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ARCHIVED DISCUSSION FROM 1/2/2005
All times are U.S. Mountain Time

(Yesterday's Discussion.)

USAGOLD - Centennial Precious Metals, Inc. (1/2/05; 21:37:36MT - usagold.com msg#: 127874)
Just Released!! - - - Gold Forecast 2005 Issue of the Client Letter
http://www.usagold.com/business/cpm/amk/clientlettermk1305DD.html

Gold Forecast 2005
by Michael J. Kosares, author: 'The ABCs of Gold Investing - How to Protect and Build Your Wealth with Gold'

see url

TownCrier (1/2/05; 20:13:11MT - usagold.com msg#: 127873)
New highs in gold to glitter 2005
http://www.financialexpress.com/fe_full_story.php?content_id=78643
MUMBAI, JAN 2:  Gold is set to march ahead in 2005 with some fresh highs in between.

Gold, which rose 25% in 2002 and 19% in 2003, rose 5.52% in 2004, making us feel as if we could be on to something.

Not since the early 1970s, has gold rallied over such a long time frame. Back when Richard Nixon was US President, the metal gained over a five-year period.

Analysts maintain that gold will at least sustain the momentum it gained in 2004, if not more...

Analysts forecast that a 11% drop in mine production and a 16% decline in total supply this year, will help boost prices.

Gold, which opened on an optimistic note at $415.2 per ounce on January 1, 2004, (London Fix) closed the year at $438.

It peaked during the year at a 16-year high of $455.75 recently on Dec 6, after recovering from its year's low $373.5 on May 14.

Bullion has grown by leaps and bounds in the last few years, recovering from a 10-year low of $252.80 on July 20, 1999.

"A declining US dollar, supported by strong fundamentals, is set to make gold attractive, even above $450 an ounce in 2005," an analyst at a domestic brokerage said.

Against an array of major currencies, the dollar index ended the year with a whimper, slipping last week to fresh nine-year lows.

If Americans continue to buy foreign goods more quickly than US businesses can sell their goods and services overseas, the outflow of dollars will remain heavy.

The negative sentiment for the dollar has been exacerbated by expectations that the world's economic powers are not likely to combine forces yet to stem the currency's decline.

-----(from url)----

A nice recap of the range of figures hit by gold last year, plus a sense of where we've been, where we're going, and why.

R.

mikal (1/2/05; 18:50:41MT - usagold.com msg#: 127872)
Resolving old agendas in a new year
http://www.iht.com/articles/2005/01/02/business/ylede.html
Big issue for 2005: Asia's ties to troubled U.S. currency
by Floyd Norris - International Herald Tribune - January 3, 2005


mikal (1/2/05; 18:41:42MT - usagold.com msg#: 127871)
Words whispered on the street
http://www.iht.com/articles/2005/01/02/business/ycurrency.html
Prospects are grim for dollar
by Jonathan Fuerbringer - New York Times - January 3, 2005

USAGOLD / Centennial Precious Metals, Inc. (1/2/05; 14:56:14MT - usagold.com msg#: 127870)
A FREE info packet -- we've been helping ivestors diversify their portfolios for over 30 years!
http://www.usagold.com/Order_Form.html





Druid (1/2/05; 12:26:43MT - usagold.com msg#: 127869)
Economic Regionalism and the Euro and the Dollar
http://www.womensgroup.org/
Snip:

"We are confronted on every side with projections about the future. Movies like Independence Day and Godzilla give us an interesting, though unrealistic, view of what may be ahead. As this newsletter has reported over the past two years, the future should to be seen from the international level. In the past three months, two very important and historic events have taken place. One has been followed and written about for the last forty years, while the other has gone unreported and unheralded.

The truth is that the world is being divided up into economic "regions" in order for it to be managed from an international perspective. For years this newsletter has discussed the value of the dollar against the Deutsche mark (Europe) and the Japanese yen (Asia), which represent two of the world's economic regions. This edition will report on yet another region, which was birthed in March, as well as discuss Europe and the coming euro.


The (coming) five economic regions of the world are: the Americas (the 34 countries of our hemisphere), the European Common Market (11-14 countries), the Asian Free Trade Association, Africa, and the Middle East. The most developed of these regions is the European Common Market, which will officially begin trading with a combined currency, the euro, on January 1, 1999. The newest region to-be region is Africa, which the Group of Seven highlighted in Denver in 1997 to which the World Economic Forum gave its blessing in January-February, 1998. The most volatile is the Asian region, which was covered in the December 1997 newsletter. The newly birthed region, the Americas, is the subject of this newsletter, along with the European Common Market."


