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ARCHIVED DISCUSSION FROM 6/30/1999
All times are U.S. Mountain Time
View Yesterday's Discussion.
turbohawg
(6/30/99; 23:24:41MDT - Msg ID:8284)
Aristotle
That was quite a feat packing a history of the modern economy in five relatively short segments. It buttresses the case for gold well on more than pure monetary reasons.
So, what's next ?? May I suggest a primer on man's role in the cosmos ??
By the way, the lack of economic jargon was refreshing. Lately, I've been distancing myself from the news, the internet, economic/political debates, and all things that have been distracting my focus from simply enjoying life ... and it's (arguably) restoring my mental health.
Peter Asher
(6/30/99; 22:56:04MDT - Msg ID:8283)
Al, re your fuel guzzler post #8265
First of all, are you heating with electricity?? If so get a wood stove or two. Also, it's not to late to super-insulate, create solar gain through southern glass (with exterior insulating blinds for night, which are also good security) and possibly close down some of the house for the winter. Combining all options can cut unbelievable percentages off you heating energy needs.
We did a design recently where the forced air return duct was in the wall of a vaulted ceiling above a living room wood stove (small size, airtight, burned very little wood). The owner went through the Portland winter running only the fan motor (very little current draw) and the duct system heated every room in the house on a minimal amount of firewood.
Peter Asher
(6/30/99; 22:36:30MDT - Msg ID:8282)
The bitter Y2K Truth
http://www.drivezero.com/herbal/framec/lampoilc.html
This may be the definitive article on the coming day when all the lights go off!!
Gandalf the White
(6/30/99; 21:58:13MDT - Msg ID:8281)
Is the GC9Q line in the sand at 264 ?
The action in afterhours trading on GC9Q is moving up slowly and has hit 263.9 before dropping a tenth or so. BUT the size of the ASK side at 263.9 is now 166 contracts!!! --- WOWERS, is that the defensive line for the shorts ?
<;-)
ET
(6/30/99; 21:52:58MDT - Msg ID:8280)
Stranger
Hey Stranger
My wife is on the floor laughing her tail off! She says you have great insight. When Letterman starts analyzing my posts I'll know I've reached nirvana.
Believe it or not, I agree with your analysis of the BOE. They seem to be in a state of panic. Aren't the BOE and IMF hoards the last of the available gold that might reach market to satisfy claims? It looks like short squeeze city to me.
Just an aside - I used to have a bike but I kept falling off the thing so I sold it and got a Corvette. I've recently rebuilt the engine and I'm running about 450 horse. Somehow it's easier to keep on the road than that damn bike. Thanks for the note. Keep the shiny side up.
ET
Cavan Man
(6/30/99; 21:50:24MDT - Msg ID:8279)
Al's 8264
Sorry for the typos. I also meant to say that I do not believe the US could win a war like WWII at this point in our history. Look out in the Balkans. It ain't over yet.
Cavan Man
(6/30/99; 21:48:16MDT - Msg ID:8278)
Al Fulchino 8264
Al.... I was just going off on atrip when I saw your post; curious that you should use the term "fountain head" "of free enterprise; Fountainhead of course is a Ayn Rand novel. My friend, I have just finished reading Citizen Soldiers by Stephen Ambrose. How I and many others long for THAT AMERICA. The comprehensive strength of this country is at least temporarily diminished. All is not lost but as I sit here and type, I truly believe we are a nation of wooden men and iron ships as my father is fond of saying. Liberty, freedom you say; our individual freedom and liberties are being eroded incrementally by socialism's march of folly. Sadly, the financial dreams of many Americans will not be realized. We need a wake up call! Hello, anybody out there? The 4th of July is my favorite holiday. God Bless America (and have mercy on us). Amen.
Sailor
(6/30/99; 21:39:19MDT - Msg ID:8277)
ARISTOTLE'S WORK
Aristotle was once (in Latin) called 'The master of they who know,' and I would greatly appreciate a link to a summary of all the five parts. Many thanks.
By the way, it looks good for gold. Central bank selling can slow the process down, but I'm expecting:
1. rising interest rates, and a long-term secular bond bear mk.
2. gold rising, modulo short-term dips.
It'll reverse only when US debt gets under control, is my guess, which is why we had Prez. Klingon saying the US would pay off all their debt in 15 years. Of course, this is just talk. Watch the bond rates rise once the market realizes that nothing has changed.
Dan
ET
(6/30/99; 21:34:02MDT - Msg ID:8276)
Technician
Hey Tech - sorry but my mail service is screwed up. It keeps telling me my password is invalid. I haven't a clue what's wrong but it has been an ongoing problem. Sometimes it works and sometimes it doesn't. I'll try again tomorrow after calling my ISP.
ET
The Stranger
(6/30/99; 21:28:31MDT - Msg ID:8275)
Top Ten Reasons ET is called ET
#10- Thought it stood for Enjoys Tulsa.
#9- All of his best ideas come from something he et.
#8- His economic forecasts are strictly from outer space.
#7- After he makes his killing in the gold market he has no intention of ever again phoning home.
#6- Hides his gold coins in a large bowl of Reese's Pieces.
#5- Thought it would help him learn the Elliot Wave (think about it).
#4- Every time gold goes down, enjoys saying OOUUUCHHHH....
#3- Thought it stood for Extra Testicle.
#2- Wants everyone to think his posts are out of this world.
And the number one reason Et is called Et is:
#1- He only looks okay on Halloween.
ET...thanks for your reaction. I have been told I have a keen grasp of the obvious, so I don't always expect to get feedback. I am starting to think that BoE is going to be one of those dramatic market turning points, like LTCM or the Hunt silver fiasco. Hope so, anyway. Thanks again, ET.
USAGOLD
(6/30/99; 21:28:20MDT - Msg ID:8274)
Oh boy....not again
That's supposed to be "jogged" not "fogged".
USAGOLD
(6/30/99; 21:26:50MDT - Msg ID:8273)
THX-1138
You fogged my memory on a couple other comments from Mr. Insider this afternoon:
He said that the rumor was that the reason why the BOE didn't allow inspection of the gold is because they didn't have it. Have to say that he chuckled when he told me the story, as if to say: "Anything's possible when you're talking about the gold market." Once again I must warn that Mr. Insider was very emphatic that all this comes under the rubric of "rumor" -- interesting gold market gossip at this point and nothing more.
He told me something else of general interest. He knows an academic of prominent stature who has studied the gold leasing stiuation in great depth. His conclusion is that it doesn't matter if most of the central banks were to decide to sell their gold because, in essence, the metal has already been sold anyway! (He thinks that 10,000 tons loaned might be low, believe it or not.) When the sales come up, much like the British sale, the cb's will have to call in their loans to sell it, thus driving up lease rates and the price! Though I don't think we will get sales to that extent, it adds an interesting twist to the leasing story nevertheless.
