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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...

The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

ARCHIVED DISCUSSION FROM 6/2/2003
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Bull Moose (06/02/03; 23:40:27MT - usagold.com msg#: 104006)
Oil & Gas Personnel
Merrill Lynch says 50% of seasoned personnel have left the Oil industry since 1982. That figure is absurdly low. As one of those seasoned persons, I know that since 1986 the people I knew in the industry has dwindled to less than 25%. These are the people with many years of experience like my self that have permanently left the industry. You cannot ramp up exploration quickly without those people who have the hands on experience. There is no body of memory and experience to avoid trouble and know where the secrets of the underground lay hidden. It takes years to develop that kind of experience and body of memory.

Black Blade (06/02/03; 23:09:55MT - usagold.com msg#: 104005)
The Nation's Next Energy Crisis Won't Be At Corner Gas Station
http://story.news.yahoo.com/news?tmpl=story&cid=1471&ncid=749&e=5&u=/ibd/20030602/bs_ibd_ibd/200362general

Snippit:

In the 1990s, natural gas was hailed as the growth fuel of the future. It was relatively cheap, burned cleanly and polluted less. Power plants that used the fuel were easy to build with reliable construction schedules. But it's become apparent that the early hosannas extolling the wonders of natural gas were overblown. Prices are now about $6 per million British thermal units (Btus), up from an average price of $2 in the 1990s. On May 21, Federal Reserve Chairman Alan Greenspan called attention to the problem in his testimony before Congress. "I'm quite surprised at how little attention the natural gas problem has been getting," Greenspan said. He went on to describe the issue as "very serious." Greenspan noted that, in addition to electricity generation, industry has found "myriad new uses for natural gas."

Even before Greenspan's comments, there were warnings from industrial users of natural gas, like the American Chemistry Council, which in February called on the government to take immediate measures to avoid a supply crisis. And in May, Energy Secretary Spencer Abraham called for a national summit. Greenspan said the reasons for the tight supplies were a "colder-than-average winter," the country's "limited capacity to import liquefied natural gas" and the failure of increased drilling to raise production. Greenspan also remarked on the contradictory federal policy toward natural gas. "If on the one hand we have encouraged, as we have, very significant growth in domestic demand for natural gas - but are very readily constrained by our ability to increase supply - then something has got to give, and what is giving, of course, is price," he said.

Said Jewell: "What he meant by that is that federal policy encourages consumption of natural gas, particularly in the electric power sector. At the same time, federal policy becomes more restrictive and more limiting as to where we can drill for natural gas." While the number of rigs drilling for natural gas has grown - tripling over the last 15 years - production has remained level since 1994 at about 19 tcf a year. There are places in the U.S. to get more gas - off the coasts of California and Florida and in areas of the Rocky Mountains - but they're off-limits, Jewell says. It's not just federal policy, he said, "It's state policy and concerns of the public that are limiting the areas we can drill." The natural gas industry's failure to meet demand is "not necessarily for a lack of effort," Jewell said. "They do drill more. The technology is improving. But it seems they're running faster and harder and making no progress."


Black Blade: A fairly good article that cuts to the chase and outlines the current NatGas supply problem. Even if we are somehow lucky enough to squeak by this year, the long term problem remains that there are simply not enough drill rigs in existence, land access remain a delicate issue, permitting is often too slow to prevent repeated crises, and infrastructure is woefully inadequate to get supply to where it's needed. This year will likely be just the first of many with low NatGas supply while demand continues to grow.




Black Blade (06/02/03; 22:15:48MT - usagold.com msg#: 104004)
Postwar oil prices flowing higher than analysts predicted
http://www.canada.com/search/story.aspx?id=cb95f1c5-b42c-40b3-a899-55df659ec296

Lower exploration levels partly to blame

Snippit:

What happened to the widely-predicted post-Iraq slump in crude oil prices? Back in early March, before the launch of the U.S.-led campaign to topple Saddam Hussein, oil prices rocketed to $37-$38 (U.S.) a barrel. Everyone knew those lofty prices weren't sustainable, and the flat performance of many energy stocks reflected that. Most analysts predicted crude oil prices would quickly fall to $23-$24 a barrel once the war ended. Some said prices could slump all the way to $18.

Boy, were they wrong.

Falling U.S. crude oil inventories and recent terrorist attacks in Saudi Arabia are two factors behind the latest run-up. Now, with the peak summer driving season already underway, some say oil prices could cling to the $30 level for months to come. Meanwhile, North American natural gas prices have stayed strong, closing Friday at $6.25 per MMBtu (million British thermal units) on NYMEX, $1 above the level of early May. Gas storage levels remain low and some analysts predict North American production capacity will drop this year, setting the stage for another price spike next winter.

Certainly the energy analysts at Merrill Lynch are convinced that the era of cheap oil is finished. In a 40-page report issued last Thursday, Merrill Lynch says major energy stocks are poised for their best run since the 1970s. Merrill Lynch is forecasting an average oil price of $28.50 a barrel for 2003 and a "normalized" price of $24 a barrel for 2004. "While there is a lot of noise as to why oil prices should eventually decline to $20 per barrel, the cold hard facts and analysis suggest that the normalized oil price is moving higher, not lower," Merrill Lynch says. At the same time, the number of geologists and other technical personnel in the upstream end of the business has plunged by half since 1982. So even though oil producers are awash in cash, they won't have the ability to quickly ramp up exploration and development, the report says.


Black Blade: yeah, I know and I am not one bit surprised either. ;-)



Black Blade (06/02/03; 22:02:39MT - usagold.com msg#: 104003)
Rising retail inventories create headaches
http://www.kansascity.com/mld/kansascitystar/business/5970526.htm

With below normal temperatures and the war in Iraq stifling consumer demand, retailers are saddled with an oversupply of merchandise.

Snippit:

Discounts will be perhaps most generous in apparel, where inventory growth -- up 8 percent -- was higher than a 2.9 percent sales gain in the first quarter, according to Slater's estimates. That marks the first time in at least a decade that inventory growth is higher than sales growth in apparel, he said. The inventory buildup is extending to other areas including electronics and home furnishings, said Frank Badillo, senior retail economist at Retail Forward, a consulting firm in Columbus, Ohio. In March, it took 1.6 months to sell merchandise overall, up from 1.54 months a year earlier and continuing a pattern of inventory buildup since last October, according to the Commerce Department.


Black Blade: Consumers are tapped out and not spending – who can blame them? People are worried about jobs and the economy. Costs are rising and necessities come first, and many now find themselves stuck deep in debt and are struggling to meet obligations after years of spending like drunken sailors. To make matters worse many have mortgaged their future by risking the family home to keep spending. It's going to get very ugly. As always, get out of debt and stay out of debt, stash enough emergency cash for several months’ expenses, accumulate Gold and Silver portfolio insurance, and start a nonperishable food and basic necessities storage program.



Dollar Bill (06/02/03; 21:56:12MT - usagold.com msg#: 104002)
*>*
Aristotle,
Hate to make an email type post, give me couple days to respond, have to mull.

Black Blade (06/02/03; 21:46:52MT - usagold.com msg#: 104001)
Market Wrap Up – Puplava
http://www.financialsense.com/Market/wrapup.htm

Snippit:

The Carry Tax Cometh?

Not to worry. The Fed is also considering unconventional means if money velocity shrinks. Fed senior vice president Marvin Goodfriend of the Richmond Federal Reserve branch first proposed a study of implementing a "carry tax." This tax would be imposed on cash if consumers don't spend the money as fast as the government wants it to. Essentially this tax would be designed to eliminate the problem of zero-bound interest rates. The tax would lower the value of the currency the longer it is held without making a transaction. In effect, it becomes a negative interest rate, which punishes cash holders for preferring to hold on to their cash. It would be designed to eliminate the Japanese problem where consumers and investors have preferred to hold on to cash as their assets deflated in the stock and real estate markets.

In my opinion, besides the constitutional problems this would present, it would most assuredly backfire. As the government continues to depreciate the currency, implementing a carry tax would force investors and savers into "things" as they see the value of their assets depreciate such as paper assets and real estate and the value of things they need go up in costs. People would simply put their money into "things" and avoid paper. The most valuable asset under these conditions would be the only real money that has ever existed throughout history: silver and gold.

We may soon be revisiting history as the alchemist take us back to the days of John Law, something I never thought I would see. However, it looks even more likely in the days ahead more of which will be written about in the future.


Black Blade: Unconventional methods to stave off the coming financial disaster. This is "interesting" reading in tonight's article. Definitely worth reading! We already know that the Fed is desperate after 12 rate cuts that did absolutely nothing and the problems just pile up. This debt ridden nation is fast approaching the end of the line and if foreign investors bail, then the dollar craps out, while on the other hand as debt piles up and if US investors bail, then the dollar craps out. Quite a catch-22 we got here. The Fed is outta bullets and all that's really left is to push for rapid massive inflation but even that is a hard pill to swallow. "Interesting Times" indeed!



Aristotle (06/02/03; 21:43:00MT - usagold.com msg#: 104000)
Thoughts for Dollar Bill
"Isn't it a key issue for a country to work for a lower currency for trade reasons?"


Thanks for posing the inquiry.

On your foremost point, "isn't it a key issue for a country to work for a lower currency for trade reasons?" the response I would offer is this -- sounds about right, !!BUT!! not carved in stone!

It is a political reality that governments find great comfort in a fully employed citizenry. This is true even at the cost to national welfare of spoiling the population's savings (through beggar-thy-neighbor type currency depreciation.) But there's a political limit (citizen tolerance) to the acceptible level cost incurred. That's to say, a trade advantage to support full employment through currency depreciation will not be tolerated or politically acceptible to the degree where the lost purchasing power effectively impoverishes the population. If many citizens are unemployed they are likely to riot (vote officials out of office) because they have no purchasing power (in the form of income;) and by a similar stroke of the brush even the fully employed are likely to fuss if their currency noticeably collapes and their savings and salaries lose significant purchasing power. Think Asian Contagion or Argentina on that one.

Ultimately, the various governmental monetary authorities must strike a fine balance between exporting their nation's goods and their race to the bottom regarding currency valuation.

Further evidence that your hypothesis isn't completely accurate can be found in a few examples to the contrary. Certainly, it can be argued that the United States was not among the *universal* list of all countries seeking a lower currency. Before it structurally failed in its effort a year and a half ago, Argentina tried to halt its long trending currency decline by pegging for a whole decade to the U.S. dollar. How about the Hong Kong dollar peg as another example to halt a race to the bottom? And hey!, how about all those wily European dudes who valiantly defended various exchange rate mechanisms among each other until finally forming a currency union in the form of the modern euro? Not *every* nation, apparently, thinks low and lower is the short path to righteousness. Think, therefore, we can chalk up some of that perception of yours as coming from observations and residue of a complex international league of semi-independents all struggling together to learn and evolve out of infancy? That's my shorthand explanation for that bit of "conventional wisdom" folklore.

