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June 2006 Archive
Coverage of the London Bullion
Market Association meeting in Switzerland...
Note: The London Bullion
Marketing Association annual meeting attracts luminaries from
the gold industry including executives from the major mining
companies, central bankers, bullion bankers and top players from
the various investment funds. We will be monitoring the festivities
for important news and opinion.
 Gold crunch looms
David McKay/Miningmx - 6/26/06
"Gold reserves owned by
the world's top gold mining companies will be exhausted by 2020
if new discoveries are not made."
USAGOLD comment: One should
not assume that this problem will visit itself upon the price
some 14 years from now. It takes roughly a decade between
the time a deposit has been discovered and it produces its first
ounce of marketable gold. Gold owners with a view to the
long-term will take advantage of this developing situation.
Pensions tipped to be strong metal holders
David McKay/Miningmx - 6/26/06
"Pension and insurance
funds invested in commodities were unlikely to quit the sector
notwithstanding a correction in the prices of metals," said
a banker working for Goldman Sachs in Europe.
"We believe this is only
the start of the investment market for commodities," said
Arun Assumall, head of European investor sales for Goldman Sachs
International.
USAGOLD Comment: Coupling
steady long term demand for gold from massive pension funds with
an erosion of mine production to zero will make for some interesting
price projections as we move forward over the next five years.
Beaten up dollar unsettles investors in USA and
abroad
John Waggoner/USAToday - 6/22/06
"Soaring gold prices are
one sign of how bearish investors have turned on the dollar.
Gold tends to rise when the dollar falls, and vice versa. After
all, if you fear that the mightiest currency on the planet will
lose buying power, you buy gold, which has served as currency
for as long as currency has existed."
USAGOLD comment: USAToday
quotes USAGOLD's Michael J. Kosares, author, The
ABCs of Gold Investing: How to Protect and Build Your Wealth
with Gold.
(5 star must read)
 Currency agreement could avert dollar's collapse
John Grieve Smith/Financial Times - 6/22/06
"There is growing discussion
in the International Monetary Fund and elsewhere about the need
to tackle global imbalances. But it is strange that, while the
dollar is widely acknowledged to be overvalued, this has so far
had relatively little impact on the market or central banks'
willingness to hold dollar assets. There is an increasing danger
that sooner or later something could spark off a dramatic fall
in the dollar, leading to chaos in currency markets, a sharp
fall on Wall Street and a recession in the US spreading to the
rest of the world."
USAGOLD comment: Unfortunately
the link above takes you to a subscription article. Financial
Times does have a 15-day free trial though and it might be worth
starting the clock for Grieve-Smith's article. I have been saying
for a long time that the only way the great trading nations can
proceed under the circumstances is to make a new international
monetary agreement. In that agreement, I believe that gold will
necessarily play a significant role in official sector reserves
and that it will have to be sharply up-valued in order to accomodate
the huge overseas dollar balances in China, Japan, Europe and
the Gulf States. If you are looking for the scenario in
which gold could reach the heights suggested ($6000) by the Aden
Sisters in an accompanying link in this USAGOLD NewsGroup Alert,
this is it. Grieve Smith ends his interesting suggestion with
a question: ". . .[D]o we have to wait for a crisis before
taking any policy initiative?" We would like to think
not, but sadly given the magnitude of the steps which need to
taken, the remedy might have to be crisis induced in order to
get the parties to go along. --MK
"Just how super is the super cycle?"
Jackie Steinitz/Resource Investor - 6/20/06
"If a week can seem a
long time in commodities then six weeks is a dim distant memory.
So when commodity prices have plummeted some 15-35% in less than
thirty trading days, and gold is 'only' around the $570/oz mark,
it is easy to forget that prices are still significantly above
last year's levels. But they are. And recent data confirm that
the arguments underpinning the strong commodities bull run --
the supercycle -- are still in place."
USAGOLD Comment: This
article offers some solid reasoing why the recent correction
in the gold price might be a good buying opportunity for the
long run.
 What next for gold?
John Robson & Andrew Selsby/Money Week - 6/22/06
"On Tuesday last week
the gold price fell by $45/oz, the biggest one-day fall for 15
years. That sort of dramatic event quite often marks an important
turning point, probably representing a last moment of panic.
Action since has been very good, indicative of strong hands taking
advantage of a wonderful opportunity."
USAGOLD Comment: A good
summary of the reasons why gold makes sense for the beginning
investor.
Golden Opportunities
Mary Anne & Pamela Aden/AdenForecast - 6/20/06
". . . if this bull market
ends up rising 2300% like the one in the 1970s did, then gold
would eventually get to $6,000. As wild as this may seem, remember
that $6,000 in the future will not be worth the same as $6,000
today."
USAGOLD Comment: The Aden
sisters have a long history of making the correct call on the
gold market. $6000 gold? It's possible. As the Aden
sisters point out these are not ordinary times or circumstances.