As I have said so many times before, countries do not sell gold because they want to, they sell it because they have to. I would still like to know: Why did Britain find it necessary to part with this gold?
ET
(6/30/99; 21:20:35MDT - Msg ID:8272)
Technician
Hey Tech
You wrote in part;
'ET, call me crazy but gold may have a gap opening not to be filled. Real baby bull with lot's fun ahead;)'
Gutsy call on your part. The 500 pound gorilla appears alive and well. You realize of course that if you are correct, it's the end of the financial system as we know it. The price of gold is about the last thing they have to hang their collective hats on.
You may be right but I believe they still have a few rounds left in their arsenal. We may have seen the bottom but I'm unconvinced at this point we will see any kind of significant rally. Now if silver jumps a buck in the next few days, forget everything I just said. <g>
I'll send you a mail. I'd enjoy seeing your site.
ET
USAGOLD
(6/30/99; 21:12:07MDT - Msg ID:8271)
Here's the article Mr. Insider referred to on the WGC ads in British newspapers this morning. Sorry it it was already posted.
Wednesday June 30, 5:04 pm Eastern Time
Company Press Release
U.K. Gold Sales - Overwhelming Response
to 'Hold Onto Our Gold'
NEW YORK--(BUSINESS WIRE)--June 30, 1999--Floods of irate British
citizens choked telephone lines yesterday to protest against the Labor
government's decision to start selling the U.K.'s gold reserves next Tuesday.
Several thousand callers ran a freephone number to register their disapproval of the gold auctions, which start with 25
tonnes of gold reserves going under the hammer on July 6. Another 390 tonnes are scheduled to be auctioned, leaving
Britain ultimately with just 300 tonnes of gold reserves.
Countless other callers were unable to get through as the switchboard of the call centre fielding the calls was swamped.
``In 10 years of operation we have never had such a response,'' said a spokesman for the call centre concerned. At one
stage the call centre's switchboard was so heavily log-jammed that its system crashed. Forty operators have been hired
to field the calls, which continue to come.
The callers are responding to advertisements in Wednesday's editions of the London newspapers - The Sun, the Daily
Mail and the Daily Telegraph - placed by the World Gold Council, which works on behalf of many of the world's
leading gold mining companies.
The advertisements read: ``If you can tell the difference between gold and paper, tell Gordon Brown before it's too
late,'' and exhorted the government to ``hold onto our gold.'' Gordon Brown is the British Chancellor of the
Exchequer, the British equivalent of the Secretary of the Treasury.
At one point the number of callers succeeding in getting through was almost 1,000 an hour, a vast number given that the
advertisements had only just been published. There were also hundreds of faxes sent in, again protesting against the
gold auctions.
``This is a staggering response, far beyond anyone's initial expectations,'' said Haruko Fukuda, Chief Executive Officer
of the World Gold Council.`` It underlines the fact that the vast majority of the U.K.'s citizens do not want the
government to sell Britain's gold reserves, which are the rock upon which this country's economy rests in times of
crisis,'' she added. She said that opinion polls conducted in the U.S., Germany, France and Italy have shown that an
overwhelming majorities of those polled are in favor of increasing their nation's gold reserves and believe that gold
continues to play a central role in world finance.
Miss Fukuda said that the WGC will be presenting the results of the direct-action vote against gold sales to the British
government as soon as possible. Meanwhile, the telephone lines are still open to the British public up to and including
Tuesday, July 6, and the Council have urged any British citizen or indeed any British expatriots who want to see the
British Treasury reverse its position to make their opinions known.
ET
(6/30/99; 21:06:35MDT - Msg ID:8270)
Aristotle
Hey Aristotle - great work! I hope Mike adds it to the permanent collection.
The only thing you haven't told us is how we get invited to these meetings. <g>
Thanks again for a fine effort.
ET
THX-1138
(6/30/99; 21:01:18MDT - Msg ID:8269)
USAGOLD on Mr. Insider
On the rumor that BOE is calling in loans to have gold available for the auction:
Does this mean that they announced the sale of 25 tons of gold that they didn't even have?
Isn't that lying, false advertising?
Very interesting rumor.
THX-1138
ET
(6/30/99; 20:54:50MDT - Msg ID:8268)
Stranger
Hey Stranger - how ya doing?
You wrote in part;
'Anyway, this is just a quick comment, incase some poor fool cares what I am thinking about the Fed's
action today.'
Who, me?
'Obviously, A.G. is challenged by the need to put caution in the minds of speculators and
deficit spenders, and to do so without endangering the worldwide recovery. Today's decision to raise
fed funds by 25 basis points, and simultaneously remove the tightening bias, was the softest warning to
the markets A.G. could possibly have sent. The message: "We want you to slow down, but for awhile,
at least, we will continue to accomodate growth and worry about inflation later."'
You've got that right. Windowdressing. They can't afford to derail the economy going into y2k. They certainly don't want people selling anything.
'The markets have already responded. Such gentle persuasion is a waste of breath. As a result, long
term interest rates are nowhere near a top, and those who were buying today were sorely misguided in
doing so.'
Yup - long rates are going to sky from this point forward. Watch everybody howl as they jump quickly to 7%. Nobody is expecting this. The concensus seems to be rates will remain steady. Big joke on them.
'For gold bugs, the happy news is that, in a very public way, reinflation has now been
accorded the Fed's seal of approval.'
Sure. That's always been the deal. What else can they do? The US economy is holding up the entire financial system. I don't believe this reflation will be successful. US consumers as well as the government are about as far into debt as they can get. The bond market action is testament to that.
ET
Technician
(6/30/99; 20:48:52MDT - Msg ID:8267)
ET
Regards ET
Yes, $ has a very weak triple top and DM is best play. I been nibling a few times, in and out with wash trades. But close to a concrete buy I think.
ET, call me crazy but gold may have a gap opening not to be filled. Real baby bull with lot's fun ahead;)
Copper and crude were easy I can read charts plus I have my own software developed over the years. Just keep them with 8/16 weight average closing basis.
Grains look pretty sick and piggies etc but I will play them on long side, one day.
Would not choose to give my web wite out of respect to USA gold, on line, but my email is edwin_pu@yahoo.com. Non-commercial, just like to pass on my thoughts:)
62 and seen lot's this stuff!
Technician
ET
(6/30/99; 20:34:16MDT - Msg ID:8266)
Technician
Hey Tech - congrats on some nice calls. Crude is rolling as well as silver. What was the deal today with copper? Up over 5 cents! I heard something on the radio today about Phelps-Dodge shutting down a mine.
It is interesting that the bond market couldn't take out the previous high. I doubt we'll see that happen. Look at the US dollar chart. Looks like a very weak triple top on a short term basis. I like your DM play.
