002 on two technicalities, the evidence presented in it is recognized by many knowledgeable observers as having sufficiently proven the price-fixing allegations. Nonetheless, important questions remain unanswered about the gold market activities of the investment banks and monetary authorities. Gold -- Sharefin, 10:02:42 01/18/04 Sun How Americans Lost Their Right To Own Gold And Became Criminals in the Process Gold -- Sharefin, 09:40:05 01/18/04 Sun Hands off Russian gold MOSCOW - Parliamentary sources have confirmed that an official letter from the Federation Council, the upper chamber of the Russian parliament, was sent last month to Prime Minister Mikhail Kasyanov, requesting the government's action to exclude foreign mining companies from the bidding to develop Sukhoi Log, Russia's largest unmined gold deposit, and one of the largest in the world. The move has been made to prevent Barrick Gold, and other international goldminers, from forming local partnerships and bid for the chance to develop the project. Gold -- Sharefin, 09:36:33 01/18/04 Sun Despite Drop, Signs Look Good for Gold INVESTORS who poured more than $1.5 billion into gold and precious metals mutual funds in the last year got a shock last week. The price of gold plunged 3.2 percent on Thursday and was down 4.6 percent for the week, to $407. For the year, gold has fallen 2.2 percent.What happened to gold stocks was even more painful. Even before the price of gold plunged on Thursday, two leading precious- metals indexes fell sharply. By the end of the week, the gold index of the Chicago Board Options Exchange and the gold and silver index of the Philadelphia Stock Exchange were each down more than 10 percent. That led to an average loss of 10.4 percent through Thursday for the precious-metals funds followed by Lipper Inc. Despite this sell-off, investors kept moving money into precious metal funds, adding $53 million in the week ending Wednesday, according to AMG Data Services. Investors, in this case, seem to know what they are doing. Though gold has stumbled, the gold rally won't fade for good until the dollar stops declining.The dollar rallied briefly last week, setting off the decline in gold prices, but mixed signals from the Bush administration, the Federal Reserve and European central banks and finance ministers suggest that nothing fundamental has changed. Gold -- Sharefin, 09:31:25 01/18/04 Sun Gold's glossy again and Newmont says it's no flash in the pan The surging gold market is being driven by a range of economic factors as the metal regains its place as a safe port in financial storms and the good times will flow on for years, according to Newmont Australia chief executive John Dow. ~~~ The strength of the gold market is not a flash in the pan, Dow says. Important economic factors are now driving the market. "There are important weaknesses in the US economy. The structural problems of public and private debt are almost unsustainable." Investors have noted this and as a result the US dollar is weakening, making gold a more attractive store of value, he says. ~~~ The cuts to gold exploration and development in the slump following the Asian economic crisis of the late 1990s mean that supply will take five years to catch up with demand, Dow says. Gold -- Sharefin, 08:41:56 01/17/04 Sat Dollar freefall = gold surge "A fall in the dollar from its pedestal with no substitute to replace it would … support the theory that we may be entering a period of currency chaos and a global economic contraction," warned economist Antony Mueller. "In the final stages of the currency crisis, the dollar will most likely devalue not so much against the euro and the yen, but, instead, most of the currencies combined will devalue drastically against gold." But even if you don't buy this "final stages of the currency crisis" scenario, even if you're a "glass half full" kind of person about the dollar, gold still remains a wise choice for investors wondering how they'll diversify their portfolios in this quixotic year. There are currently more predictions for $500 gold in 2004 by credible analysts than can adequately fit in this article. Nevertheless, there remains an inexplicable bias against the precious metal that borders on the astounding. Exploration -- auspec, 21:23:51 01/16/04 Fri GOING OUT ON A LIMB WITH GOLD AND SILVER MINING STOCKS?? 1-16-04 Gold and silver mining stocks are reportedly the most volatile shares on the market….right? Extreme risk coupled with extreme reward potential….right? Let’s delve into that premise a little. The gold mining professionals commonly state that “80% of the exploration plays DON’T work out” or “one out of 300 drill plays end up in success”. They repeat these phrases partly because of historical accuracy and partly for reasons of dampening excessive speculative fever, both understandable reasons, but exactly how accurate is this advice for our current market environment? Could it be that today’s mining exploration market is actually an historic anomaly in which the deck is stacked in FAVOR of the speculator? I believe that to be the case and will shortly make my argument in the form of a challenge as you shall soon see. Fair enough? Let’s discuss some factors that increase the odds of success in relationship to resource exploration. Competent management absolutely has to be first and foremost on any list of attributes followed by properties with high potential. The wisest explorers have multiple properties and induce majors companies to spend their cash in the expensive exploration process. It is also essential to have companies with healthy treasuries as well as the ability to promote their particular “story”. These factors are all elementary in resource investing….ignore them at your own peril. The most rudimentary issue in successful investing is “buy low-sell high” and the proven way to buy low is to recognize value in sectors that few people are interested in. Today’s gold & silver market are perfect examples of this “value” issue. The gold bear market post-1996 and the Bre-X scandal pretty much decimated the entire sector, being historically brutal and leaving relatively few survivors in the mining industry. Exploration budgets were severely curtailed and numerous gold exploration companies even converted into technology companies just in time to experience the Tech bust also. Only the best managed mining companies survived to participate in the 2001 to current date gold and silver bull market & I believe it is these companies that present us with opportunities for speculation that are truly extraordinary. This leads us to my rationale for writing this article. I’m going to list 40 stocks which I follow that are involved in gold, silver & in some cases base metal exploration. Each and every one of these 40 stocks largely qualify as having the previously listed important qualifications for success, in my humble opinion. Most all have treasuries that are cashed up with the renewed recent enthusiasm that currently resides in this niche. The 40 stocks will first be listed & then followed by a challenge to any interested stock pickers. Stocks are listed with Canadian prices as of 1-16-04 1-Afriore AFO .80 2-Altius ALS 2.60 3-Almaden AMM 2.25 4-Amera AMS .85 5-Anatolia ANO.U 1.20 6-Aurora Plat ARP 2.92 7-ATTAC ATC .39 8-Bralorne BPN .69 9.Bitterroot BTT .53 10-Cardero CDU 2.47 11-Coral CLH .43 12-Canalaska CVV .385 13-Eagle Plains EPL .40 14-Excellon EXN .26 15-Farallon FAN .98 16-Gammon Lake GAM 5.80 17-Great basin GBG 3.03 18-Gabriel GBU 4.35 19-IMA IMR 2.18 20-Intl Northaire INM 1.10 21-Kirkland Lake KGI 3.65 22-Mag Silver MAG 2.10 23-Nevsun NSU 4.98 24-Orezone ORZ 1.21 25-Pacific Ridge PEX .26 26-Pilla Gold PRI .91 27-Radius RDU 1.34 28-Rimfire RFM .90 29-Sunridge Gold SGC 2.90 30-Spectrum Gold SGX 3.46 31-Sterling Res SLG 3.46 32-Spur Ventures SRL 5.03 33-Silver Stand SSRI 14.07 34-Strategic Met SMD .36 35-Spur Ventures SVU 1.60 36-Southwestern SWG 35.27 37-Virginia VIA 1.36 38-Wolfden WLF 5.60 39-X-Cal XCL .85 40-Vista VGZ 4.09 {US} That’s a fairly broad spectrum list of exploration/development companies wit a fertilizer co thrown in for good measure. These are supposedly the riskiest of the risky according to the professional gold analysts, stock brokers & newsletter writers; approximately 80% of these companies should end in failure because of the inordinate odds against exploration success. I’m going to go out on a limb with these mining stories and predict that the vast majority of these plays will, in fact, work out quite successfully, just exactly the opposite of the official mantra. Why? Because I’m convinced we are currently presented with an unique opportunity in this market niche, truly a once in a lifetime situation for the previously mentioned reasons. Most of these stocks have already experienced significant upside movement so this list doesn’t in any way represent ‘bottom picking’. Here’s the challenge—issued to professional as well as everyday gold and silver investors. Your task is to select any ten of the aforementioned exploration stocks that you deem are NOT headed for significant success in the coming twelve months. “Success” will be defined as appreciating by 50% or more or making a meaningful resource discovery by 1-16-05. Pretty rash, no? Your ten picks must average less than 50% in appreciation for you to “win”. Maybe I’ll make a complete fool of myself & in the process end up lonely and destitute, but I doubt it. You may e-mail me at rtmauspec@hotmail.com with your ten selections and I will follow up with a six month update and a twelve month final outcome. The entire purpose of this essay is to portray what an incredible opportunity exists in today’s resource sector. This is not investment advice & I do happen to own many of the listed stocks. Fiat -- Sharefin, 19:57:03 01/16/04 Fri Low rates and deflation Yes, the government’s debt becomes more serviceable as rates move lower. However, every short-term piece of paper printed makes it more a difficult policy questions of when to raise interest rates. Thus, interest rate policy locks itself into an environment of zero percent return (and chronic negative real return) until liquidity becomes unavailable. Currently, an inflationary bias is also reflected in the weakening dollar and rising gold prices. But it is the long term interest rate that provides clues as to whether or not we will experience a deflationary depression, stagflation (deflation-inflation), or hyperinflation. A deflationary depression would be the worst scenario possible. Gold -- Sharefin, 08:02:46 01/16/04 Fri Gold slump seen as a temporary weakness Despite the correction, industry analysts expect gold to remain a hot property during the first half of 2004. A report from London-based Barclays Capital predicts gold will probably hit US$470 an ounce before June 30. Barclays expects the price of bullion to average US$420 an ounce for the entire year. "The rally in gold has been increasingly fuelled by the depreciating [U.S.] dollar," said Kamal Naqvi, Barclays Capital's precious-metals analyst. "Over the course of 2004, the risks are biased to the downside, with the potential for dollar recovery." A second report, this one from London-based gold market consultants GFMS Ltd., predicts the price of bullion will surpass US$450 an ounce by June 30. GFMS predicts the volatile swings along the way and expects the price of bullion to average US$437 an ounce over the first six months of 2004. ~~~ Bruce Alway, an analyst with GFMS, yesterday told a seminar in Toronto the rising gold price will cause more miners to back away from hedging policies. Hedging is the practice of signing contracts that lock in future gold sales at fixed prices. Gold -- Sharefin, 07:45:46 01/16/04 Fri Gold prices tumble 3.2% Gold prices tumbled 3.2 per centyesterday, giving up much of the gains of recent weeks and posting the biggest one-day decline in three months. Analysts said the precious metal's steep decline reflected profit-taking by big investment funds and the U.S. dollar's rise against the euro, which has gained 20 per cent against the greenback over the past year. ~~~ While the correction brought gold uncomfortably close to the psychological benchmark $400-an-ounce mark, analysts said conditions are still in place for the metal to trade above $400 this year. "The basic factors that have taken gold to where it is in U.S.