When you then pose this question:

"How to replace the US as deficit nation? If the US does not play this role, how do all the various nations handle their imbalances?"

it naturally leads me to this following response.

For every nation to complacently continue exporting net wealth for the primary benefit of the United States seems to me to be the most unnatural state of affairs. And yet, if you can tacitly accept the U.S. as a national example of chronic imbalance (deficit) why can't you as easily accept an international move toward a more level playing field in which the imbalances among all the world's nations may shift around from temporal supply to deficit? Implement a new system where you set physical Gold at the center of the international reserve structure and you'll take a huge step toward eliminating the longtime exorbitant privilege held by the U.S.

Why is that proposed *strange* new world order any harder to swallow than what we actually witnessed over the past thirty years (++) with U.S. dollar hegemony?

The world *does* go 'round and 'round...

Gold. Get you some. --- Aristotle

Dollar Bill (06/02/03; 21:29:39MT - usagold.com msg#: 103999)
*>*
Thanks for that sharp insight Goldilox.
I was thinking as I walked the dog, if the Euro actually had a decent gold backing, todays posts indicate otherwise,
The slogan on thier fiat could be "In Gold We Trust"

Wouldnt a more gold system quickly work to the advantage of China?

If the EU did go the route of a gold tie in, wouldnt those dollars awash in the system, includeing all the more that the fed could just print up electronically in a second, just make mincemeat out of that effort on day one?
Arent we stuck?
Married to the buck?
Till death do we........and all that?
Dreams of multipolar divorce court will just make us all poorer?
Arent the Arabs, and Persians, (iran), stuck also?
Their countries are big welfare states. A global depression will wack them hard.
The threat of disturbing the system will probably keep all the players in line.
mahathir and others bleating about whats "fair" or whats
"muslim" will be on the sidelines while the big players
basically get back in line.
Politicians in russia, france, germany may grouse and stir up agitation for change, but the Central Bankers will
probably not want instability. Will not take any big leaps
out of the present system.
I am guessing that the real big currency flows are heavily controlled or able to be controlled when needed.
Again, just guessing.


Goldilox (06/02/03; 20:52:05MT - usagold.com msg#: 103998)
Strong Dollar
@Dollar Bill and ARI:

I think I agree in principle with what you are saying. given the cross border nature of manufacturing trade (systems made of sub-systems, made of parts, made of componentry, etc.). A large manufactured article (like a vehicle) has origins in many countries. The more imbalanced (volatile) currency exchanges are, the greater the difficulty for both parties to conduct the many transactions necessary to complete the manufacture and sale of the finished goods. i.e., even a company as American as Harley-Davidson is buying engine technology from Porsche. There are few industries that are not multi-national in today's market
place.

It seems too simplistic to pick an outright winner in the manufacturing arena based on currency exchange. The oposite side of this is that customers face the reverse challenge of manufacturers in that they must buy goods at an inverse exchange imbalance to the sale. Countries exporting natural resources have a less complex algorithm of exchange to deal with, except that they often depend on customers for the technology to deliver the resource, so it is not completely unilateral.

In summary, currency exchange imbalances alone do not hinder trade as much as currency volitility, and trade imbalance eventually affects volitility, as we are currently witnessing. The biggest battle I see is not about exchange rates, but more about exchange reserves. The US dollar has been hugely proliferated as a result of being the world's reserve currency. Loss of that status means a glut of $$ in the marketplace as some international communities decide to change their preference for type of reserves. Herein lies a large impetus for more volitility.

Dollar Bill (06/02/03; 20:24:06MT - usagold.com msg#: 103997)
*>*
Greetings Aristotle,
I have another post for you, but this one is about this comment in the post below.

"the international governments and CBs of the world may adopt a policy shift whereby "enough is enough!" and they abandon their longtime support of U.S. "deficits without tears" by allowing those excess trade dollars to either bid directly for domestic currency on the forex markets of the world, or else bid for Gold in the event that the CBs would like to increase their own money supply while bolstering their reserves with non-national type assets"

Isnt it a key issue for a country to work for a lower currency for trade reasons?
How to replace the US as deficeit nation? If the US does not play this role, how do all the various nations handle
thier imbalances? The asian idea floated here today sounds
minor league because the main trade beween those nations is with the US. I am looking for a bridge to another way, but
I cannot see it.
Taking down the US is not the answer, I am guessing that some joint CB agreement to share the ponzi scheme is the only way to avoid global depression.

Chirac is low on details on how to make this "multipolar world". MK has on his site a quote from DeGaulle, 1965.
Nice idea, but like Chirac, low on details on how to make it work.
No one here or elsewhere ever mentions that the strong dollar policy is not criticized when Bush mentions it now or earlier. The other nations prefer it.
They are happy that the US plays deficeit nation for the global benefit. They are ok that the US gets itself into
fantastic levels of debt. By that I mean that it has been to thier advantage also.
What is Chirac thinking? The US should play strong dollar till the EU can take over and stick it to the US?
And then the EU can run up thier own deficeits till the Chinese take over?
MK says he thinks the very top guys are cooperateing.
Above chirac/bush levels.
That would get me again thinking that the future path is
cooperative CB embrace of the infinite debt world where CB's will pour money as they see fit.

If not that, then a much uglier world system. A system that no one is articulating yet but they are trying. This multipolar mush.

just guessing.


Goldilox (06/02/03; 20:23:35MT - usagold.com msg#: 103996)
Another opinion on the FCC decision to relax media ownership limits
http://www.guardian.co.uk/comment/story/0,3604,968375,00.html
"Now Dissent is Immoral", Gary Younge, The Guargian, 6/2/03

snippit:

Where America does differ (from the UK) is in the nature of [the media] industry and the war it is engaged in. The American media industry is dominated by just a few companies. AOL Time Warner, to name but one example, owns among many other things, Time magazine, Fortune, Life, Sports Illustrated, CNN, Comedy Central, Warner Brothers Pictures and Black Entertainment Television.

With the the Federal Communications Commission, under Michael Powell (son of Secretary of State Colin Powell), set to relax ownership rules later this month [today, in fact], this consolidation and the lack of choice that goes with it will get worse before it gets better. And with a war that is endless against a foe that is stateless (terror has no nationality), invisible (it could be anyone) and ubiquitous (they could be anywhere), the potential for these media distortions to become both pervasive and permanent is very real indeed.

Goldilox:

Certainly a more perilous warning about the media trend than the CNN post, but I would expect no less from the Guardian. However, if we allow dissent to be "demonized", gold ownership may come face-to-face with a desperate battle to save the FIAT currency. Anyone owning gold who is not on the "PTB A-Team" could be easily labeled "enemies of the $institution." I saw an article about Buffett and Soros last week entitled "Short Selling is not Treason". The idea that this even needs to be published is discomforting.

Perhaps I am sounding alarmist, but the latest erosions of the Bill of Rights also have some very strong historical analogues, some only a single generation past.

Gold, get you some and bury it deep!

glennh10 (06/02/03; 20:15:31MT - usagold.com msg#: 103995)
Parasite and Host
The article referenced by Misetich (103939), "U.S. Debt in Asia Has Its Costs", began with an interesting quote from Keynes, "If you owe the bank 100 pounds, you're the one with the problem. But if you owe a million pounds, the bank's the one with the problem."

At the G8, GWB said that he supports a "strong dollar". The other leaders also prefer a strong dollar (as unrealistic as it is), insofar as a strong dollar protects their precious export market. Well, as the U.S. debt grows ever greater, the debt burden at some point shifts, as Keynes' quote states. As it expands further into the stratosphere, the debt owed by the U.S. changes from being a U.S. burden to being used as a threat or a weapon. At the G8, it seems, a plan involving "mutual advantage" is being sought between the debtor (U.S.) and the creditor (exporting nations), for the presumed benefit of both sides. This is the exact type of arrangement between debtor/creditor that follows from bankruptcy.
On the Financial Sense Newshour (5/31), Jim Puplava and David Morgan discussed the Fed's considering imposing a "carry tax" on dollars that are "held" rather than "spent". Morgan went on to describe how that's the type of spending behavior that follows with the loss of purchasing power. Years ago (sometime after 8/15/71), the U.S. was described as being bankrupt. Nobody at the G8 dared use that term. But if one connects the various dots that get uncovered from time to time, a not-so-wholesome economic picture emerges quite clearly. As it is so aptly said, "interesting times".

Ray Patten (06/02/03; 19:55:25MT - usagold.com msg#: 103994)
Belgium...
You said, "all our banks do sell Gold everywhere, anytime.. and will continue to do so."

We have read on this site over the years that it is very hard to buy physical Gold in Europe. All you can buy is certificates.

Are you telling us that it just isn't so?

Aristotle (06/02/03; 19:34:53MT - usagold.com msg#: 103993)
Goldilox assets
At the risk of offending Socrates with my premature comments, let me remind you of some standard banking ops.

VAULT CASH (i.e., "pocket money" if you will) is tallied on the asset side of a bank's ledger. If some of this cash is lent (or "leased") then the corresponding LOAN (mortgages, U.S. Treasury notes, etc.) resides in its place on the asset side of the ledger. Standard stuff.

Look at March for an illustrative sketch on the way the world has worked for many years -- the continuation of which in good faith is on borrowed time. The United States in March spent approximately $126.3 billion dollars to import goods and services while earning only a counterbalancing $82.8 billion on its exports. The difference being our monthly representative trade deficit of $43.5 billion.

Foreigner companies, with the CBs representing the ultimate decision makers, can choose to hold this excess in dollars or perhaps more logically their native currency. To the extent that the foreign companies want local currency to pay their workers and domestic bills, these $43.5 billion in trade earnings will be exchanged for their own domestic currency.

Then, depending on its various motivations of price stability versus export advantage, a foreign central bank may choose to absorb these dollars into its pile of currency reserves (asset side of ledger) and newly emit a corresponding value of domestic national currency. In this circumstance, it is a subsequential no-brainer to turn these sterile dollar assets into interest bearing assets by lending them back to the United States Government as a loan represented in the form of U.S. Treasury notes.

Of course, the international governments and CBs of the world may adopt a policy shift whereby "enough is enough!" and they abandon their longtime support of U.S. "deficits without tears" by allowing those excess trade dollars to either bid directly for domestic currency on the forex markets of the world, or else bid for Gold in the event that the CBs would like to increase their own money supply while bolstering their reserves with non-national type assets.

We've all gotta get this through our heads. As we move to the euro-styled system, we are not in for merely *more of the same old same old* nationally dominated reserve structure. After all, what would be the point of that??? A lot of effort for no material improvement??? I don't think so! The direction is clear...