Do you trade grains? These babies are in the tank and showing no signs of recovery. I cruised western Kansas the last couple of days and the wheat harvest is finally making some progress. Yields are very good despite the fact that it is so late. We're expecting very hot weather the next week so I would expect they'll get it cut very quickly now. Just a small problem finding enough labor but the harvest looks good. Corn and beans look great around here. I don't expect prices to climb at all unless the dollar completely tanks.
Thanks for your contributions. I'm an old technical trader myself but haven't been trading this year. I've spent the last year or so doing y2k preps.
ET
Al Fulchino
(6/30/99; 20:19:08MDT - Msg ID:8265)
power outages
We have had two violent thunderstorms the two previous nites. And last night (the second of those two nights), we lost power for about 5 hours. So my son and I said "good time to check out the new generators. We did find a wiring problem that our electrician will fix. But the point of this message is this. Five gallons went fast in those 5 hours. I was staring at the fuel guage on the machine and it hit me.
I will need 15-30 gallons per day IF Y2K really is anything.
It is awful cold up here in New England in January, February and March. So even figure 100 days and 20 per day.
Hmmm.2,000 gallons? Have you all thought about this? It's one thing to take a wait and see attitude and another to plan for it. I needed the wake-up call. Maybe someone else out there does to. Thus, I post this.
I am going to read some alchemy books. Does anyone know how to change pm's or food into oil?
Al Fulchino
(6/30/99; 19:36:59MDT - Msg ID:8264)
AragornIII
Your views are well expressed of course. And you are as correct as correct can be in regards to the boy in my analogy "not" being innocent. My concern like yours will always be that the free market and the consumer make the ultimate decision for us. When in the long run have we been disappointed by what it brings forth?
My concern in this matter is that the fountain head of free enterprise and the goodwill that needs to be behind it, *IS* fostered by a strong America. The fine line is to keep American industry from becoming a bully that the public distrusts. Without a strong energy industry in this country we will be in jeopardy of losing our freedoms of liberty, financial dreams and eventually or borders will fall. The question for our leaders is to have fostered a strong energy industry that is also not abusive of its incredible power when it is healthy. So we need to keep the other countries at bay for what damage they can do to us, yet at the same time keep an energy industry that is competitive. I realize that we want free enterprise to handle the competitive aspects, but we need to realize our enemies and we do have them, will having taken over our energy industry, undoubtedly bring to us other dictates that we are not likely to be pleased with.
Thank you for your thoughts. And I hope this unwashed writer
did you justice in return.
Al (wishing I could purchase some more PM's)
koan
(6/30/99; 19:35:34MDT - Msg ID:8263)
excitement abounds
Everything looks great. Will there be follow through tomorrow. Oil and copper and the crb are just smoking. Abx and nem the big winners, plus some quality juniors. Major silver stocks did nothing; however word on the street is that the silver supply tightness is real. This is one of those rare times when you hate the holidays because you have to wait an extra daqy nest week for the mkts to open. If we get follow through then we can start trading around. Generally, the majors go first, then they stall while the juniors and then pennies play catchup. I have never seen the stage more set for a precious metals rally - so we shall see. Here's hoping.
Gandalf the White
(6/30/99; 19:28:30MDT - Msg ID:8262)
Ari's presentation of eye-opening truths!
The Hobbits and I truly thank you for your vivid explainations of your meeting and conversations with the GREAT one Aragorn III. I can tell that you did not have too many pints, as your memory is still sharp and all inclusive. I only wish I had been there to drink the brew that you failed to consum. GREAT JOB !! and now, with your permission, may I start the presses and reprint the five parts and start my efforts of "conversion" of the non-believers? Addenda will be added as necessary.
<;-)
Al Fulchino
(6/30/99; 19:17:15MDT - Msg ID:8261)
Aristotle
Thank your for caring enough to share your 5 part discourse. Wonderful reading and informative. I almost must confess it was in part a painful read. By that I mean this. You brought back a lot of memories from my teen years and early 20's. When I was a child in the sixties, I saw a beautiful world. The seventies were a conflict filled time for me. The world was not innocent I learned. Beautiful, but not innocent and the financial and political world that you described were so often a reflection of so many bad things. SO I compliment your writing and your vantage point. You write well and conveyed your points well.
Al
Al Fulchino
(6/30/99; 19:01:06MDT - Msg ID:8260)
Oil prices
There is new pressure to raise the prices on the street. Confirmation received today. Watch the street in the next 30 days. Not a big move but a small rise nonetheless. Don't you wish you could store the stuff?
Al
The Stranger
(6/30/99; 18:40:23MDT - Msg ID:8259)
Aristotle, Worthy of His Handle
Ari- Thanks for a real education. Your achievement should be required reading for all who take a seat here. The oil-gold connection has been so oft-repeated, without adequate explanation, that I had taken much of it for hype. NO MORE!
As one misinformed critic after another piles on to the mindless defamation of two of earth's most precious resources, truly you come forth grinning like the cat who ate the canary. GOOD SHOW!
One question: how is it, or should I ask WHERE is it, that you got to meet Aragorn? I think you once mentioned a pub, which conjures up London to me. But somehow I picture the two of you high in the Himalayas jointly contemplating the universe.
searching
(6/30/99; 17:44:54MDT - Msg ID:8258)
The Stranger And Aristotle
I have been out of town until today. I just wanted to say thank you for your input on my question on the proper asset mix. I really do learn a lot from all of you Knights.
CoBra(too)
(6/30/99; 17:39:43MDT - Msg ID:8257)
@ Aristotle #5 & #b - Great Synopsis
Very much appreciated your effort to explain the ever increasing controversy on market's exhuberant valuations, official(ly) denied and even belittled -see the outcome of todays's FOMC meeting, which is IMHO a truly misleading signal and will further enhance exhuberance- , I find your (and Aragorn's) reasoning more than refreshing and well founded.
Apart of the shoe box, I've been stunned by your remark about the Bob Roosa (BBH - probably the last uncorrupted Wall Str. firm) -SFR Bonds, similar to the Guiscard Gold bonds, which both cost a lot of money(gold) to the issuers-but at least it was fair.
BTW-I knew you would add part 6 - part 5.b. - a very noble way to avoid more stress.
Thank you again for regaining some of our purpose!
USAGOLD
(6/30/99; 17:33:00MDT - Msg ID:8256)
Mr. Insider:
Long talk with Mr. Insider this afternoon. He is now bullish on metals. Says:
1. Lease rates on gold are rising -- a bullish signal -- since the lease pool of gold is diminished. He repeats "Watch lease rates as they are the key to this market." Lease rates have doubled. If they double again, the lid's blown off this market, he says.
2. Rumor making rounds today that Britain is calling in its gold leases to have the gold on hand for the auctions. This is what's behind the rising lease rates.
3. Another rumor making rounds today is that two MAJOR traders (who shall remain un-named) are taking delivery on silver. That is....taking delivery, not simply squaring positions.