-dollar terms still exist," said Andrew Montano, a director of ScotiaMocatta, the precious metals trading arm of Bank of Nova Scotia. Mr. Montano and other analysts say the factors that have contributed to a higher gold price -- steep U.S. deficits, geopolitical jitters and reduced hedging by gold producers -- remain in play. The U.S. current account deficit was $135-billion in the third quarter, the third largest on record. The deficit represents money the United States must borrow to pay for imports and to finance investment not covered by U.S. savings. At the current pace, the United States needs to attract about $1.5-billion a day to fund the deficit and keep the value of the dollar steady. In an update on the gold market, London-based consulting firm GFMS Ltd. yesterday said it expects the gold price to continue rallying over the first half of this year, perhaps surpassing $450, but it also said a correction is possible. Analysts said gold could come under further pressure if the U.S. dollar continues to gain ground against the euro. GFMS said investment demand -- rather than jewellery fabrication or industrial demand -- helped drive gold prices higher in 2003 and will be key to the precious metal's fortunes this year. The firm estimates that $10-billion flowed into gold investments last year from investors and speculators, roughly double the value of comparable demand in 2002. Fiat -- Sharefin, 07:43:46 01/16/04 Fri 1 Euro will cost 1,4 USD by the end of the year European Central Bank (ECB) has expressed its concern for the first time on Monday in regards to the increasing Euro rate, especially after it beat a new record of 1,289 USD. Last week, Commissar of the Eurocommission Pascal Lami has expressed his worries regarding the Euro's rate. He called that rate of 1,28 dollars as "critical". Fiat -- Sharefin, 07:41:57 01/16/04 Fri Greenspan hears dollar concerns BERLIN Alan Greenspan, the U.S. Federal Reserve chairman, discussed the surging euro with Chancellor Gerhard Schröder of Germany on Tuesday, but declined to comment on whether governments should step in to halt a climb that some fear may dampen growth in Europe. . "I regret that the American government has appointed the secretary of the Treasury as the sole spokesman for currency policy," Greenspan said, "and as an economist I find that frankly frustrating but I will adhere to that." ~~~ Schröder said he and Greenspan, who was giving a speech at an event organized by the Bundesbank, discussed "the development of the American and the global economy, and the relationship between the euro and the dollar." . But Schröder said the question of how to react was up to the European Central Bank, the chief monetary authority for the 12 countries using the euro. . On Monday, Jean Claude Trichet, the president of the ECB, said "brutal moves" in the 12-nation currency were unwelcome, ratcheting up more benign rhetoric he used last week that suggested the central bank was not strongly concerned about the rise in the currency. . The ECB is coming under greater pressure from industry groups and politicians to prevent euro gains from hampering an economic recovery. ~~~ Finance Minister Francis Mer of France called on the Group of 7 industrialized nations Tuesday to take action to stem the euro's gain against the dollar, saying it threatens the economy of the dozen countries sharing the currency. Mer said he expected ministers attending a meeting in February to "send a proper signal" of the risks posed by the dollar's sharp decline." ~~~ Last week, the International Monetary Fund issued a sharp warning that the United States, with its rising budget deficit and ballooning trade imbalance, was running up a foreign debt of such record-breaking proportions that it threatened the financial stability of the global economy. . On Tuesday, the former U.S. Treasury secretary, Robert Rubin, added his voice to the chorus of speakers warning that U.S. budget deficits pose a significant danger to long-term economic growth if left unchecked. ~~~ "If you get to the point where markets begin to believe that government is going to resort to inflation rather than reestablish fiscal discipline as a way of dealing with projected long-term deficits," he said, "then you have a risk that markets will begin to demand a whole other level of higher interest rates to compensate them for the risks of inflation that they see." Fiat -- Sharefin, 07:38:30 01/16/04 Fri The flight of the Indian market Stock markets in India have generally been the purveyors of bad tidings: financial losses, corporate frauds, even suicides by brokers. But over the last few months, the benchmark Sensex (Sensitivity Index), hosted by the Bombay Stock Exchange (BSE), the country's oldest and largest bourse, has been a cause of celebration among brokers and investors alike. Nearly two years ago, in April 2002, the Sensex hovered at around the 3,300 mark. It then began a gradual slide, touching 3,181 and 3,070 in August 2002 and December 2002, respectively, before bottoming out at 2,959 in April 2003. A few market pundits warned that this signaled a long bear phase, attributing it to Indo-Pakistan tensions over Kashmir and uncertainty over the results of the general elections scheduled for later this year. But the bulls took over and, since then, have pushed stock prices up with a vengeance. The Sensex touched 3,607 points in June 2003, 4,453 in September 2003, 5,838 in December 2003, and on the afternoon of January 9, it closed at 6,112 points. In the process, it shattered a number of records. Last year, the Sensex broke an 18-year benchmark by closing 59 percent higher than the total trading days in a calendar year. Over 18 continuous trading days - between August 12, 2003, and September 5, 2003, - the Sensex equaled its earlier record of successive higher openings set in February 2000. The Sensex had opened higher for 18 straight trading sessions between February 17 and March 3, 2000. Market sources said higher openings this time around were a sign of the inherent bullishness of the market. Mahendra -- Sharefin, 07:20:44 01/16/04 Fri Dear Friends, Many of you may have been enjoying my latest book “2004 World & Financial Prophecies”. I thank those of you who have purchased the book and for the subsequent comments that you have sent me. I also appreciate your messages of congratulations and goodwill. I would like to share something very special with you and show in detail how you should plan for the year 2004. I shall endeavour to give you maximum information about what I see and feel concerning the future through astrology. Do not expect that I shall be 100% right, but at the end of the year, I am confident that you shall smile and say in your heart, ‘thank you astrology…thank you Mahendra’. Most of my clients have gained from my work for a long time now. After careful study, research and to talking to my clients, I can say that out of 100 people, 99 of them have gained. It has taken a long time of struggle and hard work to build faith in my work. Initially, not many people showed any attention when I said that I was predicting the future. However, hard work and patience has seen banks, institutions, funds, corporations and asset management firms become my clients while other players in the world economy closely follow my work. After research, we have found that $5-7 Billion move or shift on long term investments or strategies on the basis of my predictions. I will recommend a few areas where one can put money as well as highlight important points which will play a key role in world financial markets in 2004. Currencies Those who have read my book are aware that I am predicting the Japanese Yen to gain against major world currencies. Since 2002, the British Pound and the Euro have been my favourite currencies. This year, the Yen will gain up to 60 -80 against the US Dollar as well as the Euro and the British Pound. Last week when I predicted the gain of the Dollar against the Pound, Euro, Ausi, Rand etc, I recommended to my clients not to sell the Japanese Yen and they listened. In fact, they bought more Japanese Yen and heeded my recommendation to sell the Euro and the Pound. Watch list should be – Yen and Russian Rubble Silver Many people in the world investor community have closely been following my gold predictions. Those who have read my book will notice that I am more exciting in my silver predictions, even though gold is my favourite metal according to astrology. For 2004, silver will yield unforgettable returns in the short term. I do not intend to give my price projections here because some may think that I am crazy or drunk. The current level of around $6.20 is a great opportunity to buy silver and the first price target that I am predicting is $7.95, after which unbelievable prices will be attained if silver remains above this level for two days. Previous historic price levels may be reached in the next two years. After 21st January, the relationship between silver and gold will be broken and for the first time in history, silver will move on its own strength and power. Henceforth, it does not mean that silver will automatically go up whenever gold does. This is a similar situation to the past when I predicted that the Dollar would go down but the USA stock markets would go up. Therefore, do not make the mistake of basing your silver investments on the gold movements. The interlinked relationship of the Dollar and metals will also break in the last week of January. If the Dollar gains, it does not mean that metals will go down. Stock Markets I have been predicting the downfall of the American stock market for the last two months but the opposite has occurred. However there is an astrological reason behind my prediction. The market has come out of the Bull Run cycle which I predicted for 2003. When one is outside the cycle then it is very dangerous to play. Therefore when I see a risk, I warn well in advance as this is my work’s specialty. I do not emerge on the day when the market has tumbled 500 points and declare that the market has gone down AND FROM HERE NOW LOOKS BAD. This is what the technical analysts and chartists do. I am neither of these and my predictions are wholly based on energy and astrological waves. From this point, a manipulator could even take the market up a little bit. I will however not advise my close followers to remain in the market because one of these fine days the market will decline slightly and then collapse 500-700 points by the close of the session. I do not want any of my followers to be trapped in such a situation. I also do not believe in making some little money in one or two month’s temporary upward trend only to be later trapped and losing all the gains made as well as your hard earned money. And yes, I once again predict that the worst decline will be witnessed in the market and that a horrible scenario will unfold after 21st June 2004. This will precipitate widespread panic in the world stock markets but surprisingly, the South African and Russian stock markets will be on an upward trend in 2004. Investors should therefore watch these markets and make appropriate decisions. Oil As I have already mentioned in my book, I see a great rise in the prices of crude oil, natural gas and gasoline. Indeed, all energy products will remain very high in 2004. This is the one area that one should not ignore as I see a great rise in energy products. During this year, crude oil prices could go up to $50 to $60. Property Market I see a great crash in the land and property markets in Great Britain (London) and in North America. Therefore, do not engage in land and property speculation after March 2004. There will be many reasons that will account for the drop in prices, one of which shall be the hiking of interest rates in Britain and the USA. Important Note I know that short term and long-term traders gain and lose large sums of money even in a single day. The gain or loss is based on the individual’s investments. Some take risks for $100, $500 or even $5 million but when it comes to participating with the disadvantaged in society, most people will only commit a minimum amount while many ignore. Whereas they would be willing to risk huge amounts on the prospects of gain, they are reluctant to make a sacrifice for helping those who really need their assistance and find themselves in deplorable situations through no fault of their own. Wherever you are situated in the world, please contribute to charity in your area or anywhere else in aid of those who are in want and needy of your help. For the short term, a good opportunity to buy gold is between $404 and $408 while for silver it is between $6 and $6.20. One should sell in the stock markets and buy the Japanese Yen. Though the Dollar will attempt to make gains but it will fluctuate a lot now in the next 30 days. I have decided to be placing updates and write-ups on my website twice a week. They shall cover various issues in the world financial markets as well as other topics of global concern. Therefore, I shall soon be posting my next update in the following ten days. Weekly information will be available in newsletter but unfortunately you have to subscribe for it. If I give every thing for free then soon I may have to close down my office, internet and website because of non-payment. Thanks and God Bless, Mahendra Sharma. www.mahendraprophecy.com ------ I guess he's been hanging around the goldbug forums.