Druid: This lady provides some incredible research and commentary. Check out the articles on the left side of the page. Enjoy the read.




heavy mettle (1/2/05; 12:00:08MT - usagold.com msg#: 127868)
Vast Reserves of a Declining Currency are Dangerous for Asian Central Banks
Interesting take by Mr. James on how to solve the current exchange rate system of payments. Thanks for bringing it back Sir Comotose. I find it usual that the author fails to mention gold as a solution. Doesn't mention the possibility that Asian banks just might be accumulating gold to offset the future depreciation of the dollar. As well his last word of the article is ‘treasure’ as in accumulated reserves. Sort of a dammed if you do and dammed if you don't kind of treasure.

An anecdote from a far east perspective. Unfortunately I am some what forced to purchase gold from a local bullion bank here in Asia. If USAGOLD were to offer service in my neck of the woods, I would surely take the service and discount to what I'm use to paying. On one occasion at a bank, the bullion section manager, who wanted to personally meet me as I was an all too frequent customer, suggested that I should buy marked up silver commemorative coins at the local post offices instead of buying gold coins from his bank. Hmmmm.

Thanks but no thanks. I appreciated his concern for my meager purchase of a few ounces of gold here and there over the years. I don't know for sure but I certainly suspect that these banks, through the central bank, are quietly trying to balance their paper surpluses with gold. A question would be at what quantity of gold will these Asian countries be satisfied to let the dollar hit the road for good.


Solomon Weaver (1/2/05; 11:33:50MT - usagold.com msg#: 127867)
Happy New Year
Have been lurking in sometimes....but too busy to post much.

I hope all you knights and ladies have enjoyed the holidays and are heading into a good New Year.

Poor old Solomon

mikal (1/2/05; 10:02:15MT - usagold.com msg#: 127866)
@Belgium
Re: "One cannot throw out all dollar-paper in its utility of (symbolic) reserve and load up on gold as the new reserve, in one single big go !"
[Why does the dollar have to be only symbolic? It can continue to hold value if a rejuvenated version is born of crisis- where gold in-ground and in vaults in the U.S.(including "deep storage category" one could presume)periodically values it using mark-to-market POG euro-style! I would expect that other nations will continue to diversify their reserves, but more rapidly, from a polygamous, over-fertile currency landscape.
Yuan (Remnimbi), Swiss Francs, Canadian and Australian $'s, Yen, Pounds, Euros, Rubles and others that may in fact merge euro-style.]
"Of course, we experience this process as going very slow. But this does not mean that it is not happening and that in the mean time we can kill the time with wrong assumptions."
[Yes slow, but accelerating and we must not exclude either, discontinuity and "unknowns" like those Fed, Asian and European Central bankers have warned of, whether it be currency markets, bonds, equities or any of the many, ubiquitous and obscenely leveraged derivatives.]
"In the above context, it is very understandable that gold cannot "yet" be openly promoted for the huge general public, as the next new reserve, replacing the old dollar."
[As "new reserve", old gold holders will come out of the closet and new ones will join them to overtly and officially reestablish public "wealth", "liquidity" and "hard asset" consciousness. But "replacing the old dollar" is a general, not a specific term such as some popular notions we're all familiar with by now. Given these notions exist and are broadly held, "replacing the US dollar" can elicit either misunderstanding or agreement depending on the situation: a) U.S. dollar suffers a hangover and tosses it's cookies before (most) everyone rises for breakfast. b)(The most likely scenario IMO because of long-standing PTB coordination, POG micromanagement etc.) Greenbacks enter a "crisis", i.e. continuation of exchange rate slalom on more and more thrilling slopes. This elicits PLAN A or PLAN B- either a euro-style dollar as described above or a merger with Mex. Peso and Can. dollar or other units or both PLAN A and PLAN B.
c) The "Almighty Dollar"(very old cliche) stabilizes near current levels, at least until I'm in my grave.
d) The Federal Reserve Note receives more sympathy and demand from foreigners turned off by alternatives because of extreme geopolitical turmoil, another natural mega-disaster, nuclear dislocations etc. for enough demand to slowly cushion U.S.$, in the absence of much other meaningful support.]
"Think how disturbing a massive rush into gold would be to the ongoing process that cannot digest any kind of brutal shock...at present !"
["Massive rush" is what many coin and bullion dealers experienced during the holidays and @ numerous points throughout the year(and last). Intra-bank gold holdings though, as we here often say, move unfettered and silently, "discreetly" even. And while many CB gold acquisitions are announced afterwards and properly documented on government accounting ledgers, many are not IMO. Russia, China and the U.S. are notoriously opaque about their PM holdings. While Fort Knox is becoming a term denoting disingenuity versus the old strength of the past, the examples above support the idea that Asians, Arabs and others including the U.S. and "giants" are likely disguising a "massive rush" into gold. Official U.S. Executive Orders and War Powers also enable land grabs anywhere within our borders.]
"Nation states and giants, need their time to accumulate (mostly through re-distribution of aboveground gold) the new gold-reserve, WITHOUT throwing the existing (already obsolete) dollar-reserve through the window (is impossible)."
[Absolutely, and just as time in a single moment or time's passage is relative to any observer, so is "gold accumulation" and reserves and currency "diversification". Without "throwing the existing dollar-reserve through the window", CB's (and some giants, though they aren't mutually exclusive)do indeed study, consult and coordinate activities(including the general tone and direction of policy initiatives and PR) purposefully, and even grudgingly acknowledge exogenous risk. "To every thing there is a season, and to every purpose under heaven"- Ecclesiastes]
"Let's keep on imitating them and get ready for the approaching finale."
[What the bureaucrats don't know can't hurt them.:)]