4. He says the World Gold Council ad campaigns (particularly the one in Britain this morning which had government phones ringing off the hook), coupled with the growing gold "constituency" in the United States (which is having a positive effect on the U.S. Congress with respect to the IMF gold question) are changing the face of the gold market and international finance.
5. No one should trade on this information as it is nothing more than rumor and speculation. We present it for information purposes only as a matter of interest to the Table Round and our readers.
MOZ
(6/30/99; 17:32:15MDT - Msg ID:8255)
The .25% Rate Increase And The US Budget Surplus
My son got a brand new cassett tape of fairy tales today,the first story is 'The Emperor's New Cloths'.I could'nt help but grin when I heard the economic news today.
SteveH
(6/30/99; 16:22:07MDT - Msg ID:8254)
Aristotle
Fine work!
Conclusion:
25 tons of gold from BOE auction will be well oversubscribed.
Amount of gold being suggested for immediate sale by the BOE and IMF and Suisse would appear to be the amount of gold needed to satisfy guarantees by CBs (or bullion banks, maybe). So the market is short at least 500 tons of gold on the non-COMEX hidden market. 25 tons seems to offer some relief.
COMEX is not being used as a source of physical delivery because it must be known not to be a source of physical and is left to play out the low price. (So why haven't any big guns gone for big delivery here?)
Source of Gold Eagles would seem to come from US sources of gold, perhaps strategic stockpile and that is why we don't see that record demand reflected on either COMEX or LBMA.
BOE auction may be beginning of end of low spot price in gold as it becomes widely known that H of S has cornered the physical and future gold market.
Relief valve appears to be a physical delivery of outstanding gold to CB's that will likely require the price of gold to rise to $10K to $30K per ounce in order to free up sufficient gold to square all deals. This of course would freeze the COMEX in its shoes and leave no contract delivered or settled. It would further bankrupt those owing gold other than miners and the banks that loaned cash to them.
Gold stocks might see an instant 10 fold spike up in price until countries realized almost immediately that gold in the vault and ground were equally valuable. Then depending on the country the mine is in depends on the outcome. I would place my bets of recompensation from a US mine first.
This is why all the dancing around the pole. Too bad this whole scenario is so damn complicated (requiring above a 12 grade reading level). I must reread the portion about how the H of S plays into this. Other than that I think I've got it by jove. Good work Aristotle.
TownCrier
(6/30/99; 15:47:41MDT - Msg ID:8253)
NY Precious Metals Review
By Tina Petersen, Bridge News
Washington--Jun 30--Aug gold finishedhigher, settling up $1.60 at $263.6
per ounce on fund short-covering in a choppy market.
Aug gold remained rangebound in thin trading, bolstered by silver's 8c
gains. Traders said gold has been oversold prior to the UK Treasury's gold
auction Jly 6.
"Gold had been hammered down based a lot on the fact that people thought
that the Bank of England sales would depress the market," said a trader. "But
80,000 ounces worth of sales in a market that trades 32 million ounces a day is
like 2 trades for a major bank."
One-month gold lease rates are at 2.35%, up 100 basis points from Tuesday.
"As long as lease rates remain tight, it could fuel further buying," said a
trader. "It's very expensive to be short metal. Some are now buying it back."
Traders said that another bullish factor influencing gold is that there is
growing opposition to IMF gold sales.
In the news, South Africa's Finance Minister Trevor Manuel says the IMF
approach to gold sales has to be "exceedingly cautious" in the coming months.
Speaking at a briefing in Parliament, Manuel said he would worry about the
wisdom of blocking outright the IMF gold sales and other actors such as the
Paris Club and highly indebted governments needed to play a role.
South Africa President Thabo Mbeki said today his government remained
"preoccupied" with the issue of gold sales and its effect on South African jobs.
Speaking at the Opening of Parliament today, he said: "Consistent with our
concentration on this objective, including the critical importance of jobs,
the government remains preoccupied with the issue of gold sales and their impact
on gold mining, employment and export earnings, both in our own country and the
rest of our Continent."
--Aug gold (GCQ9) at $263.6, up $1.60; RANGE: $263.8-261.6
Reprinted at USAGOLD with permission. For details please go to:
http://www.crbindex.com/
No further reproduction without written permission
The Stranger
(6/30/99; 15:32:23MDT - Msg ID:8252)
Clarification
The second to last sentence in my prior post should read "...those who were buying BONDS today were sorely misguided in doing so."
The Stranger
(6/30/99; 15:28:46MDT - Msg ID:8251)
Comment on the Fed's Move Today
First- Ari, I am very excited to see Part V make its appearance. I will read it as soon as I return from getting my "hawg" registered. (Yes, Turb, I am a "biker", and today my registration expires).
Anyway, this is just a quick comment, incase some poor fool cares what I am thinking about the Fed's action today. Obviously, A.G. is challenged by the need to put caution in the minds of speculators and deficit spenders, and to do so without endangering the worldwide recovery. Today's decision to raise fed funds by 25 basis points, and simultaneously remove the tightening bias, was the softest warning to the markets A.G. could possibly have sent. The message: "We want you to slow down, but for awhile, at least, we will continue to accomodate growth and worry about inflation later."
The markets have already responded. Such gentle persuasion is a waste of breath. As a result, long term interest rates are nowhere near a top, and those who were buying today were sorely misguided in doing so. For gold bugs, the happy news is that, in a very public way, reinflation has now been accorded the Fed's seal of approval.
TownCrier
(6/30/99; 14:52:57MDT - Msg ID:8250)
5th Horseman--NYMEX Oil Review: Crude hits 19-month high on stock data
By Mary Chung, Bridge News
New York--Jun 30--NYMEX energy futures soared on weekly inventory data
showing drops in US crude and gasoline stockpiles last week. Aug crude
jumped 93c to hit a high of $19.37, a level not seen since Nov 26, 1997.
Aug crude jumped nearly 5.0% following US Department of Energy data
showing a surprising 1.7-million-barrel drop in US crude stockpiles, while
American Petroleum Institute data reported a 488,000-barrel decline last
week.
Jly heating oil jumped 278 points or 6.07% to hit a 17-month high of
48.60c, despite weekly inventory data reporting a 1.18 million barrel rise
in distillate stockpiles, according to API data, while the DOE showed a
300,000 barrel increase last week.
Jly gasoline also jumped 239 points to an 8-week high of 56.20c,
helped by DOE data showing that stockpiles dropped 2.6 million barrels
last week, while the API reported a 1.105 million-barrel decline.
Meanwhile, the market may have also been supported by news of a
lawsuit filed Tuesday by a group of US independent oil producers, charging
Mexico, Venezuela, Saudi Arabia and Iraq of unfair trade practices in the
Mexican-US oil market, through the use of discriminatory pricing and the
use of subsidies.