(:-))) Fiat vs Gold -- Sharefin, 00:19:34 01/16/04 Fri OCC Derivatives Total gold derivatives rose by 17% for the quarter - from 72.9 billion to 84 billion Gold derivatives with a maturity under one year rose a huge 26% - from 37 billion to 45 billion Gold derivatives with a maturity of one to five years rose 11% - from 27.6 billion to 30.7 billion Total Notional Tonnes rose from 5873 tonnes to 6846 tonnes for a 15% increase You can see the rise here shown in the charts. OCC Gold Derivatives So much for hedging closing out the contracts between the Miners/Bullion Banks/Central Banks It's blatantly obvious the Bullion Banks are not closing out their side of the positions but letting the positions build as the miners are reducing their hedges. This infers that the closing out of hedges is not removing supply from the system nor replacing gold borrowed from the Central Banks. Which in turn implies that the Bullion Banks are adding risk to their positions which must be blowing out with the rising gold price. They are using Greenspan's fiat to paper over what must be sizable losses. As usual we know who to blame, & thanks to the work previously done, why. Gold -- Sharefin, 20:44:30 01/15/04 Thu NY gold drop pulls down precious metals as dollar rises COMEX gold fell 3.15 percent to a one-month low on Thursday, dragging down silver and mining stocks, as a firming dollar spooked speculators out of the long positions booked in gold's rise to 15-year highs last week. Hedge funds and commodity trading advisors -- their more regulated cousins -- had been holding one of the largest-ever bullish bets and used the dollar's recovery as an excuse to take profits before too much of their windfall evaporated. ~~~ "There is long liquidation. No featured names, no producers really. It just looked like fund-type of business," said a bullion dealer. ~~~ "As the perception emerged in the market that the dollar was not a one-way street, that a rally in the dollar was possible, a small movement upward in the dollar caused a significant downdraft in precious (metals)," said Leonard Kaplan, president of Prospector Asset Management. ~~~ Though analysts see a risk of further gold selling, they remain optimistic about prices. In a Reuters survey released Thursday, analysts forecast an average price of $419.50 for 2004, which would mark the third straight year of double digit gains since gold was languishing near 20-year lows in 2001. Consulting firm GFMS Ltd. also released an update to its 2003 Gold Survey, predicting prices would average $437 an ounce in the first half of the year. Gold -- Sharefin, 20:42:44 01/15/04 Thu Miner Cambior adds glitter to gold target Cambior Inc. has increased its gold-production target 35 per cent as a result of the start-up of the company's Rosebel mine in South America next month. The Longueuil-based miner plans to produce 705,000 ounces of gold at an estimated operating cost of $221 (U.S.) an ounce, the company said yesterday. Gold -- Sharefin, 20:41:30 01/15/04 Thu Europe gold pressured by dollar, profit-taking Gold bullion slid below a $417 support level in Thursday's European trade, under pressure from profit taking and a strengthening dollar after the release of unexpectedly narrower U.S. trade deficit figures, analysts said. The yellow metal has been gradually slipping from a 15-year high reached in a steep run last week, but analysts said it is working its range and expect another rally in the longer term. "The currency market continues to impact the dollar gold price and with a combination of better U.S. data and verbal intervention against the rise in the euro, gold's recent profit taking may be extended over the next few days," analyst John Reade of UBS Investment Bank said in a daily report. Fiat -- Sharefin, 20:39:56 01/15/04 Thu The Greatest Depression Is Coming That’s no exaggeration. It will be worse in many respects than the Great Depression of 1929-1939. But those who are prepared will prosper. The First Signs Are Already Here ~~~ We’re seeing deflation for the first time since the 1930s. That’s right: downright deflation. Look at the list compiled by Comstock partners: PCs and peripherals; butter; TVs; toys; long-distance charges; used cars and trucks; audio equipment; women’s underwear, nightwear, sportswear and accessories; milk; men’s pants and shorts; pork chops; airline fares; new cars; electricity; ship fares; and kitchen, living room and dining room furniture. In most areas of the country, housing prices have started to drop. Rents are dropping. “For Rent” or “For Sale” signs appear at nearly every office building we look at, whether it’s here in Colorado, San Francisco, or anywhere. There are very few prospective tenants who are shopping for space. In fact, the only area where any inflation still exists is in health insurance and energy costs. We have experienced several periods of disinflation since the Great Depression, but never downright deflation: that is, until now. In a period of disinflation, there’s no inflation or deflation. Prices remain stable. The Federal Reserve Board is obviously concerned about deflation. In November 2002, Federal Reserve Board Governor Ben Bernanke made a now-infamous speech to a group of economists in Washington on his version of a remedy for deflation. Bernanke is quoted as saying: "The U.S. government has a technology, called a printing press - or today, its electronic equivalent - that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” He was right, but his comments led investors to sell dollars and buy Euros and gold. Moreover, Mr. Bernanke forgot one minor detail: Germany, faced with huge deficits caused by reparations requirements after World War I, tried the same thing in the 1920’s. Pictures soon appeared worldwide, showing people with wheelbarrows full of Reichmarks lining up to buy a loaf of bread. The country was still in a Depression, despite the printing presses having worked overtime. This led in large part to the rise of Adolf Hitler. What else can the Fed do? They have already knocked the Fed Funds rate from 6% to 1.25%, the lowest rate since 1962, and it hasn’t worked. Japan has knocked short-term rates down to 0.25%, and that country has been in a deep slump for most of the last 11 years. But we’ll be lucky if we go down Japan’s road: at least Japan is a country of savers. We are a country of spenders. Fiat -- Sharefin, 20:37:45 01/15/04 Thu Saddam's Face Ceases to Be Legal Tender in Iraq Bank notes printed with the face of Saddam Hussein ceased to be legal tender in Iraq on Thursday, wiping out another memory of the former dictator as thousands of tonnes of old money were sent to the central bank furnaces. The introduction of new banknotes, which are less prone to counterfeiting, and general confidence in the Iraqi economy have pushed the dinar to new postwar highs against the dollar, forcing the Central Bank to intervene in the market on Thursday. ~~~ BANK INTERVENES The Central Bank of Iraq said it had intervened to counter the dinar's swift rise, buying dollars at 1,350 dinars each after the currency hit 1,100 on Wednesday -- from 1,500 last week and a low of 2,200 last year. Iraqi Central Bank Governor Sinan Shibibi told reporters the strength was "not justified." "There's probably some kind of speculation, people have bright prospects for the Iraqi economy...It is now a trustworthy currency, but it's not justified because it's a big jump, you really want something smooth," he said. The British Treasury's Jacob Nell, a policy advisor in Iraq, said the central bank thought the dinar's recent appreciation was unwarranted by any political or economic developments. "Today (the bank) bought dollars in the auction at 1,350 and it stands ready to intervene further in order to ensure it meets its primary objective of exchange rate stability," Nell said. ~~~ In the streetside money markets, currency vendors were at a loss to explain the dinar's volatility. There are rumors of interference from outside, of Kuwaitis or Jordanians trying to play the markets and line their pockets. Money changer Abbas Feilih sat between the puddles and exhaust fumes of Baghdad's Firdous Square, a calculator and a pile of bright new notes sitting on his wooden table. "I don't really understand why it's changing so much," he said. "Yesterday 1,100, today 1,300...It's not clear why, maybe there are people outside our borders playing around. But people seem to think the economy will get better, that's a good thing." Gold -- Sharefin, 07:45:22 01/15/04 Thu Gold can rally to $450/oz in first half '04--GFMS Gold can extend last year's scorching rally in the first half of this year to $450 an ounce after a possible profit-taking pullback from 15-year highs hit earlier this month, GFMS Ltd. said Thursday. In an update to its Gold Survey 2003 report, the London-based commodity research and consultancy forecast a first-half average price of $437 thanks to speculative and investment demand and more portfolio diversification into commodities. The price of gold rose 20 percent last year. Gold -- Sharefin, 04:37:55 01/15/04 Thu Gold stocks slip with bullion price Gold stocks fell yesterday as the price of bullion dropped to its lowest point in two weeks and the U.S. dollar rose against the euro. ~~~ Despite the selloff in gold shares and the weakness in bullion, the prevailing sentiment among market watchers was that yesterday's activity in the gold markets was a short-lived correction, and that the factors that have contributed to the precious metal's rise, including pressure on the U.S. dollar, are still in place. "This is a long-awaited correction," said John Ing, president of Maison Placements Canada Inc. "We have had almost 13 weeks of up momentum and generally speaking, up moves last only seven to nine weeks." Despite the rally in the U.S. dollar yesterday, which gained 0.9 per cent against the euro, the fundamental outlook for the once-might currency remains bleak, Mr. Ing said, as a result of steep budget and current account deficits in the United States. The U.S. dollar's rise yesterday followed reports that European central bankers are concerned by the euro's rapid gains against the dollar, and may consider currency sales to temper what European Central Bank president Jean-Claude Trichet on Monday described as "brutal moves" in the 12-country currency. Gold -- Sharefin, 21:47:02 01/14/04 Wed Gold: $2,000 An Ounce Or Bust When something like a handwritten song sheet by John Lennon sells for nearly half a million dollars, you know that the U.S. dollar is no longer worth hanging on to. The buyer of that sheet music may end up regretting his purchase, or he might be able to trade the music for even more worthless dollars in the future. Who knows? I do know that tangible assets are better than dollars, which lost 20% of their value in 2003. This is where we have been directing your investment efforts over the past two years. There is no change in that advice for 2004. ~~~ I have already outlined the energy avenue, but you should also own some gold. Gold bullion has solid support at $400/ounce basis February futures. I have said that I think gold will eventually reach $2,000 to $2,500. This elicits some surprise. If you think back at the house you bought 20 or 30 years ago, this number is not surprising. In 1971, I bought the house we still live in, which is modest by modern standards. It cost $37,000, and I had no idea how I would pay for it. I also owned an XKE Jaguar roadster, which I had purchased a couple of years earlier for $2,000. I was more naive then, but I joked that when the Jag was worth enough to pay off the mortgage, I would sell it and do just that. I still have the house, and it would likely sell for some $350,000, maybe more. I still have the Jag, and once the current restoration is finished, it could sell at auction for perhaps $80,000. If anyone had suggested 30 years ago that either the Jag or the house would be worth this much, I would not have believed them. The secret to this is not that the value of the house has gone up that much. I have to live somewhere. The secret is that the value of the house is the same. The value of the house in dollars is greater because the dollars are slowly becoming worthless. Gold at $2,000 will be no big deal. You should not be surprised at the value of gold this time a year from now, but you will be surprised at the value of the dollar. ~~~ One big change I see coming in 2004 is a serious correction in the stock markets. I believe that our energy and precious metal investments will weather the storm just fine, as they will profit from one of the basic causes of the next market decline. That is a weak dollar and its ramifications. Fiat -- Sharefin, 22:13:49 01/13/04 Tue Greenspan Gives Himself An Unjustified Pat On The Back “There is currently a $3 trillion dollar bubble in the housing market, which when it breaks could have an effect similar to the bursting of the stock market bubble. Mr. Greenspan has encouraged the growth of this bubble by publicly denying its existence. But this unprecedented run-up in home prices -- more than 40 percentage points above the overall rate of inflation over the last 8 and a half years -- has no plausible explanation other than being the result of a speculative bubble. Mr. Greenspan should tell the truth about this bubble -- this time before, rather than after, it has done its damage.” -Mark Weisbrot ~~~~ There are signs that the rest of the world is unprepared to join in the ovation which Greenspan clearly thinks is justified under the current circumstances. In spite of the best efforts of Asia’s central bankers, it is highly telling that the dollar has continued to sell off and gold continues to rise. More significantly, is that such dollar depreciation, although accompanied by some hand-wringing amongst French and German industrialists (who perceive their export markets under collective threat as a consequence of the euro’s record-breaking strength against the greenback), is not engendering any significant reaction from Euroland’s monetary