To keep in touch with the gold market - daily news, prices, market commentary and opinion - we invite your visit to our popular website. www.usagold.com Ask about our gold British sovereign special - kings and queens - at prices competitive with contemporary bullion coins. History. Safety. Affordability. 1-800-869-5115 Extension #100 Trading Desk For those seeking a higher risk/reward ratio in their gold investments, may we suggest you research graded $20 gold pieces? More risk. Better potential. Strong performer over last 6 months. Go directly to United States $20 Gold Pieces A diversification within a diversification Are you interested in adding gold to your IRA? You can roll out of the dollar and into gold. George Cooper 1-800-869-5115 Extension #102 Coming soon! A new USAGOLD webpage on IRAs. Now under construction. Buy gold 24 hours a day, 7 days a week at our online store. Nice selection of popular items. Best prices. Easy to do. The Gold Coin Shoppe The Gold Classics Series Established clientele are invited to choose from our hard-copy selection of classic studies on politics, economics and gold. These items are available free of charge. Fiat Money in France Andrew Dickson White Grant on Gold James Grant The Nightmare German Inflation Deficits, the Dollar and Gold Dr. Tim Congdon How You Can Survive a Potential Gold Confiscation George R. Cooper/ Michael J. Kosares And more. . . . . Please call your representative to reserve your choices. USAGOLD Centennial Precious Metals, Inc. _________________________________ since 1973 The complete gold firm. Attuned to the times and the needs of the modern gold investor. Gold coins & bullion.   PO Box 460009 Denver, Colorado 80246 1-800-869-5115 Questions? Comments? They are always welcome. mk@usagold.com Michael J. Kosares is the founder of USAGOLD-Centennial Precious Metals, Inc., the author of "The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold" and numerous magazine and internet articles and essays. He is frequently interviewed in the financial press and has over 30 years experience in the gold business. Please remember: It your purchase of gold from USAGOLD-Centennial Precious Metals that nourishes these pages.

"[President George Bush's] precipitous nature will certainly see more aggression added to his policies, which will, inevitably be good for gold. But irrespective of the man, we are sure that what he has to face will of itself place him in the history books. The last four years will pale into insignificance when weighed against the potential global dramas and shifts in the world's 'Balance of Power' that lie in wait for him." Julian Phillips Overview: With possibly the most rancorous election in U.S. history now behind us, Julian Phillips' comments summarize the concerns of many USAGOLD clients going forward. Even as this is written, the MidEast - with the death of Arafat perhaps imminent and the U.S. military about to engage in a full scale battle with insurgents entrenched in Fallujah - may be reaching a crossroads. France's Chirac has called for the European Union to make itself a counter-balance to U.S. power. China continues to flex its muscle in the East - both economic and political. And then there's the burgeoning battle over the dollar and the stubbornly high prices for oil and the rest of the commodity complex. One must stretch to imagine a more complicated and divisive scenario than the one in which the president finds himself a week after the electorate endorsed him for a second term. Arch Crawford, the seer/market speculator of some fame, put it this way: "The party that wins this election won't win another in 100 years." Though that sounds a bit over the top, it captures the prevailing sentiment. Few see the coming period as a walk in the park for President Bush or the private investor. Short & Sweet. . . . . . .When was the last time gold reacted so favorably to an election? If memory serves correctly, we have to go back to the first Bill Clinton victory in 1992 to find anything similar. Even so, gold didn't begin its ascent until 1993, well after Clinton took office. In this case the reaction was immediate . . . . . . . . . Gold sold off on Monday and Tuesday prior to the polling results, and began to move up as soon as the Bush victory emerged. From Wednesday morning forward gold was in a solid uptrend closing $15 higher by Friday at the $433 mark. . . . . . . . . . .Gold hovered in the $260 range when George Bush arrived at the White House in January, 2001. Since then it has risen over 65% as of the Friday close at $433 mark (and we still have more than a month and a half to go). A similar performance over the coming four year term would put the yellow at the $715 mark . . . . . . . . . . . Michael Lewis of Deutschebank told Financial Times that dollar weakness was expected to remain with us for years to come because the U.S. will be "stuck" with high budget and trade deficits.". . "The current gold rally looks set to become the longest in modern times," Lewis concludes. . . . . . . . . . . In that same article Peter Smith of JP Morgan Chase/London cryptically remarked, "It looks like we might