Gold. Catch the wave of the future. --- Aristotle

R Powell (06/02/03; 19:29:05MT - usagold.com msg#: 103992)
IBM accounting
A plumber to comment on the electrical wiring?
Thanks Cavan Man for the news (103991). It did not surprise me but what did surprise me was the comment below,

"This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron," said Burton Schlichter, senior market analyst with Lind-Waldock & Co., a division of Refco LLC."

I'm surprised that Reuters News quoted someone from Lind-Waldock instead of a stockbroker. Refco bought Lind-Waldock a few years ago (much to my chagrin) but both are commodities brokers, not stock brokers. ??
Rich


Cavan Man (06/02/03; 18:56:06MT - usagold.com msg#: 103991)
Warnings 2 + years ago (here I think)
Chickens will roost.
IBM Says SEC Probing Its Accounting



Reuters
Monday, June 2, 2003; 6:50 PM



By Duncan Martell

SAN FRANCISCO (Reuters) - International Business Machines Corp. on Monday said that the U.S. Securities and Exchange Commission had begun a formal investigation of how the world's largest computer company accounted for some revenue in 2000 and 2001.

Armonk, New York-based IBM said in a statement that it "believes the investigation arose from a separate SEC investigation of a customer of IBM's Retail Store Solutions unit," which sells electronic cash registers and other point-of-sale products.

IBM shares fell almost 3 percent on electronic trading network Instinet after the announcement, which raised the specter of the accounting scandals of Enron, WorldCom and others that have undermined investor confidence.

"This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron," said Burton Schlichter, senior market analyst with Lind-Waldock & Co., a division of Refco LLC.



Goldilox (06/02/03; 18:36:41MT - usagold.com msg#: 103990)
Daily Chart Timing
Interestingly, today's Au rally preceded the SM selloff by about two hours. Any corelation?

Possible Trader scenarios:

1) Gold is going up again, so I better get me some Gold and take some profits from the wall paper investments.

2) GWB is adding no new confidence to the $$ by flapping his yap in Europe, so I expect the $$ to resume its Olympic downhill slope.

3) BB has pulled GWB's covers again so I better listen up and get me some Gold!

4. All of the above

Goldilox (06/02/03; 18:26:58MT - usagold.com msg#: 103989)
Dollar Carry Trade
@ARI, Socrates

If they adopt the C.R.A.P. accounting practices outlined on Papluva's site, I guess anything can be carried on the books after "loaning out" by using "goodwill" as colateral.

Aristotle (06/02/03; 18:21:33MT - usagold.com msg#: 103988)
socrates964 in msg#103951
said:
"One idea that interests me is 'dollar leasing'. Just as central banks purportedly lease out gold while keeping it on their books as an asset, I wonder if they could not do the same with dollars - i.e. keep dollars on their books as assets that have actually been sold into the market. This would be a covert way of getting rid of dollar holdings while maintaining appearances."

Ho HOY my boy!! You're a good thinker and I am not, so let's see if we can pound this answer out, Ari-style!

Whaddaya think a foreign-held U.S. Treasury note represents? CBs hold a lotta them, yes? That's my contribution. I will purport to know nothing on this matter until you instruct me under your gentle whip.

Kidding.

In the meanwhile...

Gold. Get you some. --- Aristotle

misetich (06/02/03; 18:17:35MT - usagold.com msg#: 103987)
Mexico May Sell Euro Bonds Via Citigroup, Deutsche
http://quote.bloomberg.com/apps/news?pid=10000086&sid=aeNJ4CHdri9w&refer=news_index
Snip:

June 2 (Bloomberg) -- Mexico may sell its first euro- denominated bonds in more than two years as early as this week as the European currency's gain against the dollar spurs demand.

Mexico has approached investors about a sale of 10-year bonds through Citigroup Inc. and Deutsche Bank AG, said David Dowsett, who says he would buy some of the bonds for the $500 million emerging-market debt fund he helps manage at BlueBay Asset Management in London. The sale would be for about 1 billion euros ($1.2 billion), Dowsett said.

Demand among some European investors for euro-denominated assets has risen amid the common currency's 11.4 percent surge against the dollar this year. Mexico typically taps international capital markets in dollars and has sold $5.5 billion of bonds denominated in the U.S. currency in three sales so far this year.
**********
Misetich

Changing times

All On Board The Gold Bull Express

Goldilox (06/02/03; 18:01:34MT - usagold.com msg#: 103986)
G-8 Press
@ misetich, (and Cavan Man):

Interesting observation. I'm also glad that Cavan Man found an even more diverse opinion from "the Straits Times". I don't pretend to know how the leaders are actually reacting, but I was intrigued by the different media slants on opposing sides of The Pond.

I'm a firm believer in the adage that one can tell a politician is lying based on the movement of his lips.

misetich (06/02/03; 17:51:37MT - usagold.com msg#: 103985)
Goldilox (06/02/03; 17:06:25MT - usagold.com msg#: 103979)
You wrote
...........

Forbes offers a much less upbeat description of the meetings than BBC. I wonder if anything can be read into that.

i.e., the Brits might be a little more anxious for everyone to "get along" than the US audience, many of whom are still talking boycotting Peugeot and French wines.
...........

___________________
Misetich

Bush left a day earlier - very unusual - Chirac unprecendent comments on US $ seems to imply Europe is concerned US is using devaluation as a tool to 1) force Europe to cut IR and lure investments to US or at least stop the exodus as US investments would be rendered "attractive" due to currency flactuation

It will be interesting if ECB will cut IR at all - I would guess they will not give what markets expect (1/2%) and probably will cut 1/4 or not at all

The US vision is for Europe to toe the line and it won't happen - Bush has painted himself in the corner with his " you are with us or against us" syndrome

Gold investors will benefit from the oncoming caos






Goldilox (06/02/03; 17:51:08MT - usagold.com msg#: 103984)
FCC adopts Media ownership rules change
http://money.cnn.com/2003/06/02/news/companies/fcc_rules/index.htm
snippit:

NEW YORK (CNN/Money) - The Federal Communications Commission narrowly approved new media ownership rules Monday, allowing television broadcasters to expand their reach, despite fears the move may reduce the variety of viewpoints available to consumers.

The Republican-led government agency voted 3-2 to allow the broadcast networks to own television stations that reach a combined 45 percent of the national audience, up from 35 percent.

. . . "I have heard the concerns expressed by the public about excessive consolidation," FCC Chairman Michael Powell said ahead of the vote. "They have introduced a note of caution in the choices we have made."

"Keeping the rules exactly as they are, as some so stridently suggest, was not a viable option," Powell added. "Without today's surgery, the rules will assuredly meet a swift death."


Goldilox:

I wonder what he meant by "swift death"? That's a very strange way to talk about administering a public trust. Maybe two viewpoints in these troubled times is just one too many.

3-to-2, that sure seems like an awfully large committee to argue such a minor issue like this . . . probably two politicians, two "industry experts" and Colin Powell's kid casting the deciding vote. Hey, Rupert Murdoch did such a fine job disseminating war info and pretending to be an all-American, we should let him run the rest of the US media, as well. If you want public information, go to C-SPAN and take a nap.

"There are laws to protect the freedom of the press's speech, but none that are worth anything to protect the people from the press."
--Mark Twain

P.S. By the way, be extra grateful for this fine forum and our Hosts, as political dissent may soon find its outlets more and more difficult to obtain.

Cavan Man (06/02/03; 17:35:31MT - usagold.com msg#: 103983)
That dog (french poodle) might hunt?
Excerpted from "The Straits Times"
The French leader was more reserved, avoiding any such direct personal praise for Mr Bush, but expressing total support for his efforts to bring peace to the Middle East.

Their 25-minute meeting, which the White House billed as a 'courtesy call', was one of the most scrutinised encounters at this year's summit.

It followed on their brief exchanges on Sunday, characterised by a cool handshake, stock smiles for the press and a Bush gift of three books on Native American culture.

Despite the upbeat signs, many areas for disagreement remain - notably on trade, agriculture and managing the post-Cold War world.

Mr Chirac also champions a vision of 'a multipolar world', where US dominance is kept in check by Europe and emerging powers such as China and India.

Some observers believe that US-French ties may not recover fully until both leaders leave office.

'It would be very dangerous to believe that relations are back on track now,' said Mr Dominique Moisi of the French Institute for International Relations.

'What we are witnessing is not a return to friendly collaboration, but an attempt on both sides to behave in a correct manner.

'You do not recreate trust just like that. They were very close to divorce


R Powell (06/02/03; 17:33:53MT - usagold.com msg#: 103982)
Belgian
My simple pragmatic, trader-type mind is not always fired up enough to fully comprehend all your words, although I often try. A total economic understanding or as near as I can get to that, is much more difficult than trading.

After reading your 103966, I found myself thinking or postulating from your thoughts that..?...?.. with Free Physical Gold ... the amount (say number of ounces or weight but NOT an amount in dollars) of gold held as a Euro reserve...does NOT need to be adjusted even if more Euros are created.
Am I catching on here or am I way off as usual?
Thanks
Rich

misetich (06/02/03; 17:24:04MT - usagold.com msg#: 103981)
Dallas Fed eyes long-term debt in deflation
http://biz.yahoo.com/rf/030529/economy_fed_deflation_2.html
Snip:

WASHINGTON, May 29 (Reuters) - Buying longer-term government debt could prove to be the Federal Reserve's best anti-deflation tool if it ran out of room to cut interest rates, but such a strategy is not without problems, researchers at the Dallas Federal Reserve Bank said.
..........
Because of the market stress a low overnight rate might cause, many economists on Wall Street think the Fed could turn to so-called unconventional policy tools once the rate reached 0.75 percentage point if further stimulus were needed.

Dallas Fed Research Director Harvey Rosenblum has said Fed policymakers would discuss "unconventional" tools at their next meeting on June 24-25.
...........
"In the event it must act alone, the Fed's best policy option is probably open-market purchases of longer-term government bonds," they said. The Fed currently conducts open market operations in short-term securities only.

They warn, however, that calibrating such operations could prove difficult.

"No one, we believe, has a good quantitative sense of the mechanics of this strategy -- that is, what size operations are needed to secure a given stimulus?" Koenig and Dolmas said.

"If standard policy options are exhausted, the Fed's quiver is by no means empty. But the arrows that remain are less familiar and, perhaps, not quite as straight as the ones that have already been fired."

One of the other measures they said the Fed could pursue would be to substantially weaken the dollar.

But they cautioned that a policy of foreign exchange intervention would, in effect, be conducting a monetary contraction in the economies of U.S. trading partners.

"If the foreign central bank was attempting to pursue a neutral or expansionary policy, the Fed's action might generate some consternation or even a policy response," they warned.
********
Misetich

"unconvential means" - uncharted territory - fasten your seatbelts - its going be a hot golden summer

Its desperation time at the Fed

All On Board The Gold Bull Express


R Powell (06/02/03; 17:20:44MT - usagold.com msg#: 103980)
Socrates964
Dollar carry trade ?
From 103951....