authorities. They appeared prepare to let the dollar’s freefall continue indefinitely. If anything, recent comments by European Central Bank President Jean-Claude Trichet, who said the euro’s 22 per cent gain in the past year would not prevent the region’s exports from increasing, appear a rebuttal to Mr Greenspan, especially as such remarks came on the heels of the Greenspan and Bernanke speeches. In effect, Trichet appears to be telling American policy makers, “You’re on your own.” It is worth remembering that the new ECB President is the same man who was synonymous with the Banque de France’s “franc fort” policy throughout the 1980s and 1990s – in spite of persistent devaluation pressures which arose at that time – in order to force structural economic reforms on the French economy. Although expressing some concern at the pace of the rise, rather than the absolute level of the euro per se, it does not appear just yet that the ECB is prepared to play the game of competitive currency devaluations, although that may come later. However, what does ring clear in remarks by former ECB President Wim Duisenberg, chief economist Otmar Issing, and now Trichet, is that ECB authorities continue to exhibit concerns about the stability of the global financial system in a manner somewhat at variance with Mr Greenspan’s own optimistic assessment. Fiat -- Sharefin, 22:09:54 01/13/04 Tue Transatlantic rift grows over falling dollar France is co-ordinating efforts with Germany to ensure that next month's meeting of Group of Seven finance ministers sends a strong signal on the need for stability in the currency markets. But both countries are facing an uphill task in persuading the US administration of the need for G7 action to correct the steep decline in the dollar against the euro. European officials said the two sides were holding increasingly antagonistic views. European governments and central bankers are increasingly concerned about the problem while US officials insisted there were no grounds to act. The growing rift was highlighted on Tuesday when Alan Greenspan, chairman of the US Federal Reserve, played down the dollar's weakness and repeated his view that he saw no problem in funding US deficits. His comments came just a day after Jean-Claude Trichet, the European Central Bank president, signalled his disquiet at the euro's rise against the dollar, insisting it had been "brutal" and a sign of "excessive volatility". ~~~ Most analysts believe the Bush administration favours a weaker dollar to help domestic exporters and narrow the ballooning trade deficit. It would be loath to see a dollar rise just ahead of the presidential election. "It will be pretty hard to get the US on board [at the G7]," said Mark Cliffe of ING. "The US is on a global growth campaign and the ball is now very firmly in Europe's court." He said the ECB might have to cut interest rates before the US was prepared to sanction any G7 concern about exchange rates. Fiat -- Sharefin, 22:08:18 01/13/04 Tue Greenspan admits US deficit could run out of control Alan Greenspan, chairman of the US Federal Reserve, tried yesterday to downplay the size of America's trade imbalances but admitted it was difficult to tell whether the current account deficit had spiralled out of control. European leaders, who blame the deficit for the dollar's recent dive, called upon the European Central Bank to cut interest rates, as Mr Greenspan acknowledged that the weak greenback had already put "considerable pressure" on European exporters. Mr Greenspan said many thought the deficit was no longer capable of being financed but added that he saw "little evidence of stress in funding US current account deficits. Gold -- ShareLynx Gold email news & snippets, 21:31:43 01/13/04 Tue Bullion banks and central banks struggle with explosive gold Gold's fundamentals may be even better than they were at the outset of the 1970s, a decade that saw a 20-fold increase in the price The gold picture in a word: explosive ~~~~ There is no better example than what is now going on as gold struggles to break away from the US$400-per-ounce area. With the fundamentals looking superb and the technical position shaping up even better, any free market would be exploding to the upside. However, whenever gold begins to surge, the usual suspects -- Morgan Chase, Goldman Sachs, Morgan Stanley et al. -- show up on the floor of the Comex and sell until the upward momentum has been reversed. They did it aggressively prior to the December options expiry to keep gold under US$400 so the December $400 call options would expire worthless. And then, when gold moved through US$400 subsequently, they sold aggressively again to prevent the price from accelerating upward. Certainly, one of the primary reasons for this behavior is the existence of an enormous short position, which is going further and further off-side. The entities that are short gold are feeling the pain, and it is requiring an immense amount of capital to sustain their positions. So just who are those entities that are on the wrong side of the market? To begin with, the so-called commercials, the aforementioned bullion banks that have capped the market, no doubt with the acquiescence and assistance of their central bank associates, are the principal culprits. They increased their shorts by 23,000 contracts in the successful effort to hold gold under US$400 prior to the December options expiry. That's not chicken feed as it represents 2.3 million ounces, worth more than US$900 million. They are now hugely off-side on a substantial short position. Secondly, we have the remnants of the carry trade, all the "smart guys" who thought they couldn't lose by borrowing gold from the central banks through their bullion-bank friends, selling it in the spot market, and reinvesting the proceeds in a financial instrument to secure a large spread. ~~~ The next group is the gold-mining companies that hedged aggressively and didn't implement risk-control programs as the price began to rise. The poster boy for this category is Barrick Gold, which is short roughly 16 million ounces, or three years of production. After bragging for years about how much money it made with its premium hedging program, Barrick now stands to lose far more than it ever made if the gold price continues to rise. Barrick may have finally come to its senses, as both the chairman, Peter Munk, and the CEO, Greg Wilkins, have now renounced hedging. Lastly, there are the gold-derivative dealers, led once again by Morgan Chase, which has a ridiculously high gold-derivative exposure, particularly when viewed in the overall context of the physical gold market. The one thing that has become abundantly clear is that this is the largest short position that has ever existed in gold, and when measured in terms of annual production levels, it might best be described as ludicrous. When one realizes that, without even considering the short position, the current gold market fundamentals may be even better than they were at the outset of the '70s, a decade that saw a 20-fold increase in the price, one can garner some insight into the potential for the yellow metal. Fiat -- Sharefin, 21:12:21 01/13/04 Tue OPEC mulls move to euro for pricing crude oil OPEC is considering a move away from using the U.S. dollar — and to the euro — to set its price targets for crude oil, the highest-profile manifestation of the debilitating effect of depreciation on the greenback's standing as the currency of international commerce. Several members of the Organization of Petroleum Exporting Countries are seeking formal talks on using the euro, as well as the U.S. dollar, when determining price targets for crude, a senior oil minister within the cartel said Monday. “There are countries that are proposing this,” Venezuela's Oil Minister Rafael Ramirez said in Caracas. “It's out there, under discussion.” Mr. Ramirez did not specify which OPEC members are pushing the proposal, but much of the impetus is believed to come from Persian Gulf producers. They have seen their purchasing power in Europe pinched as the U.S. dollar loses ground against the euro — including touching a record low Monday. Any move to water down the use of the U.S. dollar as the currency would have enormous symbolic impact, said one prominent Canadian energy analyst. “On a symbolic level, I think it's huge, not only for what it says about the U.S. dollar, but also the implied change to the nature of energy trading worldwide in the future,” said Wilf Gobert, vice-chairman of Peters & Co. Ltd. Fiat -- Sharefin, 20:57:16 01/13/04 Tue China's banking system a ticking time bomb China's banking system is like a ticking time bomb. Saddled by mountains of bad loans and insufficient capital base, collapse of the state banks will cause an implosion of the Middle Kingdom, predict many doomsayers. Many say time is running out as foreign competitors are slated to pry open the banking sector in 2006, as China pledged to open up the sector as part of its commitment to the World Trade Organization (WTO). Fiat -- Sharefin, 04:59:55 01/13/04 Tue The $44 Trillion Abyss The baby-boomers are about to retire, and it's going to cost us—big. Here's what the government doesn't want you to know. Last fall Paul O'Neill, then Secretary of the Treasury, wanted a simple answer to a thorny question: How prepared was the nation today to pay all its future bills? Two government experts worked for months to calculate the answer. Their findings, which shocked even them, were never published—the Bush administration made sure of that. The reason for the silence was that by the time the two researchers had completed their study, O'Neill had been thrown out of the Treasury and replaced by the more politically astute John Snow. No savvy administration power player would dare point out, right in the middle of tax-cut season, that there was a huge hole in the country's finances—a $44 trillion hole. The first massive wave of baby-boomer retirees will hit five years from now. That will leave fewer workers to pay for ballooning Social Security and Medicare bills. How the expected budget shortfall of $44.2 trillion* breaks down Source.................. Amount Social Security....... $7 trillion Medicare........... $36.6 trillion Other................. $0.6 trillion *Based on current government revenue and spending. Sources: Census bureau; Smetters and Gokhale Fiat -- Sharefin, 04:55:39 01/13/04 Tue BEIJING, Jan. 13, (Xinhuanet) -- China will make a one-off revaluation of the yuan within the first quarter of the year and move to a trade-weighted basket of currencies to set its exchange rate by the second half, investment house Goldman Sachs said. The measures will lead to a five percent cumulative appreciation over the next 12 months, it said. With low interest rate expectations and yawning current account and budget deficits, the US dollar has been hitting fresh lows against the euro and other major currencies on an almost daily basis. This is pressuring China to address its exchange rate policy, the investment bank said in a client note. Although a 10 percent revaluation would be needed to bring the currency to fair value, it expects China to revalue the yuan by 2.5 percent against the US dollar in a "prudent first move" towards a more flexible exchange rate regime. Goldman Sachs said that China is then likely to move from a direct US dollar peg to a crawling basket of trade-weighted currencies. It cited a recent mainland media report which said that the government was considering linking the yuan to a basket of 11 trade-weighted currencies. It noted, however, that because many of these were either managed against or pegged to the dollar, its composition would be 63 percent in dollars and the remainder split between the euro and yen. Goldman Sachs said that the move to a managed basket of currencies would lead to a one percent appreciation against the basket in six months and 1.5 percent in 12 months, totaling a five percent rise in value overall. It said that this implies an exchange rate of 8.07, 7.68 and 7.54 yuan to the dollar in three, six and 12 months respectively. The yuan will be valued at 13.00, 12.38 and 12.60 yen over these periods, it said. Fiat -- Sharefin, 04:53:00 01/13/04 Tue MoneyFiles Gold -- Sharefin, 04:51:40 01/13/04 Tue Prechter on gold - and more A Prechter point penetrated? Many readers want to know what the Elliott Wave guru has to say now that gold has closed above $422. Robert G. Prechter's lieutenants, Steve Hochberg and Peter Kendall, conceded in their most recent Elliott Wave Financial Forecaster that "a close beyond $422 would cause them to re-evaluate the long-standing official Prechter position that gold was just in a peaking bear market rally. (See my Jan. 5 column). Gold promptly closed above $422, several times. And as I write this (too late on Sunday night), it is above $426 in the Asia-Pacific markets. Now the Big P himself has pronounced in his big-picture Elliott Wave Theorist, just to hand. This is Bob Prechter's statement on gold, in its entirety: "No one wanted gold at the February 2001 low, when it was $255/oz. Since it rose above 360, it has been in demand. The hype in the gold market is tremendous, and even local newspapers talk about it. Gold has been losing momentum for several months. It