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Note: This market update
will be published intermittently during the summer months.
Overview/Gold
 The
European Union will muddle through, and the euro will plug along,
but gold is likely to become one of the key longer term beneficiaries
of Sunday's rejection of the constitution. It could take years
for Europe to sort out the repercussions from the French referendum,
and the unforgiving financial markets will begin to wonder immediately
what is going to happen between now and then. Investors too will
be checking to see if they are still in one piece once the smoke
clears. These are the sorts of events which usually send investors
to gold as a refuge, but because of the coupling of gold and
the euro in recent years, the initial reaction may be negative.
At the same time, to think that a good many Europeans would not
go to gold coins and bullion with these new uncertainties darkening
their door is to overlook the lessons passed down in continental
families for generations. I would suspect that many a preliminary
inquiry is being made into gold this very day. Though I doubt
that any renewed European interest in gold would affect the market
radically in the near term, over time it will become a major
factor on the bullish side of the ledger -- every bit as important
to the international gold market fundamentals as Chinese demand
(if not more so). European investors are in the same boat as
Americans. They must hedge their portfolios against the possibility
of a currency breakdown. That may have always been the case,
but after Sunday's vote, the immediacy resonates with the clarity
of a Stradivarius.
Please
call our Trading Desk for quotes and assistance buying gold coins
and bullion.
1-800-869-5115 Extension #100
4:00am - 7:00pm MT |
Short
& Sweet.
. . . . .
Received a
call from Congressman Paul's office thanking us for archiving
the series of exchanges between the representative and Fed chairman
Alan Greenspan at the USAGOLD website. It is our pleasure. The
Greenspan-Paul dialogue occurred during Congressional testimony
from 1997 to 2004. We hope it will become a major attraction
for those out to gain a better understanding of the Fed chairman's
views on gold and its role in the monetary system. We invite
you to visit and spend some quality time with these remarkable
exchanges at this link. . . . . . . . .Says Dr. Paul of the exchanges: "My
questions are always on the same subject. If I don't bring up
the issue of hard money vs. fiat money, Greenspan himself does.".
. . . . . . . . . . .Gold production continues to decline in
South Africa, the world's largest gold producer. The South
African Chamber of Mines reports that in the first quarter of
this year it dropped by 12.8% to 73.8 tonnes. . . . . . .
. . . . According to a Financial Times article, hedge funds have
recently experienced heavy losses on credit derivatives -- about
$1 billion according to Goldman Sachs. Some traders, the article
goes on, consider the figure "far too conservative."
. . . . . . . . . . . . .It's good to see the erudite Professor
von Braun sharing his wisdom with us again at the USAGOLD website.
An old friend, I have always valued his insights. He has a very
clear understanding of the gold and forex markets. He has published
two new essays and they can be linked through the Nuggets section
below . . . . . . . . . .Oil's on the move again closing at nearly
$52 per barrel on Friday. CBS Marketwatch reports that China
may use some of its enormous dollar reserves to purchase oil
. . . . MSN Money Markets' Jim Juback: "For the last
year, I've been convinced that inflation is back and getting
worse. I can feel it in my everyday life. My favorite pizza
guy raised his price for a slice by 20% last month. My kids'
tuitions climbed 8% this year. Heating oil and electricity are
more expensive. Breakfast cereal. Books. You name it, it costs
more.Yet for the last year, Alan Greenspan and the other members
of the Federal Reserve's interest-setting body, the Federal Open
Market Committee, have been telling me not just that there isn't
any inflation, but that there really isn't any danger of inflation.".
. . . . . . . .Every once in a while you run into one of those
quotes that sums up something very complex in one or two sentences.
This quote from economist Tom Palley is one of them: "In
the old days too much money chasing too few goods and labor drove
prices up. Now it's too much liquidity chasing too few assets."
. . . . . . . . . . . . .We alluded to that bubble phenomena
last week and the fact that some well-heeled investors are moving
profits out of the real estate market (which they see as a bubble
about to burst) and into gold, the least expensive of the primary
assets. . . . . . . . . . .The U.S. Pension Benefit Guaranty
Corporation, according to an MSN article, has announced losses
that "dwarf anything in the agency's history."