"One idea that interests me is 'dollar leasing'. Just as central banks purportedly lease out gold while keeping it on their books as an asset, I wonder if they could not do the same with dollars - i.e. keep dollars on their books as assets that have actually been sold into the market. This would be a covert way of getting rid of dollar holdings while maintaining appearances."

Rich: If the purchasing power of the dollar is declining, then wouldn't leasing or borrowing dollars to use immediately to purchase something that is appreciating in value make good sense? That something could be converted back into a currency in the future after the currency decline abates or when fiat is again needed to convert (immediately if the currency purchasing power is still declining) the purchasing power into another form, as when/if you wanted to convert gold into an equivalent value of silver. Why not call this a dollar-carry-trade? Question... if someone were to offer you a huge sum of money (currency) to borrow or "lease" for say 2%/year interest, would you take it ? (;>).
Rich



Goldilox (06/02/03; 17:06:25MT - usagold.com msg#: 103979)
G-8 reporting (Forbes #103976 and BBC #103959)
@ misetich, et al:

Forbes offers a much less upbeat description of the meetings than BBC. I wonder if anything can be read into that.

i.e., the Brits might be a little more anxious for everyone to "get along" than the US audience, many of whom are still talking boycotting Peugeot and French wines.

CoBra(too) (06/02/03; 16:57:02MT - usagold.com msg#: 103978)
Newmonts Offer - re. Yandal
Already 48% accepted.

Considering the offer was for 50 Cents on the Dollar on Yandal's hedge position, doesn't it highlight the weak position these counterparties may find themselves entangled in? (As an aside, such things tend to happen, when the messianic message as Joe Gutnik claimed takes priority over common or business opr even ethical sense).

IMO, this tough take it or leave it stance of NEM might mark the beginning of the demise of gold hedging practises for both producers and bullion banks - while the de-hedging of producer forwards have been further accelerating in the first quarter.

Lastly the Dollar enjoyed only the briefest of all dead cat bounces - thanks to the briefest statements of GWB at the G8 Evian meetings ... and POO will be affordable at over 30 bucks again? Sure, against €' and au.

The call to arms, eh? GOLD becomes more distinct by the day - cb2



Goldilox (06/02/03; 16:55:43MT - usagold.com msg#: 103977)
"Repuchase Agreements and the DOW"
http://www.financialsense.com/editorials/bolser/2003/0602.htm
An interesting, if somewhat lengthy editorial on a perceived relationship between the FED Repos and the DOW over at Papluva's site. It starts with a description and some links to the FED to define RPs.

"Repuchase Agreements and the DOW", June 2,2003 by Michael Bolser

snippit:

Interest rates are low and the FOMC talks of going lower, repurchase agreements rising geometrically as the MCDI keeps falling far below its 200-day moving average, the DOW is barely able to stay above 8,000 even with large and increasing RP support. One can see great trouble ahead even without factoring in the Middle East turmoil, a burgeoning Euro-centric economic coalition, oil producer threats to re-price their crude in Euros or any of the other traditional economic indicators that we know to be badly deteriorating. Previously effective RP utilization seems no longer effective.

Intervention in otherwise free markets historically leads to scarcity and falling liquidity. One need only look to the price control regime of Richard Nixon for examples of this type of government interventional failure. The penultimate failure in then Fed Chairman Arthur Burn?s price control regime was the forced closing of the gold window. Today the Fed seems rapidly headed towards a similar event.

misetich (06/02/03; 16:44:05MT - usagold.com msg#: 103976)
G8 - US $
http://www.forbes.com/newswire/2003/06/02/rtr988797.htmll
Snip:

Bush and Chirac shook hands and had a courteous private meeting, but each stuck to his rival view of world order, and the U.S. leader left early without holding the customary news conference, leaving a sense of anticlimax among delegates.

In a surprise move, France announced late on Monday that all eight leaders had agreed, in response to the dollar's recent sharp fall, that currency stability was a key condition for growth and they would monitor market movements closely.

It appeared to be the strongest signal on currencies issued in the name of the G8 since central banks intervened jointly in September 2000 to support a weak euro.

But officials said the position on currencies, designed to calm market volatility after a 12 percent fall in the dollar against the euro this year, would not be put in writing.

Participants quoted Bush as saying he did not want a weak dollar and would not use the currency as an economic weapon.
*********
Misetich

Bush left a "day early" - interesting - and Chirac addresses US $ and currency instability -

The descent of the US will continue... gradually

All On Board The Gold Bull Express









R Powell (06/02/03; 16:24:17MT - usagold.com msg#: 103975)
BIS news
I'm not sure if anyone is interested in downloading this type of information but thought maybe Belgian, Cobra, Randy, Michael or others might find some value here so I'll post them. As usual, they are in PDF form.
Rich



********************************************
Your current news on phrase "gold(any word)" at a glance:
***********************************************

2 new document(s) found since 27.05.2003:

1. Capital flows in East Asia since the 1997 crisis - BIS Quarterly Review, part 5, June 2003 (30.05.2003 16:51)
Part 5 of "International banking and financial market developments" (BIS Quarterly Review), June 2003, by Robert N McCauley
http://www.bis.org/publ/qtrpdf/r_qt0306e.pdf (PDF, 114967 bytes)

..and the Graduate School of International Studies at Seoul National University, 26?27 March. Triffin, Robert (1969): Gold and the dollar crisis, Yale University Press, New Haven. ... but there are risks to wider access to credit 56 B...

2. Derivatives markets - BIS Quarterly Review, part 4, June 2003 (30.05.2003 16:49)
Part 4 of "International banking and financial market developments" (BIS Quarterly Review), June 2003, by Serge Jeanneau
http://www.bis.org/publ/qtrpdf/r_qt0306d.pdf (PDF, 138895 bytes)

..364 49 58 62 61 Options 1,556 1,561 1,828 1,944 150 147 181 194 D. Commodity contracts3 590 598 777 923 83 75 78 85 Gold 203 231 279 315 21 20 28 28 Other 387 367 498 608 62 55 51 57 Forwards and swaps 229 217 290 402 ... ... ......


misetich (06/02/03; 16:21:49MT - usagold.com msg#: 103974)
Low Rates Spur Average Home Prices Up
http://www.washingtonpost.com/wp-dyn/articles/A3157-2003Jun2.html
Snip:

NEW YORK - The average price of a U.S. home during the first quarter was 6.48 percent higher than in the year-ago period, a government agency said on Monday, spurred by mortgage rates at 45-year lows.

However, the climb in home prices slowed to its weakest quarterly pace in five years, the Office of Federal Housing Enterprise Oversight said. The OFHEO is a unit of the Office of Housing and Urban Development.

This could be an worrisome sign for the economy, which has relied on the housing sector for support while other areas, like manufacturing, have struggled.
..........
********
Misetich

Sir Greenspan does not see a housing bubble - No signs of "deflation " in housing, medical costs, either

All On Board The Gold Bull Express

Black Blade (06/02/03; 16:18:41MT - usagold.com msg#: 103973)
Newmont says half cash offer for hedges accepted
http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=2863439

Snippit:

NEW YORK, June 2 (Reuters) - Newmont Mining Corp. NEM.N , the world's largest gold producer, said Monday that almost half of its offer to pay 50 cents on the dollar for outstanding unprofitable gold sales contracts with its Australian mining subsidiary had been accepted by the hedge counterparties.

Black Blade: Looks like Newmont stuck it to the bankers. In the current economic environment the bankers and investment houses are taking a beating as companies are backing those who bankrolled operations into a corner. This has been especially true of energy companies since the Enron fallout. I would not be surprised if other miners with mine specific hedges were to renegotiate some contracts down the road. As the old saying goes, "owe the bank a little and you're in trouble – owe the bank a lot and the bank is in trouble". Just wait as the "weapons of financial mass destruction" (aka derivatives) blow up. "Interesting Times"

BTW, only caught a couple of medium sized "bows" this morning as the weather turned bad. Of course the only thing attracting the fish were "gold" colored Kastmasters. Maybe a good sign. A little "golden" fried trout on a bed of "golden" safron rice with a "golden" ale for dinner tonight.

Off to the gym!



misetich (06/02/03; 16:14:23MT - usagold.com msg#: 103972)
Oil Surges Over $30 on Low Fuel Stocks
Snip:

NEW YORK (Reuters) - U.S. oil prices topped $30 a barrel for the first time in six weeks on Monday as the threat that the OPEC cartel will cut supplies again next week strengthened concern about low U.S. inventories
...........
Coming in the week leading up to the start of the summer driving season, when U.S. demand for motor fuel peaks, dealers feared a potential price spike.

"With global inventory still at extremely low levels and particular concern over low product and crude oil inventory in the U.S., there is little obvious sign of any significant weakness," said Barclays Capital analyst Kevin Norrish.

Signs the Organization of the Petroleum Exporting Countries could be preparing to announce an output cut at a meeting next week have bolstered the price strength.

Venezuelan Oil Minister Rafael Ramirez said last week that the cartel might cut its ceiling by up to one million bpd at the June 11 meeting, but any decision hinges on the extent and speed of recovery of Iraq's battered oil industry.
**************
Misetich

Will oil prices, natural gas, housing costs etc. going higher should please the Feds "deflation" worry

All On Board The Gold Bull Express


misetich (06/02/03; 15:57:32MT - usagold.com msg#: 103971)
Fed's Parry:Repeats,U.S. Economy Still'Mired' in 'Soft Patch' Jun 2 / 15:30 EDT
http://www.economeister.com/reg/popup/single_story.jsp?prod=114&ts=1054582200000&sn=7&banner=mainwire
Snip:

WASHINGTON (MktNews) - San Francisco Federal Reserve Bank President
Robert Parry, repeating Monday for the third time in a week his speech
about the U.S. economy still being in a "soft patch," chose to leave in
his comments that downside surprises would be more of a concern than
upside surprises.
.............
"So long as this remains a jobless
recovery, it can weigh on consumer confidence and lead people to pull
back on spending."
He added, "Frankly, the longer growth has to depend on the housing
and auto sectors, the riskier the situation becomes."
...........
"We're still likely to have a considerable amount of excess
capacity by the end of the year -- even with the generally anticipated
pickup in growth in the second half," he repeated. "That means the
already low inflation rate is likely to trend lower."
"With a lower inflation rate, it wouldn't take a very big standard
error of the forecast to come up with a small, but still worrisome,
possibility of deflation going forward," he said.
**********
Misetich

The auto industry is going through a "soft patch" and housing has began its descend -

The SM has raced up again - the Big Bad Bear waiting - as the 4th qtr priced in earnings will not materialize

All On Board The Gold Bull Express

Waverider (06/02/03; 15:56:51MT - usagold.com msg#: 103970)
VIP: DAILY GOLD MARKET REPORT
http://www.usagold.com/DailyQuotes.html
Snip:
"Gold appears to have not suffered any ill effects of the stronger U.S. dollar and a rallying equities market into the close of trading in the New York gold pit. Funds were seen buying into the close of the session as skepticism crept into the market about the president's "strong dollar policy" comments and less that stellar data from the ISM manufacturing index and rising oil (and natural gas) prices. Oil prices moved north of $30/bbl and natural gas prices stubbornly hold above $6/Mfc giving investors pause as higher energy costs tend to throw a "monkey wrench" into the economic growth engine."