has reached the low 400s, the upper end of our target range for this wave pattern, as cited in the October 3, 2003, issue of EWT. Commercials, typically savvy players, hold a record short position in gold." OK, I admit my journalistic antennae are twanging, even allowing for EWT's snail-mail lead times. This simply isn't an adequate response to gold's crossing of the line so specifically drawn -- particularly after so many Prechter retreats. Gold -- Sharefin, 04:26:38 01/13/04 Tue Where Are the Bond Market Vigilantes!? As we all know with the benefit of hindsight-but as many predicted a year or more ago-the great short sale of 2003 was the U.S. dollar. The greenback surrendered roughly 15% of its value as measured by the U.S. Dollar Index-and more against some currencies, including the euro. Virtually everything that should have accompanied the decline in the dollar did so. Gold, oil and other commodities denominated in the world's shrinking reserve currency rose. Easy, and fairly safe, double-digit returns were reaped in virtually all manner of overseas bonds, with the biggest returns being turned in by emerging market debt. Stock markets rose at a healthy clip, both due to needing to bounce (if only temporarily) from a three-year bearish grip and due to their choosing to focus on the beneficial effects of monetary easing. Corporate bonds-the junkier the better-turned in great years as well. ~~~ Bond market bears-of which I am unabashedly one longer-term-have again watched this all in amazement, and wondered aloud, where are the "bond market vigilantes?" Over the last year, we've seen a torrent of news and developments that should have resulted in soaring yields for Treasuries, as investors tripped over one another to get out, just like rats jumping off a sinking ship. The dollar is being trashed. An allegedly conservative Bush Administration is borrowing and spending money at a clip to make Franklin Roosevelt and Lyndon Johnson blush. Commodity prices are soaring, guaranteeing a future surge in consumer price inflation, a plunge in corporate profits or both. Last but not least, the fact that the U.S. is in an uncertain and likely open-ended conflict against the more radical elements of the world's billion and a half Muslims also casts aspersions against the stability of the dollar. Certainly this week should have seen the current owners of Treasuries get the willies. Federal Reserve Governor Ben Bernanke told us that the futures markets-which had priced in a 50 basis point increase in the federal funds rate (currently one percent) by the middle of 2004-were dead wrong. Seeming to take back the baby step the Fed made last month toward acknowledging the inflationary implications of its policies, Bernanke intimated anew that the Fed would not raise short-term rates again until The Second Coming. The dollar promptly-and predictably-sold off more, and gold's price reached new bull market heights above $430 per ounce last seen 15 years ago. ~~~ All this explains why-for now-Treasuries are strong, even as the dollar sinks virtually every day. It explains why Fed officials like Bernanke and Treasury Secretary Snow are so smug in making dollar-wrecking statements that some of us think are delusional, if not insane. It explains why the Fed may end up not raising rates for most (or all) of 2004 after all-and why for the most part they just might get away with it. But especially if they do, this all also means that the aftermath of the Fed's latest-and arguably grandest-moves to postpone the inevitable will be that much worse for the central bank to have to deal with. Gold -- Sharefin, 04:20:29 01/13/04 Tue Gold holding thumbs for weak euro Tanrange Resources chief executive Jim Sinclair said the gold price would not break the critical $500/oz level this year but would peak between $470 and $480 an ounce. “I would rather hope that would be the high of gold and that in fact will correlate to a level of the euro,” he said. Sinclair said he hoped that was where gold would cap its gains because a move to $529/oz would move the metal out of a normal bull market into a wild situation similar to what the market experienced late in 1979, when gold began its run to over $800/oz. Sinclair said most of the major global investment houses around the world now which are predicting higher levels for the euro, were also predicting somewhat higher levels for gold. ~~~ Castle sees gold peaking this year at the $450/oz - $470/oz level, purely on the back of a weakening dollar. “Its not rocket science, its purely a regression (analysis) if you trace where gold is now and take a view that the euro will go to $1.40, gold should peak this year at $470/oz,” Castle said. Gold -- Sharefin, 04:18:43 01/13/04 Tue Barrick's golden boy After a year at the helm, Greg Wilkins is bullish about bullion giant's prospects The days of beating up on Barrick Gold Corp. are over, says its new chief executive, who has cleaned house and is set to launch a building boom unlike anything the company has seen in its 21-year history. Canada's largest gold miner is expected to invest about $750 million (U.S.) this year in capital spending — its highest ever — to start construction on three of its four new mines in South America and Australia, and intends to rebuild bridges back on Bay St. along the way. In his first major interview since taking the helm last February, Greg Wilkins reflected on a tough first year in which he spent most of the time digging the company's battered reputation — not to mention its stock — out of a sizable hole. ~~~ Every gold firm wants to see the commodity price take off. Barrick's problem is that it has always been the most high profile hedger out there, particularly because it was the recipe for the company's success when gold was in the doldrums. The hedging program was a winner in the precious metal's lean years, generating an extra $2.2 billion in revenues by locking in future sales of gold at then-current prices. But after a 20-year bear market, bullion started to rally last year and the market turned sour on hedgers since forward selling is a strategy that protects companies from a declining spot price. Enter Wilkins' new "market-friendly" no-hedging policy, in which he announced Barrick will no longer sell production forward given the current investment climate. But they're not unwinding it immediately, since it would cost the company $1 billion. From Gata -- Sharefin, 04:08:48 01/13/04 Tue Bundesbank Agrees to Sell Up to 600 Tons of Gold, Bild Reports NEW YORK, January 10 (Bloomberg) -- Bundesbank President Ernst Welteke and the German government have agreed to sell as much as 600 tons of the central bank's gold to raise as much as 7 billion euros ($9 billion) for a fund to promote education and research, Bild am Sonntag said, citing unidentified government officials. No one at the Bundesbank was available for comment on the report when called by Bloomberg News. From this year on, Germany will sell between 400 tons and 600 tons of the bank's 3,440 tons of gold at metal exchanges, the Sunday newspaper said in an advance copy of an article in tomorrow's edition. The interest on expected revenue of between 4 billion euros and 7 billion euros will go to universities, it said. The government expects the fund to generate interest income of between 250 and 300 million euros a year, the paper said. Chancellor Gerhard Schroeder has made improvements in education one of his main goals for this year. An agreement limiting central bank gold sales to 400 tons a year, which has helped to stabilize prices, expires in eight months. Welteke in September said he wants the option to sell some of Germany's gold reserve, which equals 16 months of global production and is second only to the U.S.'s 8,135 tons. -END- Hopes of gold bears and The Gold Cartel were dashed within 24 hours as Chris noted with this follow up to his GATA email group: Date: 1/11/2004 5:01:27 PM Central Standard Time BASEL, Switzerland, Jan. 11 (Reuters) -- Bundesbank President Ernst Welteke said on Sunday Germany had made no decision to sell gold yet but that it would seek an option under a new gold agreement. "This doesn't mean we will sell gold. It means we want an option to sell gold. Whether we exercise it or not is another question," he told reporters. The German central bank president said there was no agreement with the government to sell gold as a newspaper had reported on Sunday. Bild am Sonntag reported that the German government and the central bank wanted to sell between 400 and 600 tonnes of gold from this year onwards to raise between 4.0 and 7.0 billion euros. These proceeds would be put into a fund which would bear between 250 to 300 million euros in interest per year that would be used for research projects, the newspaper said, quoting government sources. Welteke said on the sidelines of meetings at the Bank of International Settlements that if there were any agreement on gold sales he would know about it. European central banks are expected this year to renew a gold sale agreement that expires in September that for five years has specified the amount of gold each bank can sell. The accord succeeded in helping to stabilise the gold price when it was falling. Gold -- Sharefin, 04:06:37 01/13/04 Tue Japan to sell Treasuries for intervention Japan plans to sell several trillion yen worth of U.S. Treasuries as early as next week to make cash available for its massive dollar buying intervention, Nikkei's Nihon Keizai Shimbun Friday edition reported. The reported sale of Treasuries appears to be a stop-gap measure for the Japanese Ministry of Finance to bolster its foreign exchange account until new legislation, due in late January, provides them with more cash for intervention. The Nikkei report said the government would buy back the bonds later in such a manner that the central bank will not suffer any losses from the arrangement. Japan has intervened frequently in recent months in an effort to stop the yen from rising against the dollar with the hope of protecting its fragile export sector. On Dec. 26, the MOF, in an effort to quell speculation it would run out of cash to intervene, said it could now raise funds by selling up to 10 trillion yen (about $94 billion) worth of foreign bonds -- namely U.S. Treasuries -- to the Bank of Japan in the form of repurchase agreements, Reuters reported. Gold -- Sharefin, 04:04:43 01/13/04 Tue Andy Smith gives gold 'more respect' MINEWEB: Well, we go across to the bear of the gold market now, Andy Smith, precious metals analyst at Mitsui Metals. You’ve crossed swords with Jim Sinclair in the past – and Andy, I know you were not on the line when he was giving his forecast for the year 2004. Just to recap, Jim believes that the gold price will get to a level of $470 to $480 an ounce, based largely on dollar weakness and euro strength and thereafter would retrace some of its gains. Where are you standing at this point? ANDY SMITH: I’ve got an average of only 10% above the average of last year so I’ve got an average of $395 and I’ve got a high for this year of $435 – and I think it will continue to retrace next year and year after. Gold -- Sharefin, 04:00:27 01/13/04 Tue Jim Sinclair, one on one JIM SINCLAIR: In order to answer that question – and the answer to the question is yes, we are – you need to define why that happened. And what’s taken place is that there is an entire new group of analysts and of investment firms that have taken an interest in gold that didn’t exist the last time we spoke. And that interest hasn’t come directly out of gold. Rather, if you track those major firms around the world now who are predicting higher levels for the euro, it is an inescapable conclusion that they’re also predicting somewhat higher levels for gold. And to a degree they’re many of the clients of the next speaker, who have publicly come out, such as Merrill, Goldman, Lehman, Stearns and firms of that ilk – international investment firms that have recognised the inherent weakness in the dollar and also the fact that the dollar is a tool both of a disinflationary nature and a tool for having a bargain sale on everything grown, manufactured and serviced in the USA as part of an economic package along with tax cuts for political expediency. The price of gold in this year, in my opinion, will not break the $500 level but rather will find a high level between $470 and $480 per ounce, and I would rather hope that would be the high of gold and that in fact will correlate to a level of the euro. If you have created a hypothetical euro you’d go back in time into the 70s and equate the level of the euro to the level of gold, and have the direct relationship in a productive sense. The price of gold, as we discussed the last time, can be simplified in saying it’s all in the dollar. ~~~ MINEWEB: You talk $470 to $480 and ounce. Would that be the end of it? Would that be the end of gold’s run this time around? JIM SINCLAIR: We would hope so, because if gold moves above $529 then it moves out of a normal bull market form into a runaway market, similar to what occurred in late 1979. And any rational analyst understanding the reasons why gold would do something like that would not be necessarily wanting to predict that. So I’d rather stay with the high estimates made for the