If the PBGC isn't properly funded, it could lead to "unsavory
alternatives" like a bail-out similar to that of the savings
and loan industry in the late 1980s. . . . . . . . . State Street
reports investor confidence is at its lowest level since 1998
with investors lightening up on their stock portfolios. . . .
. . . . .The Organization for Economic Cooperation and Development
says that the U.S. could run a trade deficit of $900 billion
in 2006 -- an astronomical number. The OECD's chief economist,
Jean-Philippe Cotis says "We are not saying there will be
a doomsday tomorrow morning ... but because the adjustments are
relatively slow, we are running the risk that an accident will
happen. Time is running out the numbers are getting big,
big, big." . . . . . . . . . . The Russian central bank wonders what happened
to 350 tonnes of palladium deposited in western banks. Apparently the metal was deposited
to raise a loan to support the ailing Russian rouble in 1999,
and now there is some uncertainty as to what happened to it.
. . . . . . . . . .30,000 Canadian investors and few pension
funds who invested in two shaky hedge funds can't touch their
money. It's been frozen by Canadian securities regulators
amid "a wide ranging investigation" according to Monday's
Globe and Mail. In what is obviously a case of too little-too
late (at least as far as these investors are concerned) regulators
want to make the funds more transparent. . . . . . . . . . .
Nuggets
Real Money, Funny Money
and YOU
by Professor von Braun
Given the rest of the worlds
dependence on the soundness of US financial markets, the mere
fact that Greenspan can isolate and comment on a potential threat
to the soundness of this market, from within the US itself, should
convey the potential inherent unstableness of the derivative
markets themselves and send a warning to holders of US dollar
denominated assets.
What guarantee do you have
that an event outside of the control of any monetary authority
won't occur and have repercussions for the entire system, including
your own holdings, whatever they may be? Is it possible? Obviously
Greenspan thinks so!
Now if your assets included,
in part, gold in physical form, and you have taken delivery,
then any potential meltdown in the paper markets will be of a
lesser impact.
Full article
Hedge funds seen as threat
to central bank role
by Natsuko Waki/Reuters
Central banks, responsible
for the stability of the financial system, have long used commercial
banks as their eyes and ears in the 24-hour global foreign exchange
market, which operates mainly on an unregulated basis.
Wholesale interbank traders operate under market conventions
developed under the gaze of central banks. But they are being
replaced as major drivers of the foreign exchange market, valued
at $1.9 trillion a day, by the often opaque trading activities
of hedge funds, which use leverage to make their business worth
many times the $1 trillion or so of assets they manage globally.
This situation worries central bankers who still remember the
way hedge funds savaged the pound in 1992, forcing Britain's
withdrawal from the European exchange rate mechanism, and almost
caused a global financial meltdown when the hedge fund Long-Term
Capital Management collapsed in 1998.
Full article
An ABCs
of Gold Investing UPDATE
C is for
Choosing a Gold Firm
With oil moving higher and
stocks in trouble, we are receiving a steady stream of inquiries
on buying gold. First-time buyers need to be careful in choosing
a gold firm. In talking with a number of clients who are in contact
with some of our competitors, we are hearing stories of aggressive
telephone sales tactics and item pricing. Long ago, we decided
to keep our staff small, our pricing competitive and our relationship
with prospective clientele more laid back. You can contact us
without worrying about being put on a call list. We are happy
to answer questions and discuss your gold purchase in full, but
we leave the ball in your court with respect to the follow-up.
That might cost us a client
now and then, but those who become clients do so in their own
time and without being constantly bothered by one of our brokers.
By this they become better clients who tend to stay with the
firm for many years. (We have clients who started with us in
the 1970s.) Most of our clientele are business and professional
people fully capable of making up their own minds. They tend
to gravitate to us because they find out we know what we are
doing in the gold market and can apply that expertise to their
gold portfolio. Contact us and discover the difference. And don't
be like some who have caved in to the pressure and found out
later that the great deal they thought they had wasn't so good
after all. We have been a part of the gold business for over
30 years. We were just certified by the Better Business Bureau
for over ten years of membership. Our volumes are large; our
clientele well positioned based on their needs and goals. We
look forward to working with you.