Waverider: Thanks Black Blade, and congratulations to the essay contest winners!

Black Blade (06/02/03; 15:17:23MT - usagold.com msg#: 103969)
Job searches now averaging 20 weeks
http://www.azcentral.com/arizonarepublic/business/articles/0602jobsearch02.html

Snippit:

PRINCETON, N.J. - It takes just a few minutes for the sheet of ledger paper to complete its trip around the circle, long enough for 28 pairs of hands to log months of frustration on its ruled blue lines. Unemployed workers, struggling for traction in a stagnant labor market, are slogging through some of the longest job searches in 20 years. The time the average jobless worker remains unemployed stretched to nearly 20 weeks in April. That is up from about 12 weeks in early 2001, and is the longest since late 1983, according to the federal Bureau of Labor Statistics. Many searches take even longer. Nearly 22 percent of unemployed workers, 2 million people, have been out of a job more than six months. That is double the number of two years ago. About 13 percent have been out for a year or more.

Black Blade: This Friday we get the unemployment data for May. If I have time and the motivation I may dig into the BLS data and crunch the numbers for the alternative rate which sits somewhere between 10-12%. Oh yeah, the BLS is changing their statistical approach for unemployment yet again. This should be amusing if not totally bogus.



Black Blade (06/02/03; 15:00:07MT - usagold.com msg#: 103968)
Buffett, Economists Say Current Account Deficit Threatens U.S.
http://quote.bloomberg.com/apps/news?pid=10000103&sid=a4KLLLqY9gOw&refer=us

Snippit:

June 2 (Bloomberg) -- Economists such as Morgan Stanley & Co.'s Stephen Roach long have predicted that the rising U.S. current account deficit, the broadest measure of trade and net investment flows, would sour investors on U.S. assets. The widening gap would send the dollar into a tailspin and force the Federal Reserve to raise interest rates to keep capital coming into the U.S., Roach and others have said. With U.S. interest rates lower than those in Europe, and the dollar's 20 percent drop against the euro in the last year reducing the value of U.S. assets, investment from outside the U.S. has fallen. Berkshire Hathaway Inc. Chairman Warren Buffett and International Monetary Fund Chief Economist Kenneth Rogoff, also have warned that the record deficit is unsustainable. ``We are in a country that is buying more from the rest of the world than we're selling, and we're doing it on a big scale,'' Buffett told U.S. chief executive officers at a Microsoft Corp. gathering in May 21 in Redmond, Washington. ``Any other country in the world that did that on that scale would have seen greater currency depreciation already,'' he said. ``We have such a strong currency historically that there's been a delayed effect. But it's started to happen in the last year, and unless the underlying conditions change it's going to continue.''

Investment from abroad is key to financing that gap because the deficit can only be reduced by income from trade or capital flows. The U.S. needs to attract about $1.5 billion a day from abroad to finance the deficit, said Don Alexander, a currency strategist at Citigroup Private Bank in New York, with $166 billion in assets. Two-thirds of the increase in the current account gap last year stemmed from a rise in the U.S. trade deficit, which widened after exports sagged because of the weak world economy. At the same time, net investment income fell as receipts from abroad fell more rapidly than payments on foreign investments in the U.S. ``Our demand for foreign capital is increasing dramatically at a time when we can't provide the returns needed to attract more of it,'' Morgan Stanley's Roach said in an interview.


Black Blade: Moronic government officials aside, the dollar must weaken as there is absolutely nothing there to support it. Besides, to stimulate economic growth the Fed must provide massive liquidity and that translates into a weaker dollar and higher inflation. Something that the Fed does not want to do but must do. They have no other choice as they are out of bullets and they are surrounded on all sides.



Black Blade (06/02/03; 14:43:15MT - usagold.com msg#: 103967)
Canadian Natural Gas Drilling Cut by Bad Weather and Labor Woes
http://quote.bloomberg.com/apps/news?pid=10001099&sid=aCi4ls_9fr6c&refer=energy

Snippit:

June 2 (Bloomberg) -- Bad weather and labor shortages are forcing Canadian companies such as Precision Drilling Corp. to sink fewer natural gas wells, worsening the shortage that has caused the price of the fuel to surge. ``We had 70 rigs ready to go to work two weeks ago'' and no place to send them because of the weather, said Hank Swartout, chief executive officer of Calgary, Alberta-based Precision, which has a total of 227 rigs. Output from western Canada, a region that supplies 20 percent of U.S. needs, may fall for the first time in 17 years and may lag behind forecasts made as recently as a few months ago. That could mean even higher prices next winter, forcing some industrial users to switch to other fuels or curtail production. About three-quarters of the growth in U.S. natural gas demand has been met by increases in Canadian production since the mid- 1980s, according to Kenneth Vollman, chairman of Canada's National Energy Board. In the last few years, Canada's output appears to be ``flattening out,'' he said.

Setbacks due to weather have been compounded by a shortage of crews, drillers said. Construction of the oil sands facility in Fort McMurray, Alberta, is drawing away skilled labor, as are projects in other countries. ``A lot of rigs only had two crews and some rigs didn't get out of the yard because they had no crews,'' said Zane Reiter, manager of corporate development at the Petroleum Services Association. Lack of labor ``probably shaved quite a few wells'' off the first quarter tally. Without enough skilled operators, drilling rigs can't be run safely, Precision's Swartout said.


Black Blade: No surprise as I have hammered away at this before. Worse yet is that drill rig activity is actually up in Canada over last year but no real production gains while storage lags at critical levels. The US is not much better off either as drill rig counts are woefully low in the face of the crisis. Today oil and gas prices are ticking higher but no substantial increase in rig activity. This will obviously hurt an already crippled US economy with higher energy costs.


Belgian (06/02/03; 14:26:44MT - usagold.com msg#: 103966)
@ Gonly(g)old...
I know and do understand how enormously difficult it is to "understand" the new, coming Gold ! It also took me a lot of efforts to reach some level of understanding and Gold-insights. But Gold's complete picture is to be found here at usagold's ARCHIVES ! Study A/FOA, again, again AND AGAIN ! Yes, fellow goldmeisters, FOA is very...VERY heavy stuff and written in a cryptic language. And I remain surprised that there is nobody out there who even attempted to re-write this whole thing.

Answering your questions would take quite some hours of concentration as to be complete. Certainly because of my poor English.

The euro is NOT and does NOT intend to be "backed" by Gold !!! The euro wants to take Gold out of its "money" association ! Free Physical Gold is a *wealth-reserve-asset* and NOT money or a derivative of money. The purpose of Free Physical Gold is to become a tangible representative of all the wealth this globe is producing.
Not a contained unprecious metal that is forced to walk in line with a currency/fiat. Free Gold is un-manipulated...un-engineered, Gold. A wealth-reserve-asset that evolves with all the wealth of the world and not with one particular fiat that wishes to claim reserve status. Gold is the only "REAL" reserve.

Gold is NOT a derivative of dollar-fiat-paper. Those trillions of dollar-reserves are NOT representing the globe's wealth. And it is the dollar-system that contains Gold from doing so (representing wealth). Gold is ment for storing your surplusses and function as a transferable wealth tangible. Fiat is not suitable for doing this because of its permanent depreciation. That's why Gold must be contained. The euro project wants to promote Gold as a permanent appreciating wealth reserve. That's why the ECB has introduced the marking to market of its goldreserves in anticipation of Free Gold that evolves, valuewise, with the total, wealth that we are producing and wish to consolidate in something tangible for all seasons and times.

A surviving dollar, dollar-reserve-system, will NEVER let Gold Free !!! The dollar or any other currency can never, ever compete, permanently, with Free Gold !

The present dollar-standard has evolved into a debtmeter !
The dollar must contain Gold from setting Free as to not signal how bad/accidented, this dollar-standard, really is.
Lost 70% of its purchasing power in 30 years and will soon lose its purchasing power at a dramatic speed, when the past confetti inflation translates into price-inflation !

The euro as an alternative fiat is will become as worthless as the dollar over time if the euro-system should copy the dollar-system with unfree, contained Gold !!! But this will NOT be the case ! The ECB has made its intentions, for Freeing Gold, very clear with openly exposing its goldreserves to the present dollar-paper-gold-market pricing. The ECB wants to set Gold Free from this dollar-system with the installment of an euro-PHYSICAL goldmarket !

The amount of Goldreserves in the ECB and National vaults is of no importance !!! Even one gram of Gold could theorethically revalue as to represent a bigger and bigger amount of wealth on the only condition that one has a free Physical goldmarket.

The dollar hates Gold, wich you all agree. The euro loves Gold...not because it has an arbitrary cover of 15%, but because the euro wants a Free "appreciating" Gold-Value as wealth-reserve, instead of the dollar fiat, artificially embedded in a percepted dollar-standard !

OK guys, for the last time...the euro-currency is a fiat with another system (than the dollar) behind it. The euro wants to become associated with a Free euro-Gold market that trades Physically and NOT dollar-paperly . The WAG was NOT a dollar initiative but an euro-measure !
Euroland's financial media have never, ever bashed Gold in private possession ! On the contrary, all our banks do sell Gold, everywhere, anytime...and will continue to do so !

It was Euroland who demanded US-Goldreserves (Gold-Wealth) for their excess earned fiat-dollars (worthless paper)before Nixon closed the Gold window !

Any fiat-digit-system, for trade settlement, that tries to imitate some new form of gold-backing will always remain unworkable, managed, frauded, flawed !
Yes, we need enough political will to take that step to Free Gold ! This political will will reach enough critical mass when the dollar-system calf is drowning...as is in the process of happening. Fixing a new reference-POG is non-sense. It is another attempt to keep the dollar-system alive. It is NOT a matter of choice between the dollar or the euro but only a matter of Free Physical Goldtrade that runs parallel with the currency/digit that is used for trade settlement. Free Gold, the Wealth-Standard, regardless of any currency/digit. Free-Gold that is everyones instrument to control all those who desire to control you !

That's why the dollar-system hates the euro-project, wich is perfectly understandable.

Cheers !