Cometose (1/2/05; 08:04:17MT - usagold.com msg#: 127865)
Buffet's Bet and the following article
make history the more exciting to read and understand in light of the maxim that : History repeats itself . Some say it rhymes ....

Let's see!

Vast Reserves of a Declining Currency are
Dangerous for Asian Central Banks

By Harold James
The Australian, Sydney
Saturday, January 1, 2005

(don't know if that particular link works right now myself)

http://smcurl.com/Y79tb

..............................................


The People's Bank of China and the Bank of Japan,
as well as other central banks in Asia, are in trouble.
They have accumulated vast foreign exchange reserves, estimated at more than $US2 trillion (AU$2.6 trillion), but almost all of these reserves are in US dollars -- which are rapidly losing their value.

All policy options for Asia's central banks appear
equally unattractive. If they do nothing and simply
hold on to the dollars, their losses will increase, but
if they buy more in an attempt to prop up the dollar,
they will only have a bigger version of the same
problem.

If, on the contrary, they try to diversify into other
currencies, they will drive down the dollar faster and
create greater losses.

They are likely to encounter the same sort of problem
with other possible reserve currencies.

The euro has been touted as the replacement for, or
alternative to, the dollar. Some enthusiastic Europeans
encouraged Asians to diversify their reserve holdings,
but the same scenario may well be repeated with the
euro in a few years.

Large fiscal deficits and slow growth may convince
foreign exchange markets that there is little future in
the euro, prompting a wave of selling, and hence
losses, for central bank holders.

There is a historical parallel with today's concern
about the world's major reserve currency.

The inter-war economy, shattered by the Great
Depression of the early 1930s, offers a series of
painful, but important, lessons for the present.

In the 1920s, the world economy was reconstructed
around a fixed exchange rate regime in which many
countries held their reserves not in gold (as was the
practice before World War I) but in foreign exchange,
especially in British pounds.

During the 1920s, some of the official holders of
sterling grew nervous about Britain's weak foreign
trade performance, which suggested that, like today's
dollar, the pound was overvalued and would inevitably
decline.

Foreign central banks asked whether the Bank of
England was contemplating changing its view of the
pound's exchange rate.

Of course they were told there was no intention of
abandoning Britain's link to gold, and that the strong
pound represented a deep and long commitment (in
the same way that US Treasury Secretary John Snow
today affirms the idea of a strong dollar).

Only France ignored British statements and
substantially sold off its sterling holdings.

When the inevitable British devaluation came on
Sept. 20-21, 1931, many foreign central banks were
hit hard and were blamed for mismanaging their
reserves.

Many were stripped of their responsibilities, and the
persons involved were discredited. The Dutch central
banker Gerard Vissering resigned and eventually
killed himself as a result of the destruction wrought
on his institution's balance sheet by the pound's
collapse.

Some countries that traded a great deal with Britain
or were in the orbit of British imperial rule continued
to hold reserves in pounds after 1931.

During World War II, Britain took advantage of this,
and Argentina, Egypt, and India, in particular, built up
huge claims on sterling, although it was an unattractive
currency. At the war's end, they thought of a new way
to use their reserves: spend them.

Consequently, these reserves fuelled economic populism.
Large holders of sterling balances, such as Nehru's India, Nasser's Egypt, and Peron's Argentina, all embarked on major nationalisations and a public-sector spending spree. They built railways, dams, and steelworks.

The sterling balances proved to be the starting point of
vast and inefficient state planning regimes that did
long-term harm to growth prospects in all the countries
taking this course.

Could something similar be in store for today's holders of large reserves?

The most explicit call for the use of dollar reserves to
finance a major program of infrastructure modernisation
has come from India, which has a similar problem to the
one facing China and Japan. It will be similarly tempting elsewhere.

This temptation needs to be removed before those
tempted yield to it.

Reserve holdings represent an outdated concept, and
the world should contemplate some way of making them
less central to the operation of the international
financial system.