Mexico's Energy Secretary Luiz Tellez said the country would
"energetically" fight the US anti-dumping complaint. (Story .18614)
OUTLOOK
Most brokers and traders predict that NYMEX crude futures could move
higher Thursday following today's strong close.
"The APIs, DOEs provided us with the momentum to go higher," Kilduff
said.
"It enables us to make $20.00, (a level not seen since Nov 20, 1997) which
is an appealing target."
Aug crude is expected to test resistance at $19.45 and later at
$19.70, which could trigger stop-loss orders to buy, some brokers said.
However, some brokers predict that the contract could weaken to test
support at $19.20 and later at $19.05. "I think the market may start to
come off a little," a broker said. "Some profit taking may (push) crude
back to the $19.00 level."
But bullish brokers and traders predict that a pullback could spark a
flurry of buying activity, which will drive the market higher. "Any
pullback is a buying opportunity," he said.
(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:
http://www.futuresource.com/internet.shtml
No further reproduction without written permission from FWN
mike55
(6/30/99; 14:28:51MDT - Msg ID:8249)
Bubble, bubble, ......
The Fed announces 25 basis points and the Dow shoots up 146 points to close at 10,961. The mania is at such a pitch, one wonders if they had announced 50 or 75 basis points, would the gain have "only" been around 90-100? Some analysts quoted as looking for the high 11's in a few weeks. Glad I'm not in the market deep. Oh, and by the way -- watch out for that first step, it's a doozy!
Keep tradin' that paper for metal!!!
Technician
(6/30/99; 13:54:16MDT - Msg ID:8248)
Bottom is safe
Gold has again confirmed my call of a bottom 21 June. My crude is more fun but I have a feeling gold will be playful for a lot longer than we might imagine. If you happen to be long futures hang in there with a moving average. Don't take premature profits. And oh yes, buy more bullion coins:)
Think I will check on how my DROOY is doing;)
TownCrier
(6/30/99; 13:05:03MDT - Msg ID:8247)
Fed statement on interest rate rise -- .25%
http://biz.yahoo.com/rf/990630/5c.html
By adopting a neutral bias, is the Fed saying the economy is on a razor's edge?
TownCrier
(6/30/99; 12:15:23MDT - Msg ID:8246)
Hear ye! Hear ye! THIS WEEK IN GOLD has been updated.
http://www.usagold.com/wgc.html
The Weekly Gold Market Commentary by the World gold Council has been once again provided to USAGOLD. Click the link above to review commentary by WGC staff worldwide on matters that affected the gold market for the week June 21 to 25, 1999. This week's report is one of the most interesting ones in this reporter's short memory. Check it out!
Cavan Man
(6/30/99; 11:07:58MDT - Msg ID:8245)
Aristotle
Thank you. Secondly, there seem to be threads nay, thick lengths of rope tying your thesis on the revered subject to those of Another and FOA. Do you know those fine gentlemen? Is your analysis 100% a product of independent thought and research or, did you embark upon your journey for knowledge after reading Another's THOUGHTS. If the former, then the case for Gold presented by four fine intellects makes a poor knave like me feel especially good about my meager purchases!
TownCrier
(6/30/99; 10:46:21MDT - Msg ID:8244)
Public Opinion Research Shows Overwhelming Support for Gold in the U.S. and Europe
World Gold Council
PRESS RELEASE
Wednesday June 30, 12:00 pm Eastern Time
NEW YORK--(BUSINESS WIRE)--June 30-- The American public opposes by a margin of more than two to one the Clinton administration's support for a proposal that the IMF should sell a portion of its gold reserves, while the British public opposes by a margin of five to two, their government's plan to sell more than half of Britan's gold reserves according to public opinion surveys carried out on behalf of the World Gold Council.
Commenting on the research which was presented today for the first time in the U.S., George Milling-Stanley, Manager of the Gold Market Analysis at the WGC, said ``It seems clear, in many instances, public policy seems to be out of step with public opinion.''
The unique series of surveys which examine public opinion in five of the world's leading economies has revealed that the public is highly supportive of the role of gold as a reserve asset for governments. The public in all of the countries surveyed feels that gold plays an important role in promoting public confidence in national economies and currencies, and people are very concerned that their governments should maintain or even increase the level of gold in their reserves.
The research was conducted during 1998 and 1999, in France, Germany, Italy, the U.K. and the U.S., to measure public attitudes toward gold reserves. The surveys also researched opinion on several issues of immediate interest. These included the introduction of the Euro, the new single European currency; the U.K. Treasury's decision to reduce Britain's gold reserves to less than half of the current level; and the proposal that the IMF sell a portion of it gold holdings.
Two of the world's leading opinion research firms, TN-SOFRES in Europe, and Opinion Dynamics Corporation in the U.S., conducted the surveys. They tested for the first time the assumption that people do not care how much gold their countries hold in their reserves, or that the governments and central banks that decide to reduce their gold reserves are acting in accordance with the wishes of their citizens.
The research shows that on the contrary, the public cares deeply about gold's role as a monetary asset. In all of the countries surveyed, overwhelming majorities say that a strong currency is important to a healthy economy, and their countries' gold reserves are important to the strength of their currencies. Huge majorities want their country either to maintain or increase the level of gold reserves.
The research results and analysis have been compiled in one volume entitled ``Gold and Public Confidence,'' published today by the World Gold Council. The data show that the public in Europe and the U.S. are remarkably consistent in their attitudes toward a wide-ranging group of topics involving gold reserves, monetary issues and international finance.
The research shows that respondents in France, Germany and Italy believe the new European Central Bank should hold at least the same proportion of its reserves in gold as their own central banks. Polls in the U.S. and U.K. reveal that large majorities believe gold should remain the primary asset supporting their currencies and an important part of the world monetary system.
In other highlights:
**67% of Americans surveyed want gold to be the country's primary
reserve asset.
**The public in all countries surveyed believes that gold reserves
are important to the strength of the currency and economy.
**85% in France, 67% in Germany and 68% in Italy favour the ECB
acquiring more gold to augment its reserves in support of the
euro.
**Majorities in the U.S. and Europe agree that strong gold reserves
provide protection against future shocks.
**Respondents in Europe and the U.S. say that having gold reserves
provides their countries with economic and monetary independence.
**Respondents in all countries say that gold reserves connote
``security, independence, confidence and value''
**Majorities ranging from 56% in Germany to 73% in Italy say they
would be concerned if their country sold its gold reserves in the
wake of European Economic and Monetary Union.
Mr. Milling-Stanley added: ``The strength of the public's support for gold on both sides of the Atlantic and the fact that people want to maintain or increase their nations' gold reserves, will come as a surprise - perhaps even a rude awakening - to several governments, central bankers, and gold market commentators.
``We hope that everyone, especially those public officials acting on behalf of their citizens, will be sensitive to this resounding expression of the attitudes and wishes of the people. Governments that want to sell their gold reserves are out of step with the wishes of the people who elected them.''