euro, create the hypothetical euro, move back in time to general trading range of gold, and suggest that if gold was the trade into the $470 to $480 level that it would fulfil the high estimates made by the most accepted analytical firms that exist now, the international investment firms. Gold -- Sharefin, 03:53:58 01/13/04 Tue Gold funds still may glitter for investors It could see further gains, said Rob McEwen, chairman and chief executive of Goldcorp Inc., a Toronto-based consortium that owns the Red Lake mine in Ontario, the world's richest grade gold mine. "It looks like we're in the first phases of a multiyear bull market,' said McEwen, who thinks gold will trade in a range between $375 and $450 over the next year. "I'd say you'd want to stage your investments out; there will be pullbacks and consolidation. ... and we are in an election year, so that will have a bearing on the market and on gold and on the dollar.' The weakening dollar, which has spiraled to new lows against the euro and other major currencies for months amid growing concerns about the U.S. budget and trade deficits, remains the biggest factor propelling gold's current rise. Another driver is that U.S. interest rates have fallen to 45- year lows, and policy makers with the Federal Reserve have signaled they're not likely to raise them anytime soon. A third factor is that China is opening up its markets and demand for precious metals like gold is on the rise. "That's a new source of demand that hadn't been there before,' said Conti. "There's not that much to go around. The market is very, very tight.' Gold -- Sharefin, 03:50:56 01/13/04 Tue Consider Adding Gold to Your Portfolio Analysts expect precious metals to continue their appeal as solid investments. One of the biggest surprises on Wall Street during 2003 was the extraordinary performance of gold-oriented mutual funds — investments that normally fall as the stock market rises. The deteriorating dollar, concerns about rising interest rates and inflation and global terror fears contributed to solid gains in gold stocks and, in turn, gold funds. And analysts say gold may well continue to be a good choice in the coming months. Gold -- Sharefin, 03:34:02 01/13/04 Tue Time's ripe to invest in gold 2004 will again be a golden year. And this is a bus not a single investor should miss. This year's bull run in gold markets represents a rare opportunity to participate in a methodical wealth-building process where significant amounts can be made. However, this is not a get-rich-quick scheme. But the choice is in investors' own hands. A serious investor willing to sink a portion of his time to study the gold market and learn how to develop a buy or sell strategy in the spot or the derivatives market, can grow wealth in a conservative and orderly, but sure fashion. The success of a methodical investor will depend on the time and effort he puts in understanding the market and the disciplined investment strategies he adopts. Gold -- Sharefin, 03:30:58 01/13/04 Tue Another Gold Rush? High-flying gold prices are causing a flurry of activity in Canada as companies look for new deposits and blow the dust off old ones. ~~~ "We're holding our breath that it stays high," said Mike Vaydik, general manager of the Northwest Territories-Nunavut Chamber of Mines. "Anything north of $400 is a big source of inspiration for exploration. A lot of projects have got a shot in the arm." Unlike diamonds, where economics mean exploration is a big-company business, high gold prices bring in everyone from large companies to individual prospectors, Vaydik said. And with analysts predicting gold will remain relatively high into 2004, financing is much easier to come by. "You only have to look at how much some of these companies have raised in the last few months to realize how much activity is going on." Gold -- Sharefin, 03:20:46 01/13/04 Tue Indians cash in on gold's high price Gold prices may be at six-year highs, but some long-time investors in the precious metal certainly seem to think it has climbed far enough. India is the world's largest consumer of gold and drives world demand for the precious metal. But people there are queuing up to sell their jewellery and imports of the metal have dropped. Gold traders in India have reported that the supply of scrap gold has risen sharply in recent weeks as consumers were tempted into selling their old jewellery by their high prices. ~~~ Last year India imported 825 tonnes of gold. "India usually takes about a quarter of physical gold demand - it's actually buying zero now," said Andy Smith at Mitsui Global Precious Metals. Fiat -- Sharefin, 03:18:02 01/13/04 Tue IMF Researchers: US Budget Gaps Endanger Global Economy Economists at the International Monetary Fund on Wednesday expressed alarm at growing U.S. budget deficits, saying continued deficits could hurt the global economy by roiling currency markets and driving up interest rates. In a report on U.S. budget outlook, IMF researchers described the state of government finances as "perilous" in the long run and urged Congress and the White House to take steps to quickly rein in the deficits. Although federal tax cuts and spending increases since 2001 bolstered the global economy in the short run, the report said "large U.S. fiscal deficits also pose significant risks for the rest of the world." A key risk is that the recent slide of the U.S. dollar against other major currencies could become "disorderly," the researchers said. The dollar has declined sharply since early 2002 against both the European common currency and the Japanese yen, complicating the task of European and Japanese monetary policymakers, said Charles Collyns, who heads the IMF team that monitors the U.S. economy. "We feel there is a substantial risk that the foreign investors' appetite for U.S. assets, and in particular U.S. government assets, will over time diminish," Collyns said in a news conference. "We think to some degree over the past year this has occurred, and this is one of the reasons why there has been weakness in the U.S. dollar." So far, he said, the decline hasn't jeopardized the economic recoveries in Europe and Japan, but the danger to the global economy could grow if the U.S. budget deficits aren't shrunk. ~~~ But the IMF researchers said that won't be enough to address the government's long-term fiscal problems - including financing the Social Security (news - web sites) and Medicare programs over the next 75 years. In their report, they said the government faces a $47 trillion shortfall in its ability to pay for those and all other long-term obligations. Closing that gap would require "an immediate and permanent" federal tax increase of 60% or a 50% cut in Social Security and Medicare benefits. Gold -- Sharefin, 03:15:42 01/13/04 Tue Richard Russell's 2004 Take On Gold My real emphasis has been, and still is - the precious metals. Gold has been in a 19-year bear market, and by 1999 gold was selling 70% below its 1980 high. Gold was ridiculously cheap in 1999-2000-2001, and I said so - literally, I said that gold was selling like "dirt." As I see it, gold is still cheap. Gold would have to rise to 550 to recover just half of its bear market losses. Will gold do it? Can gold do it? I believe it can - and will. As with the early part of all bull markets, the public and most professionals relate with both ignorance and fear. But despite this gold continues higher. This morning gold was up over 7.00 with most of the gold stocks following the lead of the metal. As for the gold action, I like it. A powerful upward surge, a spike in gold, would bother me. The best action for those of us who hold gold and gold shares is a measured, cautious, step-by-step rise. Nothing to excite the retail public. Nothing to make the pros feel that they are missing anything. So far, that's what we've got. So far, that's the way both gold and silver are "playing the game." Fiat -- Sharefin, 01:45:52 01/13/04 Tue Blair: I'll take Britain into euro by 2007 Tony Blair has set a target of 2007 to take Britain into the euro, and wants the Government to agree to a public pledge to secure membership by that date. Gold -- Sharefin, 01:41:37 01/13/04 Tue Analysts predict weak U.S. dollar will continue to drive gold rally Gold broke through $425 (U.S.) this week, a level last seen in 1988, and many analysts say they expect the metal's two-year-old rally to continue through this year. They expect weakness in the U.S. dollar will be the main factor driving up gold prices, which in turn will help maintain interest in gold stocks and exploration projects. "I would say gold is going to be consistently above $400 [an ounce] in 2004," said Martin Murenbeeld, president of Victoria, B.C.-based research firm M. Murenbeeld & Associates Inc. Factors that helped drive gold prices up in 2003, including a faltering U.S. dollar, steep government deficits and renewed interest in commodities, still exist and could become more prominent this year, Mr. Murenbeeld said. Gold -- Sharefin, 01:40:05 01/13/04 Tue Nick Goodwin: Gold analyst MONEYWEB: Towards the end of last year, you gave me a big wad of information on Suzie – your gold index signals. I had the opportunity during our break around Christmas and New Year to go through all that information and it’s been uncannily accurate. Just explain to us what Suzie does – why did you call your vehicle Suzie, in the first place? NICK GOODWIN: Well, the model had been going since 1980 and it’s named after Suzie Wong. She was a Chinese prostitute in London, and the reason is that you must not fall in love with gold just as you mustn’t fall in love with a prostitute, because tomorrow night she will forget who you are and she’s got a new boyfriend. MONEYWEB: Are you serious, Nick – is that where the name comes from? NICK GOODWIN: Yes. Absolutely. MONEYWEB: So treat gold like a prostitute? NICK GOODWIN: Absolutely. Don’t ever fall in love with gold, because gold doesn’t love anyone, and many, many people do fall in love with it and they fall in love with it at the wrong time. They fall in love with it when gold is very active, and then they get sort of head over heels over it, and then it hurts them. And so that’s basically the story. It took me something like 15 years to understand that. And basically what Suzie does, it doesn’t try and predict the gold price or the rand or anything, it just looks at the relationship between the share prices and the gold price and the currencies, and it decides whether the shares are expensive or cheap. ~~~ MONEYWEB: But it all comes back to that eventually, doesn’t it, Nick? You can have volatility in between, but are people buying the actual metal? And if they’re not buying the metal, and in particularly the jewellers, you are heading for some kind of a problem? NICK GOODWIN: Yes. At the end of the day, somebody has got to take possession of the metal. Now what’s been happening, the jewellery demand has been coming off, but the investment demand has rocketed. For instance, in 2001 there was a net sale by investors who actually sold gold. In 2002, they bought 148 tons, and in 2003, they bought 580 tons. So between 2002 and 2003, the investment demand has increased fourfold. ~~~ The only thing at the moment is that the amount of indefinite demand is huge, and you’re starting to get a lot of hedge funds buying. And one of the reasons they can buy into gold is that interest rates are so low. There are very little opportunity costs, because you are not earning money on call. So your opportunity cost of holding gold is very, very low at the moment. Gold -- Sharefin, 01:33:50 01/13/04 Tue Gold set for massive 2004 gains Gold may be headed as high as $600/oz by the end of the year as the dollar sustains its current weakness and the market continues to push the metal higher in wild, uncertain market conditions. ~~~ Hart said the bull trend should be viewed in terms of years, not months, as the horizon for dollar weakness was two years. “Gold will have to show major losses before the bull trend can be questioned. The twin deficits in the US – on the current account and the budget deficit will not be resolved for some time, and this is an election year – I can see the problems continuing,” Hart said. He said there was also a danger that the key central banks which have been supporting the dollar – Japan and China, will exhaust their capacity to support the greenback. Tradek gold analyst Nick Goodwin said the market could push gold as high as $460/oz, as the markets continued to push the metal higher, building on the momentum that gold had developed over the last few days. But he warned that as the rate of change in the price increased, so did the risk. “The market is dangerous, its very difficult to say where to turn,” Goodwin said. “Both the dollar and gold have been driven too far, too fast.” Fiat -- Sharefin, 01:32:21 01/13/04 Tue No end in sight to dollar's descent Federal Reserve's insistence on rock-bottom interest rates triggers currency rout Traders dumped the greenback after Ben Bernanke, a member of the Federal Reserve Board, told a weekend meeting of American economists that the Fed had "the luxury of being patient". ~~~ The low level of American rates has reduced the appeal of investing in the dollar at a time when the US needs to attract