To be sure, reserves are important to smooth out
imbalances in a fixed exchange rate regime, but the
world has moved since the 1970s in the direction of
greater exchange rate flexibility.

Reserves are also clearly important for countries that
produce only a few goods -- especially commodity
producers -- and thus face big and unpredictable swings
in world market prices. Dependency on coffee or cocoa
exports requires a build-up of precautionary reserves,
but this does not apply to China, Japan, or India, whose
exports are diversified.

Today's big surplus countries do not need large reserves. They should reduce their holdings as quickly as possible, before they do something really stupid with the accumulated treasure.





Belgian (1/2/05; 06:27:27MT - usagold.com msg#: 127864)
A Belgian Bilderberger, E. D'Avignon on 2005....
There "IS" a global consensus on avoiding brutal "shocks" !

This is in sharp contrast with the general tone on this (and many other) forum.
But doing everything possible to avoid shocks, does NOT mean that the "transitions" have stopped evolving. On the contrary !!!
I wouldn't be surprised to see more and stronger volatility in '05, wich doesn't mean that this will automatically lead to shocking events on the monetary/financial fronts.

I even strongly suspect (almost certain) that the "Washington" in the WAGs, indicates the hidden agreement on avoiding (golden) shocks !

The transition from the dollar as global reserve to gold as the global reserve, shall evolve smoothly and broadly !
It is against this fundamental background that all ridicule gold-negative press plus perception building, must be seen.
Looks very paradoxal, but isn't.

During this tsunami catastrophe, the growing rift between dollar and euro blocks, is illustrated in political practice (co-operation). The (political) rift is silently widening at the same pace as the smooth changing of the $-€ currency exchange rate.

The competitive world players, *agreed* on stopping the goldprice crashing (below $250) and the attack on the euro-exchange rate (minus 30% versus $)...
This agreement is a mutual (win-win) one and is resulting in a calm truce between the diverging currencies ($-€) and their respective monetary concepts (contra-pro-gold)

Expect the price of oil, gold...monetary expansion...currency exchange rates, to keep on moving in the same UP_direction, with occasionally more and stronger volatility but most probably without shocking breakings.

It speaks for itself that this evolving situation continues to happen smoothly, for as long as all parties concerned do behave and don't provoke the outcome of a shock (rush-crash).
And it is on this voluntary constraint (discipline), that I have my doubts. In sync, of course, with what most forumers here, do express.

The "horizontal" behavior of the goldprice in euro (and some other currencies), is illustrating (evidencing) the above "agreed" smoothing of the transition !!!
Transition = dollar-reserve to gold-reserve.
One cannot throw out all dollar-paper in its utility of (symbolic) reserve and load up on gold as the new reserve, in one single big go ! Of course, we experience this process as going very slow. But this does not mean that it is not happening and that in the mean time we can kill the time with wrong assumptions.

In the above context, it is very understandable that gold cannot "yet" be openly promoted for the huge general public, as the next new reserve, replacing the old dollar.
Think how disturbing a massive rush into gold would be to the ongoing process that cannot digest any kind of brutal shock...at present !

Nation states and giants, need their time to accumulate (mostly through re-distribution of aboveground gold) the new gold-reserve, WITHOUT throwing the existing (already obsolete) dollar-reserve through the window (is impossible).
Let's keep on imitating them and get ready for the approaching finale.

Let us not forget that the dollar has the euro as second new competitor next to the old first one, gold ! Not the euro as yet another currency but the euro with its enhancing gold concept and therefor counting double as strong as gold alone. That's why the dollar has already given up on controlling the goldprice and the euro has been giving gold-containment support (CB-goldsales), as part of the agreement on smooth transition.

Does anyone see flaws in the above reasoning ?

Topaz (1/2/05; 04:24:55MT - usagold.com msg#: 127863)
A much-muted New Years Greeting.
http://aslwww.cr.usgs.gov/Seismic_Data/telemetry_data/MBWA_24hr.html
With well over 100 "aftershocks" (see Link) ...some quite substantial, the Sumatra region seems finally to be settling down. The precursor to Boxing Day was however an 8.1 Mag south of Macquarie Is (NZ)... Mother-Nature? now there's a misnomer!
Heartfelt sympathies to ALL those affected by this Calamitous Series of Events.

Our 'ol faithful Q4 repats should give the Dollar a kick along in the opening weeks of '05 and IF they can keep it under 85, should see Dow waltz through 11K licketty-split.
What I'd REALLY like to witness is Gold and Dollar in an upswing, as they BOTH look decidedly Northbound.

We'll see!



ski (1/2/05; 00:49:40MT - usagold.com msg#: 127862)
Year end ....


For 2004 ...

AU up 6.1%

AG up 17.8%

Looking forward to another good year.



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