U.S. mint strikes first pure gold U.S. for investors
and collectors
U.S. Mint Press Release - 6/20/06
"This American Buffalo
Gold Coin will appeal to both investors who choose to hold gold
and to others who simply love gold," said Deputy Director
David A. Lebryk during the ceremonial striking at the United
States Mint at West Point, where the coins are being produced.
"These classic and beautiful American Indian and buffalo
designs by James Earle Fraser, which have been American favorites
since they were first used in 1913, recall a golden age of coin
artistry."
USAGOLD Comment: We secured
some of the new pure gold (.9999) U.S. Gold Buffalos in one ounce
size and several clients have already ordered.
"Money, Gold, and the Great Depression"
a 2004 speech by Ben Bernanke
"The slowdown in economic
activity, together with high interest rates, was in all likelihood
the most important source of the stock market crash that followed
in October. In other words, the market crash, rather than being
the cause of the Depression, as popular legend has it, was in
fact largely the result of an economic slowdown and the inappropriate
monetary policies that preceded it."
"The Federal Reserve had
the power at least to ameliorate the problems of the banks. For
example, the Fed could have been more aggressive in lending cash
to banks (taking their loans and other investments as collateral),
or it could have simply put more cash in circulation... The Fed's
failure to fulfill its mission was, again, largely the result
of the economic theories held by the Federal Reserve leadership."
USAGOLD Comment: The financial
news pages are filled with speculaton about the various remarks
made by Fed chairman Ben Bernanke over the past several weeks.
We have been asked repeatedly what we make of his performance
thus far. In short, with respect to the markets and dealing with
the press corps, Mr. Bernanke is learning on the job. Beyond
the public relations problem, just as a tiger can't explain away
his stripes, the current Fed chairman cannot discard everything
he's come to believe in his study of economic history just because
he was appointed Fed chairman. That is why the link above, though
dating to 2004, is important for those wishing to gain a fundamental
understanding of Mr. Bernanke's thinking processes.
In this speech, Bernanke reveals
himself as a monetarist highly influenced by Milton Friedman
and Anna Schwartz. He indentifies the gold standard and its rigidity
as one of the causes of the Great Depression. The flip side of
Bernanke's argument is that the ability of the Fed to create
money out of thin air remains the primary weapon should the economy
show signs of a major slowdown. What he doesn't address fully
in this speech is what happens when the central bank errs on
the side of loose money and inflationary consequences begin to
compound themselves in the economy. Judging from his comments
here, it is hard to believe that Mr. Bernanke would err on the
side of a "too tight" monetary policy -- an observation
which might come in handy to USAGOLD News Group participants
in interpreting the Fed chairman's statements quoted in your
morning newspaper.
Bernanke: Fed Needs to Watch for Inflation
by Jeannine Aversa/Associated Press - 6/15/06
"Even though oil prices
have risen quite significantly, they haven't had nearly the effect
on overall inflation and therefore there's not nearly the response
in terms of interest rates that we saw in the 1970s. . ."
USAGOLD Comment: Gold pops
$10 in after hours trading on Bernanke's remarks.
Does the Laffer Curve apply to interest rates
by John Tamny/National Review Online - 6/15/06
"In the past week, the
dollar price of gold has fallen 6 percent. Was the presumption
of a vigilant Fed behind gold's fall, or was the death of Abu
Musab alZarqawi (not to mention an easing of Iran tensions) a
bigger factor in making investors more eager to hold dollars?
Time will tell, but historically hikes in short-term interest
rates haven't halted commodity-price increases, while the lowering
of borrowing costs has often occurred alongside falling commodity
prices."
USAGOLD comment: Some perspective
on the relationship between gold and interest rates.
 Oil trades above $69 on U.S. stockpile decline,
commodity rally
Bloomberg - 6/15/06
"Oil's rally from a three-week
low started before the report as investors bought gold, copper
and other metals, betting a one-month slide in commodities was
overdone."
USAGOLD comment: A consensus
is emerging that the sell-off in gold was overdone.
Summer
doldrums best chance to buy gold
by Jim Hawe/Dow Jones
International News - 6/14/06
"Along with surfboar wax
and sunscreen, you just might want to add a few Krugerrands to
your early summer shopping list as June and July will present
the best opportunity to buy gold for the rest of this year, according
to one industry insider."
USAGOLD comment: USAGOLD's
founder is interviewed by Dow Jones.
Inside
Wall Street's culture of risk (Business Week, June 12,
2006) - "Now, virtually
all banks are making huge bets with their own assets on many
more fronts, and using vast sums of borrowed money to jack up
the risk even more."
USAGOLD comment: Big risks
can go both ways. So far it's been a winning environment but
what happens if one of Wall Street's big gambles turns into a
big disaster? And will investors get caught in the downdraft?
Another
Chinese central banker calls for gold hedge (Bloomberg,
June 1, 2006) - "China should use its foreign-currency reserves,
the world's largest, to buy gold and oil as a hedge to guard
against the risk of a sudden drop in the U.S. dollar, said an
adviser on the central bank's 13-member policy board."
USAGOLD comment: We're seeing
enough of this sort of thing to make us believe that the Chinese
are serious about building up their gold reserves.
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