Black Blade (06/02/03; 14:11:29MT - usagold.com msg#: 103965)
Dollar Barely Up as Data Erodes Gains
http://money.iwon.com/jsp/nw/nwdt_rt_top.jsp?cat=TOPBIZ&src=202&feed=bus§ion=news&news_id=bus-n02242377&date=20030602&alias=/alias/money/cm/nw

Snippit:

NEW YORK (Reuters) - The dollar held a small advantage against the euro on Monday as last week's upbeat tone for the U.S. economy was squelched by fresh and generally weak U.S. data coinciding with a slew of world leaders' comments on the U.S. currency. The battered U.S. manufacturing sector slowed its rate of decline in May by more than economists had expected, while U.S. construction spending fell in April instead of rising as forecast. "Even with some decent components within it, the overall ISM (Institute for Supply Management) headline threw cold water on the dollar rally, easing it back a bit," said Michael McGuinness, head of North American sales at American Express Bank in New York.

According to a Canadian official, Bush also said the value of the dollar was not up to him. "As far as the value of the U.S. dollar is concerned, Bush said he was not the one who decides. It is (Federal Reserve chief) Mr. (Alan) Greenspan," the Canadian official told reporters in Evian. The Federal Reserve determines interest rates, while the Treasury typically comments on the dollar. "It seems stupid on the face of it but it is really not if Bush was trying to say interest rates as a fundamental are more important than official speak in terms of setting the medium to long-term value of the dollar," said Greg Anderson, senior foreign exchange strategist at ABN AMRO in Chicago. "Maybe he is trying to tell other officials, especially Europe, that if the currency is bothering you, call your central bank president, don't call me," said Anderson.


Black Blade: Agreed, the president's moronic comments at the G8 conference were not exactly surprising but defied the reality of the situation. The direction of the dollar is out of his hands. Treasury Secretary John Snow jumped in with "me too" comments this afternoon. Perhaps he got a nasty phone call from France, who knows. But neither of them have any real control over Fed Chairman Alan Greenspan or the market. If Mr. Bush wants the dollar to be "strong" then he had better reverse the soaring budget, trade, and current account deficits as well as pay off the soaring national debt. Somehow I don't see that ever happening.



Gandalf the White (06/02/03; 14:04:01MT - usagold.com msg#: 103964)
THE REST of my last POST ! ESSAY CONTEST WINNERS
The following day, the markets gave their assessment of "The Maestro's" performance--Two thumbs down! Shedding nearly all of the post 4th of July rally and ending at 8351 on the Dow. News of a new record trade deficit, and a record slump in auto sales helped to push down the Chairman's scores. Gold surged ahead to $426.50 (a new high for the move) as both U.S. and Chinese efforts to organize talks with North Korea had come to nothing.

Outside of the USA Gold Forum's vigilant membership, few were aware that the Comptroller of the Currency, in a highly unusual move, had swooped in to examine both of New York's largest banks simultaneously. Obviously though, some gold traders had also taken note.

At the end of the day, Greenspan said that he used a poor choice of words, when referring to "prosperity," but had felt a little light-headed at the time. Both Rookies and King said they couldn't explain it either, but both said they had felt almost "high" during the television broadcast. After reviewing tape of the show, all three, it was noticed, were drinking much more liberally than would normally be expected, from their French bottled waters. The bottles were located and sure enough, tested positive for a mild hallucinogenic drug. Tom Ridge declared it, "An act of financial terrorism." Ordered a full investigation and promised, "total justice to the guilty." The French ambassador immediately denied any French involvement.

The poor Dow, NASDAQ, and S&P continued to sag into August as did the weary countenance, jowls, and eyes of the forlorn, Sir Alan.

On August 4th, (The one-month anniversary of the President's "Let's sit down with the North Koreans speech," They abruptly said all talks were off...They did not trust the United States...They were armed and well prepared for war...They as a sovereign nation would decide their future...They welcomed support in the name of freedom from any country willing to stand against the United States. They also now admitted to having over a dozen nuclear weapons and stated that those weapons would be used WITHOUT DISCRETION to defend themselves.

The following day Iran and Syria both issued support for North Korea and admitted having nuclear weaponry--nothing more than that. Within a day, Israel sealed its borders and declared that any provocation was a act of war.

Russia's Vladimir Putin spoke in Paris. "The World is poised for War...Only the United States can prevent it."

You can imagine what was going on in the markets.. Gold futures lock-limited up three consecutive days. After that, the COMEX was closed. A spokes man said, "because of computer tampering and the necessity to protect traders from the unscrupulousness of speculators." At the same time, spot rose to $500, then 6, then 7. Stocks? I wasn't watching them that much, but they crashed to about 6,000 on the Dow within days, and kept heading South.

The news of financial insolvencies and the inability of market makers and banks to meet obligations now were causing the public to "run" from the markets and banks. The FDIC had joined in the New York bank investigations and stated that a congressional "pay out" might be needed to meet legal mandates in certain situations.

Rumsfeld must have seen his face reflected in the new foreign enemies and blinked. He demanded, "The United Nations must act!" What!(?) This from the new town Marshall, who only months before had been looking for new gunslingers to blast? The world froze for two weeks. The USDI plummeted to 53.

Then at 8 A.M. in the morning, on Sunday, August 24th, one day after the traditional Dragon Boat Festival in Hawaii, a nuclear device was detonated a few hundred yards offshore of Waikiki Beach at Honolulu. The device, believed to be aboard one of the many luxury yachts in the area, leveled the beachfront Hotel Strip and immediately killed and estimated 300,000 people.

The following day, Monday, none of the markets opened-nor did they open for the remainder of the month. I visited the local trader in my small town. He figured physical gold at somewhere around a thousand dollars and ounce, but he didn't know for sure--didn't seem to care. Nothing seemed to matter now. "What were you thinking of doing?" He asked. "You DON'T want to sell it now. I don't even know if you'd get your money. And even if you did, you might not want it after a while. Because gold's probably just going to keep going up...for a while anyway."

By September 1st, --Labor Day-- Physical Gold Stood at $1787.35 per ounce and was still climbing, as the United States considered retaliation--but against whom?

Respectfully submitted by:

-------Goldendome 5-24-03
====

AND because of the CLOSE RANKING, the Judges are making RECOGNITION of two additional entries as
"HONORABLE MENTIONS" !!

as FOURTH PLACE "Honorable Mention"

Boilermaker (5/29/03; 15:37:33MT - usagold.com msg#: 103744)
Essay Entry
Whistle Blower Blues

We celebrate Labor Day as the hot dry summer drags on. But this is not a time for celebration with the markets in disarray. The Administration and all of Washington is in full panic deployment. No one could have predicted the financial devastation and fallout that began when the former head of security at the Fort Knox Gold Repository revealed that "large quantities of gold bars" had been shipped out of the facility over the past several years to unknown destinations. This former employee who was under oath to maintain secrecy about all aspects of the depository had become intrigued with several of the internet gold sites where the buzz in recent years has been about the alleged manipulation and suppression of the price of gold to create the illusion of a "strong dollar". It was June 16th when Robert Smith, a 30-year government employee of several different agencies wrote to his Congressman, Ron Paul of Texas, and revealed the ongoing reduction of the gold in our largest National Gold Repository. Miller suggested that it was part of the effort to subdue gold and brace the dollar. Interviewed on several financial news outlets, Miller made a convincing case for the allegations and got the attention of investors around the world.

Congressman Paul, himself a gold advocate, demanded an audit by Treasury that would be overseen by a congressional delegation. At first the Administration dug in their heels, denied the charges and refused the audit. But like Watergate, the denials only brought more criticism and pressure to reveal the truth. The media, at first not much interested in the story, became fully involved as the financial markets began to react violently to the allegations. The Administration, seeing the futility of further denials, finally confirmed on July 25th that shipments of gold from Fort Knox had occurred as part of a long-term program to reduce the US gold reserve. This reduction was "in keeping with the objective of stabilizing and strengthening the US$ and in recognition of the diminishing role of gold as a reserve asset".

The financial community was caught off guard by this sudden revelation and there was instant chaos in the gold markets that quickly spread to currencies, commodities, stocks, derivatives and even interest rates. As we celebrate Labor Day the financial landscape is littered with the confetti of worthless paper and firms that had so recently been given great value. Now the term "precious metal" has been given a renewed meaning to a humbled nation.

Gold has suddenly become the standard by which other assets are valued. With the closing of the COMEX and other official gold exchanges there is no market that establishes an official price. The value of physical gold can be measured only by comparison with what people are willing to offer for it from day to day. For instance, auto dealers are accepting gold at a ratio of $2250 per ounce and real estate brokers are advertising even higher exchange rates.

The government is in a frantic effort to reconfigure the dollar and is threatening to make gold illegal as they did in 1933. This has only served to strengthen gold and make the Euro the currency of choice with US producers and consumers. The most recent rumor is that the US is negotiating to become a member of the Euro system because OPEC will no longer accept the dollar.

This Labor Day is the painful turning point for Americans used to the special status of the dollar. Call it "The Night They Tore Old Dollar Down".
===

and FIFTH PLACE "Honorable Mention"

The Hoople (5/29/03; 13:27:47MT - usagold.com msg#: 103735)
$$$$ ESSAY CONTEST ENTRY $$$$
The POG on labor Day is an appropriate thought. It is labor that toils to mine, extract, refine, and ship gold. It is labor that builds wealth and fortunes. It is then bankers that cheat laborers out of their wealth by all the tried and true sleight of hand methods. How? By issuing worthless fiat that can never be a store of value but rather a depreciating asset. By confiscating gold 70 years ago and using it as a weapon against laborers. By publicly deriding gold as a "barbarous relic" while secretly knowing it is their only salvation. By devising paper instruments to manipulate and control the POG. There are many other schemes to mention that would be too lengthy for a simple essay, suffice it to say all schemes eventually fail.

One thought rarely mentioned about the big "scheme" is how the reported CPI/PPI numbers not only understate the real rate of inflation(a scheme itself), they are going the wrong way to actually reflect it. Hedonic deflators, quality improvements and superior technology are trumpeted as deflation adjustments but nowhere does cheapened product, smaller portions, and inferior service get any consideration. Whether it is a home, car, or pair of jeans products are cheaper and poorer service is the norm. This is another hidden wealth destroyer.

The old axiom about an ounce of gold being able to buy a fine men's tailored suit is still true. I recently bought a fine tailored suit at Nordstrom's for about $1,200.00. It still isn't as fine tailored as suits were years ago. The service while good by today's standard is still inferior to back then. I can only speculate that to replicate a fine tailored suit by those yesteryear standards would require up to $2,000.00. To me that represents the true value of gold. So what I submit as the POG on Labor Day are 2 prices: The real one ($2,000.00) and the banker scheme POG to defraud laborers everywhere- $392.00. By the time Labor Day rolls around we will have printed another 150 billion of FRN's. Our Gross Public Debt should have increased by a similar amount. Frightening possibilities for all holders of paper wealth.
==
THANKS to ALL that did spend the time, thought and effort to enter the ESSAY CONTEST !
These entries were all TRULY GOLDEN and very difficult to judge between.
===
<;-)


Gandalf the White (06/02/03; 13:59:38MT - usagold.com msg#: 103963)
TA TA TAAAAAAAAAAA --- We have ESSAY CONTEST WINNERS !!!
This is a LONG POST !! and shall also be posted in the "HALL of FAME"
The Essay Contest TOP PRIZE WINNER of the Dutch King Willem 10 Guilder GOLD coin is Sir John the Jute !!!