have a real market back." . . . . . . .That remark, no doubt, had something to do with the triple top of $427-$430 being penetrated and the $433 figure being posted as a close. . . . . . . . . .Who do you think is the top-ranked investment banking house in the world? Citigroup? JPMorgan? Goldman Sachs? Deutschebank?. . .Guess again. It's NM Rothschild. . . . . . . . .From John Brimelow's report last Friday as posted at LeMetropoleCafe.com: "Today, of course, has been more obviously dramatic, with a massive bear raid after the payroll data massacre in what might be the decisive encounter of this bull market. Estimated volume by 10 am was a steep 35,000 contacts. Gold's technical achievement is considerable, and many will concur with the JP Morgan "Metals and Energy Strategist" comment today: 'Gold prints a new high for the year, signaling the return of the bull trend from the 1999 lows. As such, we expect the market to stage sustainable rallies over the coming weeks/ months, with the initial medium term objectives at 461/464, and potentially 500.'". . . I point out that those objectives came from the usually staid JP Morgan . . . . . . . . . The big question is whether or not the the price can be sustained above the $430 level. The technicians say that we've broken through a triple top - a very bullish event. . . . . . . "We believe the gold price will probably stay in the higher bracket -- $400 to $475 -- for the next 12-15 months," says Newmont's Pierre Lassonde. . . . . Also from Lassonde: "The Arabs are not coming to the U.S. They're not putting money in the U.S. What they are buying is real estate in Beirut. They're buying euros. They're diversifying outside of currencies and they're buying gold. They have a great affinity to gold.'' . . . . . .The Economist reinforces concerns voiced here over the past several weeks: "In the three years from 1985, the dollar fell by 50% against the other main currencies. Inflation and bond yields rose and, in October 1987, the stock market crashed. America's current-account deficit is now almost twice as big as it was then, so the total fall in the dollar-and the fall-out in other financial markets-could well be larger. The wolf is licking his lips.". . . . . . .Former Fed governor, Lyle Gramley see little chance of a dollar rally. The chances of a slowing U.S. economy are rising," he says, "so a rally in the dollar in these circumstances would be very unexpected.". . . . .Watch out for a possible blind side from the hedge funds in the form of another Long Term Capital Management-style debacle. The following observation/warning was printed in The Times of London: "Weak returns on conventional investments and the flood of cash into hedge funds are driving the sector's managers into a scramble for ever more innovative strategies and ever more exotic instruments. No sooner is a new technique or investment discovered by one group than it is copied by competing funds. Thus a fresh search for higher returns on the fringes of the financial world begins. And, like lemmings, the funds dash closer to the cliff. The result is that an escalating amount of money is being bet on the same extreme positions. And since funds rely on similar models to gauge the scale of their gambles, the fear is that some unexpected development could cause a simultaneous dash for the exit, with disastrous consequences." . . . . . . . . . . Japanese gold demand is back on the front burner. ". . . "[F]ears about inflation, the state of the Japanese economy and high U.S. oil prices had triggered renewed interest in gold," reports FX Street. . . . . . . "There's financial and economic uncertainties," said Itsuo Toshima, Japan and South Korea regional director of the World Gold Council. "People are buying gold as a portfolio asset of pensions," said Toshima, referring to soaring pension and health care costs in Japan. And Japanese investors have recently been buying gold from major bullion houses in Tokyo "to preserve the value of the assets rather than for short-term speculation," he said. . . . . . . . . . . . ."Triple U.S. deficits -current account, trade and budget - heighten geopolitical concerns and a growing belief that the days of robbing Peter to pay Paul are coming to an end for Americans continue to bolster the bullish argument for gold," says Peter Grandich, editor of The Grandich Letter. . . . . . . . . . . .A UPI article buttresses Grandich's contention: "Global currency investors who carry the bulk of the U.S. deficit appear closer than ever to dumping the dollar, the Times of London reported Saturday. The dollar Friday fell to a record low against the euro and to its weakest overall value in nine years, the Times reported. If foreign investors who are holding or planning to buy dollar-denominated assets, such as U.S. Treasury notes and bonds, decide such assets are a losing venture, they could start selling the dollar-denominated assets. That would potentially disrupt global currency markets if the impulse to sell gains global momentum." . . . . . . . . . . . With that we'll bring this chapter of Short & Sweet to a close. Happy Trails, my friends. . . . .It seems