METHODOLOGY
The survey questions were organized into three broad sections:
1. Attitudes regarding economic situation
2. Attitudes toward the respondent's national gold reserves.
3. Perceptions concerning gold's usefulness and characteristics as a
reserve asset.
In Europe, the survey samples were 1,000 citizens representative of the general population in each country, providing a margin of error of +/ -2.5%. In the U.S., the sample size was 800 for a margin of error of +/-3.5%.
The World Gold Council is an association of leading gold mining companies from around the world with the aim of promoting global demand for gold.
Gold and Public Confidence will be published on June 24, 1999 by the World Gold Council, 444 Madison Ave., New York, NY 10022.
Issued on behalf of the Centre for Public Policy Studies, World Gold Council by Marston Webb International, 60 Madison Ave., Ste. 1101, New York, NY 10010 Telephone (212) 684-6601 Facsimile (212) 725-4709
TownCrier
(6/30/99; 10:35:51MDT - Msg ID:8243)
Tea leaves for the a.m.
http://biz.yahoo.com/rf/990630/rc.html
IMM currency futures mixed early in thin dealings. NAPM higher.
TownCrier
(6/30/99; 10:27:58MDT - Msg ID:8242)
Mexico, S.Arabia, Venezuela to fight dumping probe
http://biz.yahoo.com/rf/990630/yu.html
Here's more on the oil dumping allegations, but few questions are answered.
TownCrier
(6/30/99; 10:17:49MDT - Msg ID:8241)
A path is cleared for the movement of synthetic gold from the UK
http://news.bbc.co.uk/hi/english/business/the_economy/newsid_381000/381999.stm
HEADLINE: Breakthrough in euro chocolate war
Wow. This is offered as light reading, which is in order after Aristotle's magnum opus.
Aristotle
(6/30/99; 10:08:37MDT - Msg ID:8240)
A quick word to the Round Table expert-economists
I should offer my apologies for the folksy fashion with which I provided that commentary. My ultimate purpose was to circulate it among selected friends and relatives of mine, and unfortunately, some of them possess a temperament that would not tolerate a more scholarly disertation. Hopefully the brainiacs at the table will find its tone entertaining rather than demeaning.
The sentiment remains the same however...
Gold. Get you some. ---Aristotle
TownCrier
(6/30/99; 9:59:01MDT - Msg ID:8239)
Gold stuck in range, ignores lease rate puzzle
http://biz.yahoo.com/rf/990630/h2.html
Uncertainty surrounds the BoE gold auction next Tuesday.
beesting
(6/30/99; 9:48:20MDT - Msg ID:8238)
BANKERS WARN IMF!!!
http://biz.yahoo.com/rf/990630/v6.html
Sorry Townie I should let you do this, but I think a major economic war is developing click above URL........beesting
Aristotle
(6/30/99; 9:44:57MDT - Msg ID:8237)
Part 5 (part b)--- Life on Earth: Gold and the Free Market (continued)
...continued beyond the buffer limitation....
OK, so what else does the bullion bank get out of this, other than the applicable margin mentioned above? It also collects the interest on the currency loan that was written using the oil as collateral. You can see how the mechanism that has brought us temporarily cheap Money (Gold) over the years has also given us cheap oil not subject to the same shocks witnessed in the Seventies. You can also see why the economists can look at the Saudis balance books and see tremendous deficits where once there were surpluses that threatened to buy up the world. They have in fact bought up a significant portion of the Gold mined well into the future. Both Loans and Hedges bought all the way down from the top. Who are we to question whether to buy now or tomorrow, and to gripe over a missed opportunity of $10? The equation is simple. If you have cash, buy Gold immediately, because the downward trend has become teriibly unstable. Here's why...
The Hedge Funds saw how easy it was for miners to raise low interest capital, and further appreciated the fact that even if you yourself were not a Gold producer, the Gold could be repurchased on the spot market at ever lower prices. You could invest the capital received thru taking out this Loan (the infamous Gold carry trade would invest the currency into U.S. bonds that yield over 5%) and have a double profit potential. And of course, with the proper central bank guarantees, the House of Saud would be there to buy up repayment rights for these Money (Gold) loans also. The problem is that these speculating hedge funds have cummulatively driven the price so low (well beyond where mines would have long ago stopped seeking this type of Loan) that some unhedged mines are shutting down or going bankrupt. This aggrevates the spot market with thin supplies of real metal reaching it (due to so much production already having delivery obligations) such that it becomes hypersensitive to any real effort to make substantial purchases there.
The Hedge Funds will be in for a rude awakening, and the bullion banks are sweating because they swore up and down to the CB's that they were credit worthy of the CB Gold guarantees, and the important Oil Producer sees that the big bucks paid long ago for future Gold is now of uncertain arrival. And some miners, despite their hedges, have played fast and loose selling them for cash and buying back, and through general mismanagement have not been able to stay so viable as to ensure future delivery of the repayment terms. The CB's are sweating, because their guarantees were used over and over again, and they are on the hook for a lot of Money (Gold) when the speculators find it impossible to cover their Loan repayment obligations on the spot market as the price races away from them due to the hypersensitivity. Shades of Rotterdam. Does this give you new pespective on the push lately by some CB's to free up some Money (Gold) from the vaults, whether it is Bank of England, IMF, or maybe even Swiss.
It is this same currency, borrowed against oil for the purchase of Gold, that has added the massive liquidity to the world over the past decade and a half that many people have used in turn to fan the flames of the stock markets here and overseas. That's a lot of cash born unto Gold, and were it not for the prospects of receiving the real wealth of Gold, this supply of currency would have been stillborn, and oil would likely only come forth by way of brute force rather than by civil, economic means. I realize that I have left a lot out, but this should get you started along the clear road travelled by smart currency. Now, knowing what you know, what would you do with your dimes? Because this is really his tale, not mine, I'll leave you once again with perhaps my favorite statement made by Aragorn one evening last month among his old friends. "If I were given a dime for every time I cursed the market for providing easier gold, I'd have a dime...and that one was found on my way over here."
Everyone, your comments are welcome. And thanks again to MK for the USAGOLD forum and for the opportunity to obtain a world-class Money education and shiney yellow metal diplomas all at the same place!
Aragorn III, let me know if I have relayed the message to your satisfaction. Even though I struggled for clarity, the nature of the creature may require several readings. I'm certain that in my latest rewrite many typos crept in, and maybe some general blunders to boot. Please feel free to repair the errors, and assist with the Q & A sessions that will surely follow.