And the Two Essays selected as "Honorable Mention" WINNERS which will each be awarded a SILVER one-ounce Canadian Maple Leaf are: Sir Sundeck and Sir Goldendome !!

Will the three prize WINNERS, Please provide Marie your REAL name and snailmail address for posting the PRIZES. She can be reached at marie@usagold.com

=====
ALSO -- Two Essays were granted "Mention" recognition status as they were very close to prize winners. These Two Essays are by: Sir Boilermaker and The Hopple !!

CONGRATULATIONS to ALL the ESSAY CONTEST WINNERS !
===

These COMPLETE Essays are setforth below:
---

John the Jute (5/30/03; 10:42:24MT - usagold.com msg#: 103801)
$$$$ ESSAY CONTEST ENTRY $$$$
What do you think will be the price of gold by traditional summers-end -- Labor Day, midnight, September 1, 2003? And why?

"And what, pray, is so fascinating about the price of gold?"

I came back from my day-dreaming with a start. "I beg your pardon, Holmes?" I said.

"Well, Watson, you stopped reading those papers in front of you some while ago, and have been in a reverie since then, thinking about the price of gold. I was just wondering why?"

"But how on Earth could you have known what I was thinking?"

"You know my methods, Watson. Apply them."

"But how? I can't imagine what you can have noticed. It's not as though I had taken a sovereign out of my pocket and was studying it."

"I didn't 'notice' anything: I observed. When you first lowered the papers to your lap, you gazed at the photograph on the wall which you took when you lived in Australia in your youth."

"So I did."

"And then you transferred your gaze to that stain on your hand which has resulted from your use of the wet collodion process for printing your photographs. You were thinking either of photography or of something from your days in 'Oz', as I think they call it."

"Please don't call Australia 'Oz', Holmes. Oz is quite a different story."

"No matter. The next subject of your gaze was the teapot. What, I asked myself, does a teapot have in common with the wet collodion process? The answer is obvious: silver.

"But the mines you knew in Australia were the gold mines of Ballarat in Victoria. Was the teapot just a tangent into precious metals in general? I watched carefully, and observed you feeling with your tongue at that large gold filling you have recently had in a tooth. And then you shook your head in just the same way as you did when you lamented the cost of that filling. Ergo, the price of gold."

"Wonderful," I said.

"Elementary," Holmes replied. "What is in those papers that started your chain of day-dreaming?"

"These are really very strange. Mr. H G Wells says that they came back to him in his Time Machine from 108 years in the future. They come from something called the "Inter Net" and relate to a contest in which people attempt to predict the future price of gold."

"And is this 'Inter Net' a sort of cloth netting used in place of a shroud, to wrap corpses before they are interred?"

"I'm not sure, Holmes. Wells is not at all clear."

"Hmmm. I suspect Wells's fertile imagination rather than a real example of time travel. But the problem is interesting enough. From the very nature of the question, I presume that the gold standard has not lasted until this year 2003."

"Clearly not. Which seems strange to me. The gold standard seems to be spreading all over the World. Even India, that bastion of silver coinage, adopted a gold standard two years ago. The United States is the only great power still using both silver and gold standards."

"Quite so. And unless Mr. William Jennings Bryan has his way, they too will adopt a gold standard soon. But a major war could blow that asunder. At least, it could if John Keynes is right."

"I'm sorry, Holmes. Who is John Keynes?"

"John Keynes is a schoolboy. A quite astonishingly precocious schoolboy."

"I see," I said chuckling. "Well, have a look at these letters from the Inter Net and see what you make of it all."

"Why not? I'll just light a pipe before I read."

"Ah, that's another thing. Wells tells me that in this future time, people are not allowed to smoke in public."

"Ridiculous! You'll be telling me that they have banned cocaine next."

I forbore from entering into that issue, one of our few major disagreements, and watched while Holmes scanned the Inter Net letters at great speed.

At last, he put his pipe down, and looked at me. "A strange world, this 2003. There would seem to be two major factors that will affect the price of gold that summer. One is War and the other is Politics. Supply is stable and well-known, so that won't have an impact in such a short time. And the Economies of the great powers appear to be in a mess, so the gold price is rising steadily as that mess becomes more and more apparent. But War and Politics could change everything in a period of three months.

"War in country A is bad for the economy of country A but can be good for the economy of country B. Take the United States for instance, since so many of the letters come from people living there. The War Between the States -- or whatever we are now supposed to call it -- was disastrous for the economy, particularly of the Confederacy. But the perennial squabbles in the Balkans have done wonders for the sale of Mr. Winchester's rifles."

"Oh, Holmes!" I cried. "That's far too hard-hearted a way of looking at things! The real disaster of the War Between the States was the death of so many brave young men."

"I am sorry, Watson," he replied. "I should have said that better. Yes, indeed, the human cost is the greatest cost. But we cannot ignore the economic results. Particularly when there are people who exploit them.

"During a war, the antagonists spend freely on the materials of war and, after the war, they spend as much as they have left on the materials of reconstruction. A country whose industries are undamaged -- and particularly a country like the United States, which is geared to responding to needs in the marketplace -- will benefit from that. And I'm not thinking of war profiteering. Quite ordinary industries, making weighing scales, or gas mantles, or telegraph machines, will receive a boost to their sales -- a boost which will trickle down to the rest of the economy.

"If the economies of the great powers benefit from such reconstruction in the summer of 2003, then the pressure on the gold price will ease.

"And there is also the effect of Politics. Elected politicians, such as the President of the United States, and our own Prime Minister, want their voters to feel that the economy is doing well. Partly of course, they want the economy to be doing well in actual fact -- that's why they went into politics -- but little more than a twelvemonth before a US presidential election, there will be a focus on the perception as well. Which again will ease the pressure on the gold price."

"So what do you think the gold price will be in September 2003?"

"It isn't so much a price as a probability distribution."

"What does that mean?"

"It means that the price of gold will be between 70 and 90 pounds. If you must have a single number, then let it be 80 pounds."

"The contest requires a value in US dollars. What rate should I use for the conversion?"

"The traditional one, as first calculated by Sir Isaac Newton, of one dollar to four shillings and sixpence ha'penny."

"Hmmm. A pound is 240 pence; four shillings and sixpence ha'penny is 54.5 pence. So eighty pounds is (19200 divided by 54.5) dollars."

I scribbled on a scrap of paper for a minute or so, wishing that someone would invent a pocket machine for long division.

"$352.30. That's a rather bearish view."

"Perhaps it is. Maybe I am giving more credence to market manipulation than to market forces. But my experience of crime leads me that way."

"Is this what you meant when you spoke of those who exploit the economic results of war?"

"It is indeed. Some of the greatest criminals in London, far worse than the late Professor Moriarty, are those who not only exploit war but even foster war so that they can exploit it. And these criminals are all too often welcomed into our highest society because of their wealth. But we mustn't get dragged into depression by Wells's little game."

"So you doubt whether the papers are genuine?"

"The nature of the prizes is significant, I think. One is a 10 guilder coin from the present Dutch Queen, Wilhelmina, and the other is a 10 guilder coin from the late King Willem III. Why should a contest in the early 21st century use money from the late 19th century? Have they no reliable money of their own?"
===

SECOND PLACE WINNER of the SILVER !

Sundeck (5/29/03; 05:57:52MT - usagold.com msg#: 103715)
$$$$$$$ Essay Contest Entry $$$$$$$
What price Gold on September 1, 2003 and why? That is the question?

Technical Approach
------------------

From a simple technical standpoint, one can apply (at least) two approaches:

1. Extrapolate the primary up-trend in POG that has endured for the last two years. This yields a value of $374 plus or minus about $30 on 1 Sept. 03.

2. Extrapolate the primary down-trend in the USDX and convert to POG using the line-of-best-fit derived from the strong inverse correlation over the last few years between POG and the USDX. Using an extrapolated value of USDX = 90 on 1 Sept. 03 and evaluating the equation,

POG = - 4.35 USDX + 782

yields POG = $390.50. The uncertainty in this result is about plus or minus $40.

Halving the difference in these two results yields a POG around $382 plus or minus about $35.

How much faith can one put in this result? That boils down to how much faith one can put into the durability of the primary trends in the POG and the USDX.

Let's look first at the "scree slope" of the USDX. " ‘Scree slope’ you say? Isn't a scree slope the gradient of the accumulated loose rocks at the base of an eroding mesa?" Yes it is, and it has a characteristic slope that is a function of the force of gravity and the physical properties of the loose rocks and other materials involved; as well as other factors, like whether its base is being eaten away on one side by a river, or is periodically shaken by earth-quakes. Pretty complex, heh? Sure, but a well-defined and enduring slope results nonetheless! The principal "emergent property" from piling up rocks and sand. Fascinating! So it is with the US dollar. It is too high and it is eroding… and the forces and properties at play are like those in a scree slope. They are impossible to measure or predict individually, but a stunning property emerges - a characteristic down-trend in the USDX, that persists for as long as the basic ingredients stay the same. I am assuming that the basic ingredients stay the same until September 1. I am reassured because major "scree slopes" in the USDX over the past 30 years have persisted for several years and this one has only been going for a year-and-a-half and looks like being a beauty!

How about the up-trend in the POG? Pretty much the same deal. Unless there is a major seismic shift between now and September we can expect the trend to continue. But you never know and it is impossible to predict.


Fundamental Approach
--------------------

Much more complex – akin to measuring the shapes, as well as the physical properties, of all the rocks, stones and grains of sand in the scree slope and also knowing when the river at the base is going to flood, and how high and how fast the water will go; as well as the timing and magnitude of the earth-quakes, and the interplay between the S and P components, and a whole lot more ... you can see why many people prefer technical analysis! But let's have a go anyway.