that it's all about the dollar. MK Quote of the Week   "The price of a fine suit of men's clothes can be used to show anyone who is not familiar with the price history of gold just how very cheap gold is today. With an ounce of gold, a man could buy a fine suit of clothes in the time of Shakespeare, in that of Beethoven and Jefferson, and in the depression of the 1930s. In fact, this statement was still true in the 1980s, but not in the late 1990s. The suit standard now implies a gold price of perhaps $1000 per troy ounce. Today, a really good man's suit can easily cost 4 ounces of gold, and that is without a vest, which once was standard." The United States Geological Survey     Miscellaneous Post Election Gold Comments Editor's Note: As might have been expected, just about everyone writing on the current economic and financial scene had something to say about the election. Here for posterity's sake are some of the more valuable comments. "Gold futures closed Wednesday with a nearly $5-an-ounce gain as the metals market celebrated President Bush's re-election. A Republican Party victory will 'continue the excessive debt creation of the federal government," said Ned Schmidt, editor of investment publication Value View Gold Report.'" Myra Saefong, CBSMarketWatch "The gold market is starting to resemble its 1970s form after the price of the precious metal hit a 16-year high on Friday, making the current rally the second- longest since bullion was freely floated in 1971. But, unlike the 1970s when inflation helped boost prices, this time it is lack of confidence in the dollar that is causing the metal to glisten again." Financial Times "The mix of another four years of Bush economic and political policies, geopolitical instabilities, particularly in the Middle East, and the threat of terrorism all suggest higher gold prices, with $440 my target for the year." James Moore, thebulliondesk.com. "Just made it again, but a bit more convincingly this time. What does this mean for gold? That's a big story, so we shall try to give you a taste of what lies ahead.   Certainly we can expect "more of the same, but in larger doses, because the U.S. voter has, after all, endorsed his policies by electing him? This time round, his last, he will seek a place in history. His precipitous nature will certainly see more aggression added to his policies, which will, inevitably be good for gold. But irrespective of the man, we are sure that what he has to face will of itself place him in the history books. The last four years will pale into insignificance when weighed against the potential global dramas and shifts in the world's "Balance of Power" that lie in wait for him."   Julian Phillips, AuthenticMoney.com "I believe the mandate given G.W. Bush on Tuesday, both in his own vote total and Electoral College victory and perhaps even more important in new strength through additions in both the Senate and the House, now give him an opportunity to set the global markets straight by turning them upside down. Everything has been standing on its head. Now he can set things back right side up. His correct course is clear. He knows it and so do you. He has to rip the dollar loose from the manipulating hands of China, Japan, Singapore, Hong Kong, Taiwan, South Korea, Canada, Germany and France. I think you saw recognition yesterday in global foreign exchange markets of just exactly what I have said here." Adrian van Eck, Hotline on the Money and Economy "It didn't take long for world leaders and influence makers to pronounce their agendas with Bush's re-election secured. Blair, Putin, and our Middle Eastern oil sellers quickly either praised, denounced, or whined about the election. Russia, India, China, and our wonderful supporters on mainland Europe are now selling our shrinking dollar with both hands. Those in New York and Washington, D.C., with a vested interest in propping those markets to guarantee Bush's win have in fact been successful. With the election won and many pressures removed, we can expect some very serious market realignments, as artificial economic forces are removed. A lot of very smart people are now saying they would not want Bush's job for all the tea in China. A big downdraft is coming for sure. The single most newsworthy event for next year and the present is the sell-off in our U.S. dollar." Jay Taylor, HoweStreet.com The U.S. dollar will likely remain under downward pressure due to the debt and deficit situations, which is bound to continue. The U.S. dollar index hit a nine year low yesterday and another leg down in the bear market is now underway. This is very bullish for the foreign currency markets and we continue to like them. The weak dollar will also keep upward pressure on the metals. Today gold is at a 16 year high and it's now entering a stronger phase within the bull market. The Aden Sisters More on fractals/Benoit Mandelbrot's new book: Those of you who are regular readers are familiar with fractals, a pattern whose parts echo the whole. Pictured below is a computer generator image which serves as a graphic example. Market events on any given day - as represented by a chart - could very well be precursors of a much larger movement drawn out over time. The Elliot Wave Theory broke ground on this concept years ago, and now, Benoit Mandelbrot, who many believe to be the father of chaos theory, has taken the concept to a whole new level by applying fractal theory to the financial markets. Mandelbrot's work could very well be one of the most important areas of market research made available to investors in recent years. "It is beyond belief," Mandelbrot told Financial Times, "that we know so little about how people get rich or poor, about how it is they come to dwell in comfort and health or die in penury and disease. Financial markets are the machines in which much of human welfare is decided; yet we know more about how our car engines work than about how our global financial system functions. We lurch from crisis to crisis; so little is our knowledge that we resort not to science but to shamans." For the fractal theoretician, "as it is above, so it is below." Markets do indeed cycle. What seemingly appears as chaotic might very well be recognizable if understood in the right way. How many times have you heard a television pundit express their appreciation for the properly balanced portfolio, and then go on to define that balance as one between stocks and bonds? Since both assets are denominated in dollars, that "balanced" portfolio is ill-designed to weather a turbulent and seemingly chaotic shift in the economic climate wherein the dollar loses substantial purchasing power. It is a portfolio designed on old theories - the Dark Ages of Finance as Mandelbrot warns. A more enlightened approach is to recognize the fractals as warnings, as is the case with the dollar today, and hedge with the primary, most liquid and internationally recognized non-dollar based asset, GOLD. The title to Mandelbrot's book summarizes the approach: "The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin, and Reward." If markets have become essentially unpredictable then the portfolio must make the proper allowances through asset allocation.   Worth keeping/Comments from past issues Investors should never forget the lessons of the South Sea Bubble and John Law's experiment with paper money, as discussed in Friday's Reckoning. The Mississippi Scheme in particular is relevant to the current situation in the United States; in fact, there are several lessons contemporary investors can learn from John Law's rise and ultimate demise.   It is true that Law's policies were initially a great success, boosting the French economy considerably. In fact, at his peak in 1719, Law was one of the most admired personalities in continental Europe. But the Mississippi Scheme failed, and Law fell from grace because the Banque Royale held for too long the firm belief that it could solve every problem simply by increasing the supply of paper money. When Law finally realized that the enemy was a loss in confidence in paper money and accelerating inflation, the damage had already been done.   There will surely be a time when the present "chain letter" type of fiat money operation practiced by the U.S. Federal Reserve Board will similarly no longer work and lead to a sharp depreciation of the U.S. dollar. The other possibility, of course, is that the dollar begins to depreciate, not compared to foreign currencies, but -- as was also the case at the time of John Law -- against commodities and real assets." Marc Faber "I want to say something about owning gold and gold shares. Personally, I have an easier time owning gold over gold shares. Wife Faye, who has a different personality, has no trouble holding gold shares, and she has held many for years. I don't view gold, the metal, as a trading vehicle or something akin to stocks. I view gold as pure wealth. The economic world can roll over on its fannie, my house can burn down, any stock can crash and burn (think MRK) -- but gold as wealth is as old as civilization. Gold is pure wealth -- it was wealth in 2000 BC, it was wealth in the 1400s and the 1600s, and it's wealth today. The people at the Fed may tell you that gold is just an ancient "relic," but gold will be accepted as wealth when these yo-yo's at the central banks are gone and forgotten along with the whole un-Constitutional Federal Reserve system and its currency-printing operations." Richard Russell, Dow Theory Letters "Although there are only a few reserve currencies, an appalling lack of discipline is demonstrated by the US dollar. As things stand today, the United States is indebted to the external world to the tune of $3 trillion. This sum actually exceeds the total official currency reserves of all the nations of the world -- including the USA. . . The evolution of the reserve role of the American currency in recent years gives grounds for a pretty pessimistic prognosis. The relationship between the state of the dollar and the value of gold is obvious. In relation to our discussion today, this means that gold continues to have particular monetary attraction in the minds of all prudent financial investors." Oleg Mozhaiskov, Deputy Chairman, Bank of Russia "One of the favorite gold