Easy Money. Make you some. ---Aristotle
Aristotle
(6/30/99; 9:41:59MDT - Msg ID:8236)
Part 5--- Life on Earth: Gold and the Free Market
...continued from Aristotle (6/25/99; 18:06:45MDT - Msg ID:8073) "Part 4"
which was continued from Aristotle (6/24/99; 6:17:53MDT - Msg ID:8007) "Part 3"
which was continued from Aristotle (6/23/99; 19:56:08MDT - Msg ID:7997) "Part 2"
which was continued from Aristotle (6/20/99; 15:31:21MDT - Msg ID:7839) "Part 1" found at:
http://www.usagold.com/cpmforum/archives/2019996/default.html
Before I conclude this commentary, let me first express my gratitude to USGOLD for hosting this illuminating site, and for the tolerance I've been extended by so many here for my four long posts that up until this moment probably didn't seem germane to the topic of Gold. If you are joining this series late, I strongly suggest you first read the prior four parts which were given as necessary background. On any journey, the first few steps are the most important, and in this case they were also the most difficult--to include enough for context without drifting off-topic. This last part is easy. The task at hand is to provide an explanation of Gold's pre-eminence as a monetary asset. Gold is, in fact, Money, while the dollar and others are merely currencies--an importance difference!
I am not claiming to be offering new findings of my own. The inspiration for this series of posts originated from comments Aragorn III offered to a small group last month, and I have been challenged to render this tale into the clearest of terms suitable even for those not acquainted with Gold and worldly economics. If I have suceeded in my challenge, at the conclusion of this final part you will fully grasp how the free market has managed to provide a sophisticated asset (Gold) at a laughably minute fraction of its relative value. You will also understand how to justify to your WallStreet-enthralled loved-ones that Gold (metal, not stock) must be added to their wealth management plans. You will KNOW that Gold is Money, and will gain new respect for its "price." Although this information isn't "new," hopefully this explanation of financial operations with Gold, together with the background information of the 1970's Oil Crises will help you anticipate and conclude for yourself an outlook for events ahead, and will also help you to better understand and evaluate the important messages being presented by ANOTHER and FOA, in addition to the other worthy knights of this Table round. Knowledge is power, and with it your destiny shall be yours to decide.
To start, I'm going to paraphrase some specific remarks made by Aragorn that some people need to hear and think about, though most of the forum posters are already in tune with this. 'The falling price of Gold has had a remarkable effect on people. The common person says, "Of course, it is because Gold is demonetized." The Goldheart knows better, so the falling price has a more remarkable effect bringing out the insecurities and irrationalities of some. Though they don't question that Gold is money, they do start to question whether the world really needs money at all...that somehow this greatest device of mankind has been antiquated. Simply preposterous. If they knew the truth they would confidently buy today at triple the price and call it a bargain of a lifetime. People ask, "Why waste effort to dig up Gold from the ground, only to rebury it in vaults?" I say, "For the same reason the central banks toil to print millions of fancy notes that nobody reads. If you've read one, you've read them all." The effort is needed to prevent cheating, though we easily see the fancy cash does not stem the abusive tide of money for nothing. People also say, "Gold is a dead asset. It does not earn interest." What is the point of such a comment, to demonstrate their naivete? Did banks not pay interest when coins were stamped from Gold? You see, it is not the nature of money money itself to earn interest, but rather, it is the investment risk that maybe earns a reward. A modern dollar in a shoebox is as a Gold coin beside it. No interest for either. Interest paid by a bank savings account is not a product of the money itself, but instead it is the rewards on the risk the bank takes with the money you have provided for their investment use. Sometimes these banks choose poorly, and even the modern dollar earns no interest, and does not come back at all--lost with the closing of the bank doors. Money must be risked, invested, to expect a yield, and in this regard, the big players in the world risk Gold money as they do paper money (though often not as aggressively), while the small players are content with the shoebox yield. You must be more aggressive (more risky) with paper because it's value dies quickly, unlike Gold that stands forever, even in a shoebox of no risk.'
With that, I will now conclude this tale that shows Gold functioning in its role as Money much to the consternation of those who don't understand the big picture. As Aragorn recommended to me, because preconceived notions of words often cloud a person's ability to see the case before them, I shall try to deliver this message with the scantest use of such terms as Gold loans, leases, shorts, etc. In fact, I will be so bold as to simply refer to Gold as Money (but I will write it as such--"Money (Gold)" to ensure you know my meaning, but as you read, simply pronounce it as "money"). As far as what you might think is money (dollars, yen, pesos, etc), I shall from this point forward not call them money, but refer to them by their given name (dollars, yen, pesos, etc) or else will call them "fiat currency," or just "currency" for short.
Enough of the preamble. Let's pick up where we left off from Part 4. In days past, the oil exporters had been poor to modest contries scraping by when two things occurred. They discovered that they owned lots and lots of oil, and they also found that the rest of the world had developed a voracious appetite for oil. Think how different the world situation would be today if this supply of oil had simply never existed. We are certainly lucky to have its availability, and it is a reasonable expectation to pay fairly for all that we take. As bald as that statement is, it is necessary because some people have suggested (as Kissinger did in the 1970's) that warfare is a possible alternative to obtain what isn't ours. Such a world!
We've already discussed much of the turmoil that resulted from consumption that outpaced ability to pay. Payment in Money (Gold) was terminated, and many payment scenarios were developed in addition to the ever rising prices in paper currency. While it can be suggested that currency is a reasonable means in which to track balance of trade accounts (equating oil exports with similar value of infrastructure improvements as imports), it should be readliy admitted that paper currency is an unacceptable means in which to pocket one's profits. Book the trades with paper currency, but pocket the profits (savings) with Money (Gold). That's what I do every month, too! Paper currency was falling in value fast when it was no longer tied to Money (Gold), and this was causing international settlement difficulties on many fronts in addition to oil. It is instructive to investigate some of the tools of the international financial System, bacause what worked for Money (Gold) and currency back then, certainly works for Money (Gold) today. (Please reread the paraphrasing of Aragorn's money comments if you have forgotten them already.)
Back in the 1960's when dollars were still tied to Money (Gold) under the Bretton Woods agreement, the American penchant to spend for goods abroad let Kennedy's Undersecretary for Monetary Affairs, Robert Roosa, to fear a mass "cashing in" of these dollars in international hands for Money (Gold)--a run on the Treasury, so to speak. Roosa created a new financial device, referred to as a "Roosa bond," which was a special issue of Treasury bonds that were denominated in Swiss francs. As the bonds were sold to the world, they would sop up excess dollars with the terms that repayment at a future date would be in a given quantity of Swiss francs. Notice I said quantity, and not value. While these Roosa bonds stemmed the tide of a possible run on the Treasury, they ended up costing America more because the Swiss currency appreciated versus the dollar during the life of the bond.