growing sums of over seas investment to fund its current account deficit. "If the Fed does not see a weak dollar as an inflationary threat, it has little reason to raise interest rates and the trend of dollar weakness will continue," said Shahab Jalinoos, a senior currency strategist at ABN Amro. Analysts said that the greenback's decline was likely to continue, with the US authorities apparently relaxed about the currency's fall and worries about the country's ballooning current account deficit weighing on the market. "There is a general feeling in the market that there is little to stop the dollar's fall," said Adam Cole, a senior currency strategist at Crédit Agricole Indosuez. ~~~ "The dollar's fall has been orderly so far, but if it breaks through technical support levels at around $1.28, it could easily accelerate," said Nick Parsons, a currency strategist at Commerzbank. "If it starts to hit the stock or bond markets, the US attitude would turn on a dime," he added. Mr Bernanke said it was a mistake only to look at the dollar's sharp drop against the euro, adding that the greenback's fall against a broad basket of currencies had been much smaller. The risk of a "dollar crisis" was low, he maintained. Fiat -- Sharefin, 01:29:52 01/13/04 Tue 'Father of the euro' calls for global currency Robert Mundell, a nobel-prize winning economist, often credited with paving the way to the European single currency, has called for a global currency. In an interview with French paper Libération, Mr Mundell said, "with the emergence of the euro and its instability against the dollar, Europe, the US and the Asian powers should come together and create a new international monetary system". However, this would not mean the end of the euro and the dollar. Mr Mundell continues, "Of course, one would keep the dollar and the euro. This international currency would be used in the large international exchanges, for movements of capital and commercial transactions". Gold -- Sharefin, 01:14:08 01/13/04 Tue Mineweb Jumps the Gun on GBS On December 22nd, Mineweb ran an article entitled, "Gold Bullion Fizzles Out" in which Stewart Bailey made a great deal over the fact that after the initial week of growth of Gold Bullion Securities on the LSE that new gold deposits had declined to zero. Bailey's article then went on to suggest that this might be a bad omen for other gold ETFs such as the planned Equity Gold Trust. Many readers might have been misled by the article to think that trading volume of GBS had fallen close to zero when that was not the case. What Mr. Bailey failed to mention was that total daily trading volume has persisted above 1 million units per day (over 100,000 ounces) since the fund was listed in mid-December. However the article does quote Dr. Robert Weinberg, CEO of Gold Bullion Securities, as saying that things had slowed down for the holidays. The reason for the apparent discrepancy in new gold purchases versus total trading volume is at least partially found in the structure of the security itself. Registered shareholders may only purchase new GBS shares in blocks of 4,000 shares by depositing 400 oz gold bars with the Trustee for GBS (HSBC USA in London). Therefore GBS, like most securities, has a wholesale-retail structure, where institutional investors and brokerage houses deposit gold bars in exchange for shares, and then hold the shares, or resell them to their own clients, or other brokerages through the London Stock Exchange. Gold -- Sharefin, 01:08:21 01/13/04 Tue Dollar Slide Accelerates; Risks of Rout Increase NEW YORK -- The relentless dollar selling showed no sign of letting up in New York Tuesday, with the dollar sinking to new lows across the board. ~~~ If anything, the dollar's slide was accelerating along with the increase in trading volume as investors return to the market after the holiday period. With very little to convince them otherwise, certainly not official rhetoric from U.S. or euro-zone policymakers, they're simply putting on fresh short dollar positions, en masse. The euro was printing fresh all-time highs and zoning in fast on $1.30, the market's next big psychological target. Meanwhile, sterling was up around two whole cents on the day at new 11-year highs. The dollar's malaise is widespread, with only official buying -- mainly from Japanese monetary authorities -- and a sprinkling of corporate demand appearing to stand in the way of the current run on the dollar turning into a rout. Certainly, Japan's position differs from the official line coming out of the U.S. and euro zone, which is one of relative and potentially damaging nonchalance. For example, Federal Reserve (news - web sites) Governor Ben Bernanke said Sunday that the risk of a dollar crisis is "quite low," and on a historical measure against a basket of currencies, the dollar isn't actually all that weak. In this context, it's difficult to see what will, in the very near term, prompt a shift in market opinion and spark a dollar rally. Positive U.S. economic data clearly aren't doing it. ~~~ The stark difference in official rhetoric between Japanese officials on the one hand and U.S. and euro-zone policymakers on the other was highlighted Tuesday by Japanese Finance Minister Sadakazu Tanigaki. He warned that the MOF will "take proper action when the market moves rapidly." His comments are in stark contrast to Mr. Bernanke's, and appear to be backed up by firm action. Dealers estimate the MOF bought around $5 billion or more Monday to prevent the dollar from falling below 106 yen, and have bought at least another $2.5 billion Tuesday. Gold -- Sharefin, 01:03:40 01/13/04 Tue A Solid Year for Base Metals Base metal producers provided investors with terrific returns in 2003, can we expect the same in 2004? The outlook is good ~~~ "There was a lack of supply basically in a lot of the base metals and there hasn't been a lot of capacity additions in the last few years." Fiat -- Sharefin, 01:01:12 01/13/04 Tue John Embry: Outlook on Gold The price for bullion will increase more than the price of gold stocks this year. But with expectations that gold will hit $500 an ounce this year, gold stocks will still do pretty well, says Sprott Asset Management President and Portfolio Manager John Embry ~~~ "I think it’ll be better than this year in terms of the gold bullion. I’m not so sure that the stocks will necessarily reflect it to the same degree as they did." ~~~ Summary The growing debasement of the U.S. dollar is setting the stage for gold to be increasingly recognized as returning to currency status. And since the gold market is small compared to the paper money market, the impact on gold can be dramatic. According to Embry, we haven't seen anything yet. He says the U.S. dollar will remain weak. He is bullish on gold in part because other countries don't want their currencies to rise against the U.S. dollar. To date, the leading consumer of physical gold is India. But going forward the Chinese will be the ones to buy gold. Chinese consumers are now allowed to buy gold, and the Chinese central bank would like to back the currency, the renmimbi, with gold. Mr. Embry has stated previously, and still holds the view that gold production around the world will fall over the next few years. It doesn't necessarily mean more consolidation in the gold sector. He says everyone thinks their properties are worth more than the others, so when they try to put them together, they can never reach an agreement. He doesn't like Barrick, as he says it's too hedged. Even though they are getting out of using hedging, Embry says getting out will be costly. Investors, he says, are best to look at quality junior players, and the bullion itself. 2004 will be better in terms of bullion price (he says it will go to $500 an ounce) but gold stocks won't likely see the same kind of appreciation they've had over the past couple of years. Fiat -- Sharefin, 00:57:22 01/13/04 Tue Gold Fever 2003 Year 2003 passed under the sign of consolidation of Russian gold producing assets. Privatization of Matrosov mine (Magadan Region) and Lenzoloto (Irkutsk Region) earned $186 million for the budget. Norilsk Nickel that bought them entered the top ten of international gold producers. In 2003, world gold prices grew by almost 30% exceeding $400 per ounce. Against this background interest of investors in Russian gold production, a non-consolidated industry with turnover of about $2 billion grew tremendously. Privatization auctions became events of the year. In August, the Russian Federal Property Fund sold a 51% stake in Matrosov mine, the main value of which was the license for the Natalkinskoe deposit with gold reserves of about 250 tons. Norilsk Nickel and another consolidator of the gold industry, the alliance of Susumanzoloto (Magadan Region) and British Peter Hambro Mining producing about 10 tons of gold a year together, struggled for this asset. Norilsk Nickel finally won having offered $34 million or 1,100% more than the stating price. In September, the struggle for a 51% stake in Lenzoloto was even more bitter. This is not only Russia's third largest gold producer (about 9.4 tons a year) but also owns the infrastructure necessary for development of Eurasia's largest gold deposit Sukhoi Log with reserves exceeding 1,000 tons. The government plans to announce the tender for development of Sukhoi Log in the first half of 2004. Understanding that Lenzoloto may become the entrance ticket in gold production, Basic Element, Sovlink belonging to shareholders of SUAL and Nafta-Moscow participated in the auction too. Norilsk Nickel won again having offered $152 million for the state-owned stake in Lenzoloto. Fiat -- Sharefin, 00:55:55 01/13/04 Tue Gold hits 15-year high Gold prices rose to their highest level in 15 years in Europe Tuesday as the U.S. dollar continued to flag against the euro. ~~~ The greenback's latest woes come after a string of comments from Federal Reserve officials indicating that U.S. interest rates likely won't rise any time soon, despite the broader economic recovery in that country. The most recent came late Monday from Atlanta Federal Reserve President Jack Guynn, who suggested tame inflation in the United States has given the central bank room to hold off on interest rate hikes. Gold typically becomes more attractive to investors as the U.S. dollar declines. At this point, many analysts suggest that the U.S. dollar will likely continue to suffer, even as the world's biggest economy turns up. “The greenback is under relentless downward pressure arising from the persistent current account deficit, ultra-low U.S. short-term interest rates, and the apparent nonchalance of U.S. officials to the dollar's plight,” BMO Nesbitt Burns economists said in a recent report on the dollar's plight. Fiat -- Sharefin, 00:53:49 01/13/04 Tue Golds help Sprott save dismal year Hedge fund bounces back: Manager watching bond market for short-selling signals Eric Sprott started out having a rough 2003, but has to be given credit for turning things around in the second half. Through 2001 and 2002, Mr. Sprott was one of Canada's hottest money managers. His $342-million Sprott Hedge Fund LP rose 64% and 74%, respectively, profiting from short positions on tech stocks and long positions on gold. ~~~ In the second half, Mr. Sprott's unhedged gold stocks did much better than the first half. He also didn't get religiously attached to his tech shorts and wound up most of these positions mid-year. Instead of going short on techs, he recognized that the market is in the midst of a cyclical bull run. This is a short-term bull market based on economic growth, a rally off a low that he realized he couldn't afford to miss. He is still bearish on the market long-term because of the bubble in credit levels and housing. But in the meantime, he found various special-situation stocks to invest in, such as Taser International Inc. (TASR/NASDAQ). Taser makes non-lethal weapons for law enforcement and is up more than 1,800% in the past 52 weeks (it has quadrupled since July). Mr. Sprott has also loaded up on natural gas stocks because he believes that declining production rates in North America will be positive for the commodity price. He also is overweight on silver, uranium and oil stocks, in addition to keeping his long-time favourites, the gold stocks. These will protect him from a long-term bear market, he said. There will come a time again to increase his short positions, but he is watching the bond market for signs of when to do that. He says he finds it hard to believe the bond market hasn't paid more attention to the falling United States dollar. "If I saw the bond market finally taking serious either inflation or the dollar decline or both at the same time, that would tell me that economic growth would abate," he said. "[Interest] rates would go up and the housing thing would stop in its tracks." Fiat -- Sharefin, 00:51:34 01/13/04 Tue Dr Faber's views on 2004 Dr Marc Faber's book 'Tomorrow's Gold' published just over a year ago was spectacularly correct in its predictions for 2003. This article updates his thoughts after another year in the financial markets. I remain convinced that the present 'strong' recovery phase in the US economy won't last for long, as it is totally artificial. There are simply too many