1-800-869-5115
Trading Desk
Extension #100
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--About us--
Archives
 NEW Disturbing Trends: Is Now the Right Time
for Gold?
2005
Gold Market Forecast
- "I foresee two
potential scenarios for the gold market in 2005. One involves
a see-saw market which culminates with a roughly 20% gain on
the year in keeping with the average over the last three years.
This would take gold to the $525 level. The other involves a
substantial price spike resulting from an uncontrolled deterioration
in the value of the dollar. In that scenario, gold would threaten
and probably exceed the $600 level."
MarketUpdate 5/23/05 - The
threat of a dollar crisis and rolling financial breakdown continues
to dominate the financial pages. This issue, like the last two,
focuses on the reasons for this concern and related developments
around the world. Our intent is to keep you informed so that
you might position yourself ahead of Mr. Buffett's "stampede"
as referenced above. In my more than 30 years in the gold business,
I cannot recall a time when there has been more legitimate justification
for concern about the financial system matched by a more widespread
complacency on the part of the general public.
MarketUpdate 5/16/05 - The madness of crowds can pop up anytime, anywhere.
No era is immune; no individual beyond its unflinching grasp.
And crowd madness pays no heed to intelligence or experience.
In 1841, Charles MacKay wrote an important book titled "Extraordinary
Popular Delusions and the Madness of Crowds -- the book that
Bernard Baruch called the secret to his incredible wealth. In
it MacKay points out that Roger Bacon, "by far the most
learned man of his age" believed that the philosopher's
stone could turn lead to gold. (Book
link provided)
MarketUpdate 5/09/05 - Last
week systemic risk was in the air. General Motors and Ford's
bonds reduced to junk status. Rumors of at least one hedge fund
and possibly others on the ropes. Talk of several major American
corporations in financial trouble. Amidst all of this, the Chairman
of the Fed raised the specter of systemic risk citing Adam Smith's
"invisible hand" and the forces of chaos and creative
destruction in the market.
MarketUpdate
5/02/05 - The brief history outlined
in this week's masthead quote speaks volumes why gold makes sense
for the average investor. The graph to your immediate right supports
Mr. Bonner's reference to the "5¢ dollar." Modern
nation states have a way of running their currencies into the
ground. Germany, Turkey, Argentina, Mexico, Brazil, Russia, Poland,
Greece, Hungary, China, Austria, Thailand, Chile and Yugoslavia
(just to name a few) experienced wipe-out inflationary episodes
in the 20th century. The damage was significant enough to leave
an indelible mark on the indigenous population for generations
to come.
MarketUpdate 4/25/05 - Day
to day we sometimes get lost in the heat of the daily market
battle only to lose sight of our progress with respect to the
war. This short essay is about the progress of the war.
MarketUpdate 4/18/05 - "Perhaps
the reality is that the current crop of problems defy easy answers
and short term solutions and when all is said and done, that
is probably the real message delivered by last week's stock market
plunge. If the down trend gathers momentum in the weeks ahead,
2005 could turn out to be a more harrowing year for investors
than most anticipated."
MarketUpdate
4/11/05 - "This past week was a quiet one
for gold, but it could very well have been the calm before the
storm. A vanguard of highly
regarded analysts have begun to voice concerns that there is
too much complacency in the face of some of the most far-reaching
threats to stock market stability in memory."
MarketUpdate
4/4/05 - "Europe doesn't have a huge balance-of-payments
problem as the United States does. It's not at war. Europe doesn't
have a lack of currency reserves to tap for foreign payments.
So why liquidate gold when the dollar is in severe trouble and
gold is on the rise?"
MarketUpdate
3/28/05 - "The old school will tell you
that inflation needs to be weighed in a larger context -- one
that encompasses real rate of return. (A yield bearing
asset shows a real rate of return when its interest rate exceeds
the inflation rate after taxes.) Currencies with a positive real
rate of return attract investment capital, and they rise. Currencies
with a negative real rate of return experience an exodus, and
they fall."
MarketUpdate
3/19/05 - "This is a good starting point
for those of you who are new to the gold market. The current
bull market trend began in late 1999 when Europe's primary central
banks signed an accord limiting gold sales and leases of the
yellow metal. This proved to have a liberating effect."
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