bull hopes is that the People's Bank of China (and the Bank of Japan) will look to substitute their massive and growing reserves of US dollar denominated assets for gold. ... Quite apart from the various pros and cons of any central bank owning gold, the major flaw in this story is that even if the People's Bank of China wanted to increase their gold reserves to a significant level, the gold market is not physically large enough to allow that without a major price reaction. For example, if People's Bank wanted to match the proportion of gold in its reserves to that of the European Central Bank (initially),that increase to 15% would equate to a purchase of more than 4,600 tonnes -- nearly two years of mine output -- virtually impossible to transact in anything other than a massive off-market transaction. [Editor note: or, we might add as a reminder, impossible without the aforementioned 'major price reaction'.]" Kamal Naqvi, Chairman of LBMA's Public Affairs Commitee, "Evidence of the government's 'active hands' in the markets continues to grow. First, there is the manipulation of the gold market that has been solidly documented but not widely disseminated in the press. Beginning under the Clinton Administration, the dollar has been made to look strong by holding down the price of gold. This legal and logical market manipulation has been accomplished by central bank gold sales and by lending gold to bullion banks that could, in turn, sell the gold to earn carry trade profits. You might wonder why our government is so actively involved in keeping the price of gold down. Well, a logical reason would be that when the price of gold takes off, even the investment masses will focus attention on the real problems of massive trade and federal deficits and world-wide money creation. For investors with a long-term view, the price of gold is being subsidized and held well below market. If you like government subsidies, you can get one by buying gold." Richard Benson, Specialty Financial Group, LLC "FIVE major risks threaten the world economy. Three centre on the United States: renewed sharp increases in the current-account deficit leading to a crash of the dollar; a budget profile that is out of control; and an outbreak of trade protectionism. A fourth relates to China, which faces a possible hard landing from its recent overheating. The fifth is that oil prices could rise to $60-70 per barrel even without a major political or terrorist disruption, and much higher with one. Most of these risks reinforce each other. A further oil shock, a dollar collapse and a soaring American budget deficit would all generate much higher inflation and interest rates. A sharp dollar decline would increase the likelihood of further oil price rises. Larger budget deficits will produce larger American trade deficits, and thus more protectionism and dollar vulnerability. Realisation of any one of the five risks could substantially reduce world growth. If two or three, let alone all five, were to occur in combination then they would radically reverse the global outlook." Fred Bergsten in The Economist "Gold hedge books are real liabilities that will continue to grow and likely sink more gold companies." Pierre Lassonde, CEO, Newmont Mining "While the French government announcements a few months ago to dishoard gold made headline news, a tiny article buried in the August 19th Financial Times said: 'The Bank of France has already sought to renew France's love affair with gold by rebuffing government attempts to sell some of its 3,000-tonne hoard to ease the budget deficit.'" James Turk, Freemarket Gold & Money "In the past there was another parallel period, between today's deficits and the deficits of the seventies. In the seventies, the deficits surged with a war in Vietnam, an oil crisis and a surge in global inflation. The Fed Fund rate increased a net 14 times from 4.5 percent to 20 percent. Inflation soared to 20 percent and the dollar fell 70 percent. Gold moved from $35 an ounce to $850 per ounce. Today, the deficits are even larger and we have only begun gold's second leg. The dollar has fallen only 15 percent so $510 per ounce continues to be only an interim target." John Ing, Maison Placements Canada "Let us be blunt about it. The U.S. is now the comfortable path to ruin. It is being driven along a road of ever rising deficits and debt, both external and fiscal, that risk destroying the country's credit and the global role of its currency. . .What cannot last will not do so, as the late Herb Stein famously remarked. But we can choose now it changes. The U.S. authorities can allow things to take their course or they can develop a policy to reverse these trends. The essence of the needed changes is quite clear: a further substantial devaluation of the dollar. . ." Martin Wolf, Financial Times "The reality of horrific multiple U.S. deficits, a worsening energy crisis, a geopolitical landscape that must get worse before it can get better, and a polarizing national election [will]give the support gold needs to go to new highs and challenge $500 in the next 12 months or less." Peter Grandich/The Grandich Letter.