imbalances in the system, as reflected by a record low national saving rate, record household debts, and record trade and current account deficits, for this recovery to lead to sustainable strong growth that would justify the present stock valuations. I have quoted Joseph Schumpeter in previous reports, but for the benefit of some of our new readers, I quote him here once again regarding the subject of economic recoveries, that are purely a consequence of fiscal and monetary stimulus. Schumpeter writes: 'Our analysis leads us to believe that recovery is sound only if it does come from itself. For any revival which is merely due to artificial stimulus leaves part of the work of depression undone and adds, to an undigested remnant of maladjustments, new maladjustments of its own' (emphasis added). ~~~ I hope the reader appreciates the precarious nature of this state of affairs. The entire US economy is depending on high 'asset inflation' in order to stay afloat! Only if asset prices continue to rise at high rates can consumers maintain their borrowing binge. But trouble seems to be brewing in the American wonderland. First of all, it would appear that the housing sector is slowing down. ~~~ So, we are in a situation where the imbalances are likely to worsen further until something gives. At some point, the American consumer will be forced to retrench through a rapid loss of the US dollar's purchasing power, which will lead rising inflation rates and inevitably also to higher interest rates. Accelerating inflation will most likely also bring about falling real household income, as wage increases would unlikely match the rate of inflation, due to the overseas competition for jobs we referred to above. Therefore, a voluntary or involuntary consumer retrenchment could badly derail the Fed's inflationary monetary policies. I am not sure exactly how the present imbalances will play themselves out, but I am certain that Peter Bernstein will be proved right when he writes (see above) that the breeze that will accompany the restoration of balance won't be 'gentle' but will likely take the form of a financial and economic hurricane. In fact, trouble may have already started. All measures of money supply have turned negative, and MZM has declined at an annual rate of 7% in the 13 weeks ended November 10 while M3 is growing at its slowest pace since 1993. ~~~ The recent decline in money supply and bank credit doesn't bode well for either the economy or the stock market. In fact, if we look at the recent performance of consumer-sensitive shares such as airlines and retailers, one has to wonder about the wildly optimistic economic forecasts. ~~~ In sum, the stock market seems either to have had second thoughts about the sustainability of the present economic recovery, or it may already have fully discounted the recovery. In fact, in the past a high level of ISM orders, such as we had recently, has always been a reliable sell stock indicator! In short, US equities offer limited up-side potential but entail, in my opinion, high risk and should best be avoided. Gold -- Sharefin, 00:45:14 01/13/04 Tue Gold charges to 14-year high LONDON (Reuters) - Gold started the first week of 2004 as it ended 2003 -- charging to its highest since February 1990 as the dollar crumbled against the euro and the yen and speculative funds maintained their appetite for precious metals. ~~~ "The precious metals are all off to the races -- they are all up on the U.S. opening," analyst Kamal Naqvi of Barclays Capital said. ~~~ "So much for profit taking on the New York open as COMEX traders drove gold and silver to fresh highs. Gold opened strongly around $418 and traders were quick to emerge on the bid, pushing gold higher and finding some stops that helped fuel the rally," James Moore of TheBullionDesk.com said. ~~~ Naqvi said the important CTAs (commodity trade advisors) would be looking to continue acquiring commodities, and that fresh funds would flow into the sector early in 2004. "People were looking to see if that would evidence itself (today) and it did," he added. Gold -- Sharefin, 00:40:29 01/13/04 Tue THE MARKETS AND GOLD 2004 -THE END GAME IS IMMINENT In US$ terms; from July 2000 to the present day; we have been witnessing the first phase of a gold bull market. However, as will be seen from the graphs presented below, this bull phase has merely reflected the collapse of the world reserve currency, the US$, against all other currencies. In terms of the Australian $, Canadian $, South African Rand and Euro one could clearly argue that the bull market is at best weak or is non-existent. Furthermore, the rise in value of the Rand and the Canadian and Australian dollars is having a substantial impact on mine costs of production in these major gold-producing nations. Nowhere is this impact more severely felt than in the deep, high cost, gold mines of South Africa, where mine grades are declining steadily, and 7 out of 12 producing mines are facing potential closure with appalling social consequences for that country. ~~~ In the case where the Fed commences raising interest rates, initial rate rises are likely to be of the order of 25 basis points. This will have little or no impact on the gold market. If the decline in the US$ is not arrested, more severe interest rate rises will be required, and in rapid succession, to restore confidence. There will come a cross over point where the dollar ceases to fall and the brakes are put on gold’s relentless rise. Where and when this point will come no one can predict. However, it seems pretty obvious that gold will surpass its 1980 peak of US$ 850 per fine ounce with consummate ease. Given the massive and ballooning US debt position, and economic structural imbalances, it is likely that this cross over point will be at interest rates of well over 10%. However, the longer the Fed postpones "the evil day" when it has to address the debt / dollar issue the chances of a hyperinflation scenario increase. The social consequences of the foregoing, given the current unprecedented debt exposure of US corporate, public and private sectors, are expected to be serious, possibly calamitous for some organisations and individuals. However, whichever way one cuts the cake, the precious metals market has a long way to go yet, and for those who have had the prudence to position themselves and thus also protect themselves againsts the ravages of inflation, the gains could be enormous. Gold -- Sharefin, 00:36:37 01/13/04 Tue Where Did The Money Go? It's my belief that since the unprecedented increases in M3 continued to show diminishing returns in GDP growth, and while the Fed had the low interest rate gas pedal to the floor with a plunging M3 velocity, I can only surmise that the additional money supply found its way into the stock market fueling the current bear market rally. Lastly, notice the tail end reversal of M3. That's contraction of the money supply. With interest rates at 1%, M3 velocity grinding to a halt, and the pure liquidity injections failing to hold up M3, I believe we will see an outflow from the equity markets unless that trend can be stopped and M3 growth resumes. I don't believe they can stop it without completely debasing the dollar and risking its total collapse, therefore I believe that once the equity market outflow begins it could be quite severe. Gold -- Sharefin, 00:34:22 01/13/04 Tue Concerns Rising With Dollar's Continued Fall Analysts Fear Rates Will Climb, Recovery Will Stall With the economy expanding smartly, interest rates low and inflation in check, President Bush is sailing into the presidential election year with perhaps only a single dark economic cloud on the horizon: the shrinking U.S. dollar. Whether that cloud produces a nourishing rain shower -- in the form of swelling U.S. exports and a recovery of manufacturing jobs -- or a deluge of rising interest rates and soaring budget deficits is the subject of increasingly heated economic debate. ~~~ But concerns are growing, especially on Wall Street, that the dollar's slide will inevitably drive up long-term interest rates, and some analysts think the decline could even force the Fed to raise the rates it targets. That could slow the nascent economic recovery, swell the already-record federal budget deficit and possibly resurrect an economic problem unseen for nearly 20 years: inflation. In that scenario, foreign investors abruptly stop buying the ever-weakening dollar, interest rates soar to lure them back, and the budget deficit explodes as the government struggles to pay the interest on the $4 trillion debt held by the public. ~~~ As long as foreigners keep buying, the day of reckoning will be postponed, probably until later this decade, and certainly well after the 2004 presidential election, many international economists say. "Everyone agrees these deficits are unsustainable; at some point, something has to give," said Nouriel Rubini, an international economist at New York University's Stern School of Business. "I'm not sure if it's in two years or three years, but it will be in the medium term, not around the corner." ~~~ Economist Edwin M. "Ted" Truman of the Institute for International Economics, a former senior official at both the Federal Reserve and the U.S. Treasury, said it is impossible to predict with any precision what will happen to the dollar. "The question is, how much of a correction do you need to have?" Truman said. "If the adjustment is $500 billion, and it all comes through the exchange rate, then there is a long way to go. Take the standard rule of thumb, a 1 percent decline [in the value of the dollar] gets you about $10 billion. If we have done 10 percent, then there's another 40 percent to go. ~~~ "Why do people want to keep buying the dollar?" Black asked. "It's been living off the vapors of its past credibility. This is mass psychology, and once everyone agrees there's a problem, there's a problem." Gold -- Sharefin, 00:29:45 01/13/04 Tue Have Gold and Silver Seen Tops? That's the question everyone seems to be asking right now. After an impressive and relentless upside trend since the dominant low in July, both gold and silver have continued to make higher highs and higher low (the classical definition of a rising trend). But with gold stocks looking shaky, many traders are starting to wonder if the top if already in for the actual gold and silver markets. My answer may seem evasive but it's really the only answer one can honestly give: the trend is up until proven otherwise. Gold -- Sharefin, 00:28:04 01/13/04 Tue Worried metals prices might fall? Be prepared A bull market in gold and silver is a roller-coaster. If you get lightheaded at the first curve, you need to imagine a dizzying drop and have a plan to limit your exposure. The markets for metals and metals stocks always have attracted a tremendous amount of motion. The recent roller-coaster action may have left some folks with positions in the metals and/or metals stocks queasy and questioning what to do. Being prepared for the large swings endemic to these markets, as well as keying into one's own psychology, is to my mind the best strategy for weathering the ride. The wild action we have seen is part and parcel of what happens during a bull market in metals. (Editor’s note: Gold has moved nearly 60% since early 2001, silver 40%.) Along the way, the metals probably have attracted some hot money, and the metals stocks almost certainly have. (Editor’s note: Gold stocks are up 62% since early 2001; silver stocks are up more than 135%.) These Johnny-come-latelies are fun to have around while prices are going up, but you quickly can see how violent corrections can follow. For those folks to exit as soon as the stocks don't "act well" is not surprising. It is exactly these kinds of corrections that get people shaken out of bull markets. Perhaps we could be on the verge of a correction in the metals. I don't know. What I do know is that, in a bullish climate, the market goes up in such a way that you can lose your position in the process. Fiat -- Sharefin, 00:24:48 01/13/04 Tue Banks selling dollars actively Moscow 15:32:44. The trade volume of deals with tomorrow settlements exceeded $700m at the UTS at 15:00 Moscow time, while at 13:00 about $340m were sold at a special session. One of the main reasons for this accelerated selling of US currency is a further retreat of the dollar rate against the euro on international exchanges. At the same time, this situation on the currency market has not led to the ruble's strengthening due to the Russian Central Bank's activities. Commercial bank dealers say that the Central Bank continues buying US currency at 29.245 RUR/USD. The Central Bank's ruble intervention is estimated at $700m some less than two hours before the UTS closing. Periodic Ponzi Update PPU -- $hifty, 00:19:27 01/12/04 Mon Ponzi Chart Periodic Ponzi Update PPU Nasdaq 2,086.92 + Dow 10,458.89 = 12,545.81 divide by 2 = 6,272.90 Ponzi Up 64.64 from last week. Thanks for the link RossL ! Go GATA ! Go GOLD ! Hi Ho Silver ! $hifty Gold -- Sharefin, 09:41:08 01/09/04 Fri Kitco CC CBS Gold CNN Gold Gold Future News US Indices Live Gold NewNow Kitco Gold Mining Web Yahoo Gold Int Indices THE GOLDEN POT gold news & views - charts & more not so much a forum but rather a news archive