What does one regard as "fundamental" in pricing gold? Well, since it is priced in $US, I suppose the "value" of the $US is fundamental. Now the value of the $US is declining in giant steps. The rate of descent might be slowed, but not substantially reversed – unless the EU enters the market as a major buyer. Likely? I think not. The decline in the dollar is probably pretty well locked in. It might be moderated a little by the EU and other countries lowering interest rates before September, but that is likely to be offset by another cut in US rates. Hence the slide is on for quite a while. The US rate cut will probably be 50 basis points and that will encourage another round of house refinancings and ensure that the big bond bull is kept alive for at least the next three months. Some money may even flow back into shares, but the historical sequence of equity market corrections augurs strongly for a major sell-off before September. Also, while a rate cut will encourage US nationals to stay in the housing and bond markets, it will have the opposite effect on international traders who are already seeing their profits from bonds turn strongly negative from low interest rates and foreign exchange losses. Their interest in the housing sector may remain, but they would be concerned about its teetering top-heaviness and liquidity concerns should it fail. So ... the prognosis for the dollar is down at the same rate to a level of about 90 for the USDX. That's about a 5% drop from here and equates to a 5% increase in price for gold, or about $18. this would put gold at about $382 come Labor Day. (Well, look at that – the same answer as the TA provided!)

But wait! We haven't mentioned other "fundamentals", like supply and demand.

Take supply first, and that is relatively easy (I think). New mine production will go on much the same and there probably will not be any dramatic change in the current trends by miners to reduce forward sales and close out some of their hedged positions. The Washington Agreement is still in effect. Activity outside that accord will probably continue to see net acquisition, rather than net disbursement of gold reserves. No surprises there. The US position on gold is as unclear as ever, but the bias will continue to be away from leasing and more towards covering exposed positions. Recycling of scrap will probably go on as normal.

Demand? Well, that is where the uncertainty lies. Few would deny that gold as an investment and preserve of wealth has received increasing publicity in the last twelve months. Accessibility to gold investments of one form or another is increasing. Gold is probably entering portfolios with renewed confidence and the talk amongst "people in the know" is of a sustained, long-term bull market in gold. Bull markets being what they are, one would expect some "irrational exuberance" along the way, but how much of this will occur before 1 September? I think it is still too early for the glitter to appeal to Jack and Jill Ordinary – and they still have a bad taste in their mouths from the slumping equity markets. Also, "fear" has not set in yet in the equity markets and the "Greenspan put" will probably stave off that phenomenon for a while yet. Demand will continue to ramp up in China. In India, although the wedding season will be ending by September, many dealers may be wary of a runaway in the price of gold before next year. I therefore suspect that seasonal demand may not slacken as much as normal.

What about "demand shocks"? China revaluing or floating its currency? Mmmm ... don't know. Terrorist attack in the US? Maybe, but God forbid. The effect from 9/11 was a step in the gold price of about 8% for about a month. A similar event might see gold above $400 on September 1, but that is unlikely. Major bank failures in Japan? – could see a surge in Japanese buying, but probably not more than a few percent on the price. What else? Major US bullion bank caught short? Not much talk of that lately, but the risk is probably still there. Were they protected by the increase in COMEX margins back in February? Perhaps they were. Might COMEX increase margins still further? Well…it's a crooked game with some large asses swinging on the chairs. And then there is the Barrick / Blanchard law suite. If dismissed – gold may fall a few percent; if upheld – gold may go up a few percent. Derivatives failure – Buffett's weapons of financial mass destruction – they too are out there for gold and for just about everything else that can be gambled upon; and that could be a Puplava 10 sigma event, but probably not before September. War with Iran? Very real possibility if Mr. Bush and his colleagues cannot get the economy moving in time. The "Iran re-election contingency plan" is definitely on the cynics table – and they have oil too, and they need liberating just like Iraq, and they may be harbouring terrorists, and developing WMD... Yes, some premium might appear in the gold price from that contingency before September, but probably not much.

Whew! Where does that leave us on the fundamentals? I'd still say $382 plus or minus $35, but with a strong upside bias. Better than Fed-speak, but still not very clear. Oh well…we will just have to wait and see…

FWIW and DYODD

:-)

Sundeck
===

THIRD PLACE WINNER of the SILVER

Goldendome (5/24/03; 13:32:32MT - usagold.com msg#: 103426)
$$$$$$$$$$$$$ ESSAY CONTEST ENTRY $$$$$$$$$$$$$$$

DOOMSDAY-DEJAVU

On Tuesday, June 17th, 2003, after repeated denials, North Korea admitted that it was re-processing spent nuclear fuel, that they have found they have enough plutonium for several nuclear weapons, and that they have possessed more nuclear weapons than first estimated. Secretary of State Colin Powell condemns the news and says, "The North Koreans are on a path of recklessness." On the news, Gold moves up $6.10 to $386.40, sparked by heavy buying in Asian markets. The dollar also rises to its highest level in four months against the Yen. The Dow Jones sheds 181 points on the troubling news to 8338; Kudlow and Cramer claim the market will surge back once the true nature of the "bluster" is understood.

The last two weeks of June saw a choppy but steady rise in the gold price as the dollar continued its swoon against foreign currencies. The USDI fell to 87.65 by month's end. Rumors of problems developing in the financial markets with currency and interest rate spreads moving to adverse extremes against several large unnamed financial institutions, but rumored to be located in New York, Germany, and Japan. Of further Note: Several large short players and hedgers in the gold market were making aggressive moves on gold price dips, to exit unfavorable positions, as the gold price moved significantly into the $400 range as the month closed. New buyers entered the market when the Federal Reserve abruptly cut short-term interest rates to 3/4% in mid-June. Banks were reportedly paying as little as 1/10 of a percent interest on savings accounts. Gold had now gained a full 25% in the previous year alone!

By July 4th, several congressional, as well as United Nations' meetings had taken place to discuss the Korean situation. All agreed on one thing--Now was the time for talk. President Bush also chose this historic occasion to talk (by television) to the American people. Telling us all again, how we have always stood in times of trouble to defend freedom, whenever it was threatened. "We now face such a time; the North Koreans WILL NOT be allowed to keep their nuclear arsenal!"...(Well, that was clear enough). He continued, "We must first sit down with the North Koreans, in an attempt to voice our concern. Therefore, the United States will open dialog with representatives of the North Korean government as soon a possible [something we had previously said we would not do unilaterally] to bring lasting Peace and Stability to the region."

Monday, July 7th, the stock market opened up 136 points on the "good news of impending talks." Gold dipped $3.70, to $414.60. Later in the week the first estimate of second quarter growth was released showing a GDP up-tick of 2.3%; the Dow Jones tacked on another 91 points, and Gold closed at $416.10. At about this time, (no one knows for sure but the decision maker) Alan Greenspan, stepping out of character, decided to make a guest appearance on "Larry King Live". Don't ask me why, only he knows that answer. Although publicly supported for re-appointment by the President, some said it was the first stop on Al's "farewell tour".

Anyway, the guest appearance was on Thursday, July 24th. A record audience tuned in to see "The Maestro" and fellow market crooner, Louis Rukyser exchange notes with "Mr. Suspenders". The audience that night saw their beloved Chairman, Mr. Greenspan, "live" as never before; he was witty; he was even comically engaging, exchanging clips with "Rukey", and acting almost giddy at the economies recently reported performance. At a point near the show's end. "Rukey" offered that were it not for Alan Greenspan, that he [Rukyser] would not be were he is tonight. King looked perplexed, pondering the comments meaning, as if thinking and wishing to say: "Hey Bozo, who do you think gave you the invite here, anyway?" King then turned his head and asked Greenspan in his most sympathetic manner, "Alan, when do you see the economy returning us to real prosperity?" Greenspan, in rare historical based glibness responded, "Larry, prosperity is just around the corner."

Ted Turner, owner-or former owner of CNN, later commented about the show. "I thought I was going to throw up. Here are those three, yucking it up, like a bunch of drunken frat brothers at a fifty-year reunion. They should have shown a little more concern for the poor folks that lost all their money in the Markets." Ted failed to father mention, that he too, was now one of these much poorer folk.

The following day

silvercollector (06/02/03; 13:51:46MT - usagold.com msg#: 103962)
GAB
I was just re-reading your post of the 15% of Euro reserves being gold. Randy often publishes these numbers although I have had a difficult time reconciling this figures. I think someone had thought about putting together a spreadsheet to monitor the Euro reserve and gold fractions thereof going back to the inception of the currency.

I have not seen this or similiar charts.

Your post also interests me from the point of view of US reserves which I understand are principally gold. It says little that the reserves are '100%' gold but in terms of 'fractionality' $1000 of pure gold 'backs up' a zillion gadzillion dollars.

For the mathematically inclined (Sundeck and contrarian) this fractionality can be expressed by the formula;

1/infinity ;)

Ouch!!

Thanks for the note, have a golden day.

Gandalf the White (06/02/03; 13:01:14MT - usagold.com msg#: 103961)
Date that keeps a SMILE on your face ! <;-)
GC3Q 5/30/03 Settle = $365.6 OI = 117,710
GC3Q 6/2//03 HIGH = $368.3 low = $361.2 Settle = $367.1 Change +$1.5
<;-)

Socrates964 (06/02/03; 12:57:53MT - usagold.com msg#: 103960)
GAB
Yes, you've understood my argument exactly. As for your point about running the same calculation on the ECB reserves - one could certainly do it and I'll try and find the relevant figures.

What I'm trying to get at, however (and we can only get a rough feel for the truth here) is where the price of gold has to go to keep Europe's financial system happy in the face of a revaluing euro. On this basis, I think that you have to look at the overall reserves of Euroland, since at the end of the day, this is what is backing the Euroeconomy.

A lot of people write about the Euro as if it is a new currency. I view it as an extension of an old currency, consisting of the DM, the Guilder (which was pegged to the DM) and the French Franc (which, once it had adjusted its parities by the early 1980s, settled into a reasonably tight peg to the DM). While there was nothing on the scale of the Euro prior to its launch, I know lots of non-German, non-Swiss investors who were happy to hold their wealth in DM or ChFr for decades. Looking at the ECB is like looking at the balance sheet of the parent company for a large industrial group. To understand the whole, you have to look at the consolidated balance sheet, since depending on corporate strategy, the reserves may be at parent level or distributed throughout the subsidiaries.

It may be that these figures are misleading, but since many people have advanced the argument that POG is a macroeconomic adjustment variable, I'm just trying to get a feel for where POG has to go to compensate for slides in the dollar, and looking at European reserves gives you one answer, just as looking at other countries' reserves will give you others.



Goldilox (06/02/03; 12:56:47MT - usagold.com msg#: 103959)
France and US patch it up
http://news.bbc.co.uk/2/hi/europe/2955652.stm
I'll leave the URL for you to read, but the most interesting to me was the mention of cordial relations with France and Russia, but NO meetings were planned or held with Schroeder. Could it be that having the US tactics compared to the 3rd Reich are a bit tougher to forgive, or is it just a desire to stay apart so te press doesn't even ask?

A third option, Germany is actually in a recessionary near-deflation, so perhaps GWB doesn't want to publicly expose himself to what they've got, like it was some communicable disease?

USAGOLD / Centennial Precious Metals, Inc. (06/02/03; 12:51:26MT - usagold.com msg#: 103958)
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