In 1978, the U.S. issued 10 billion dollars worth of bonds denominated in foreign currencies (marks or yen) to milk extra life out of a dying dollar system, and the fix lasted until the 1979 Oil Crisis made mincemeat of it. It was an acknowledgement that some foreign investors wouldn't hold U.S. government obligations that would be repaid in dollars worth less than originally spent on the bond. Further, it was at this time that the U.S. promised to sell Money (Gold) from the Fort Knox stockpile to foreign central banks unwilling to hold dollars. (On his last day of office, March 31, 1978, Federal Reserve chairman Arthur Burns suggested that the entire $50 billion of the nation's Gold stock be sold for foreign currency in defense of the dollar, at which time the foreign reserves could be used to buy up the collapsed dollar in international markets. While this plan was originally rejected, within three weeks the Treasury Departmentwas forced to announce it would auction Money (Gold) on a regular basis. Treasury Secretary Michael Blumenthal pledged in a meeting two days later with top-level Arab businessmen that the integrity of the dollar would be defended vigorously, and asked them to do their part to stabilize the global economy by keeping a price freeze on oil in place at least through 1978. You should have no questions now about where the dollar found its value after the 1971 delinking with Money (Gold). The asking price by oil--influenced by many factors--set the dollar's value.)
It is also important to know that not all international arrangements are conducted on the open market. To avoid the German mark from being bid up in strength resulting in ever more people bringing them dollars for an exchange, the Bundesbank issued bonds directly to the Middle Eastern buyers, avoiding the marketplace impact altogether. This was at the time Saudi Arabia was swimming in cash and spreading the excess among the world's largest banks (as mentioned in Part 4). My point is this (which I shall expand on soon): don't be surprised that banks are far more creative in their operations than revealed in your common experience of savings and checking accounts and home loans.
Eliyahu Kanovsky, an oil economist, won renown by many for accurately forecasting long-term oil production and pricing trends by OPEC where all others had gotten it wrong. In the 1970's he maintained that economics, not politics, were the determining forces behind the decisions of OPEC. In 1986 he wrote in response to the prevailing notion that OPEC would eventually own the world as a result of its oil wealth: "It is, by now, abundantly clear that these forcasters committed gross errors not only in terms of magnitude of change, but, far more important, in terms of direction of change. Instead of increased dependence on OPEC and especially Middle East oil, there has been a very sharp diminution. ... Oil prices have been weakening almost steadily since 1981 and there has been a collapse since the end of 1985. Instead of rising 'petrodollar' surpluses, most OPEC countries, and Saudi Arabia in particular, are incurring large current account deficits in their balances of payments, and are rapidly drawing down their financial reserves."
In the 90's, Kanovsky maintains that OPEC has lost its ability to raise income through raising prices, and that oil below $20 is virtually assured. (This should remind you of Milton Friedman from Part 1.) Kanovsky claims competition among producers ensures an end to price fixing. They can only pump it and sell it for whatever the market will provide. He contends (rightfully so) that Iraq can be counted on to "pump like mad" upon lifting of UN sanctions. He also contends that with the current account deficits of many OPEC members, notably the Saudis, they have no option themselves but to add to the oil glut with overproduction to raise revenue. Since it has been brought to our attention by Kanovsky, let's take a look at the Saudi budget, and the toll taken on it in the aftermath of the Gulf War. IMF data reveals that the Saudi deficit climbed from $4.3 billion in 1990 to $25.7 billion in 1991. Oil had been selling at around $14 per barrel until June 1990 when Saddam Hussein pressured OPEC to raise the price to about $20 to help repair Iraq's national buget which had been wiped out and sent into the red by their 1980-88 war on Iran. Iraq's subsequent invasion of Kuwait in August 1990 temporarily spiked the price higher.
Here I must ask you to pause for a moment to reflect on those huge oil trade surplus figures we toyed with in Part 3, and recall that they were from early 1970's oil demand at a price of $11.65 that caused the First Oil Crisis. What happened to the vast amounts of petrodollar revenue that was being pumped into international banks, and recycled as fast as the loans could be written to borrowers throughout the 1970's? What happened to the earnings that was surely being generated on these deposits through the activities of the lending institutions? As I noted at the end of Part 4, the System miraculously survived the Second Oil Crisis of1979, and concurrently the skyrocketing price of Gold promptly abated in 1980. Kanovsky points out that oil prices started weakening in 1981, and then plunged in 1985. Force yourself to make the connections. You will be one step ahead of Kanovsky who has identified the effect, but no doubt has missed the cause entirely. Let us now tie together everything we know...
Historically, the price of oil had been simply posted by the producers for contracted delivery until it was unleashed to respond to daily supply/demand forces on the "spot" Rotterdam market, at which time the price exploded in 1979-80. Although the dollar had been historically fixed to Money (Gold), after it was unpegged in 1971, the currency price of Money (Gold) was determined by the daily supply and demand, similar to Rotterdam. Gold auctions began in May of 1978 because the U.S. had trouble getting international entities to accept its dollar currency. After "booking" their trade balances with dollars, the House of Saud, among others, wanted to "pocket" their profits with Money (Gold) and therefore competed with everyone in the world for Gold on the spot market. As the price shot right through $700 it was clear that every ounce purchased made it that much more difficult to purchase the next ounce. There was little trouble raising the price of oil as needed, except the financial structure of the world was coming apart at the seams. Each dollar withdrawn from intenational banks to buy Money (Gold) made life ever more difficult for the banks to square their books against outstanding loans. There had to be a better way. This is the better way...the return of Money!
The high price of Gold brought mining companies out of the woodwork. The Earth was crawling with geologist looking for the next jackpot Gold deposit. The mining companies needed capital to finance the construction of new mines. It is not strange to you to accept that banks can lend money. It should not be difficult for you to accept that banks can lend Money (Gold) also. Struggling with that thought? Don't. They lent Money (Gold) in the days prior to Roosevelt's 1933 confiscation of Money (Gold) in exchange for currency, and they can lend Money (Gold) today. In fact, they can even create Money (Gold) out of thin air, in a manner of speaking, and I'll walk you through it.
Sometimes a parallel familiarity assists comprehension. Consider the existence of Government-Sponsored Enterprises (G-SE's) such as the Federal National Mortgage Association (commonly known as Fannie Mae). Fannie Mae is in the business of creating financing for people like you and me to acquire a house. The government's involvement in this affair is that they underwrite the risk of a default on the repayment of the loan. Dollars are borrowed, dollars are lent, and dollars are repaid. It doesn't matter what happens to the exchange rate of the dollars versus other currencies. Dollars are owed, plain and simple, under the terms of the loan contract. If a home mortgage loan is sold on the secondary market, the purchaser of the loan is effectively buying not the house, but rather the rights to receive the borrowers repayments over a span of time.
Think of a loan to a mining company in a similar fashion. Interest rates on Money (Gold) are often much, much less than on currency because the Money (Gold) holds its real value over time, whereas the paper currency fails so fast you must return more for the lender to at least break even, not to mention show a profit for the risk. Because miners will be pulling Money (Gold) out of the ground, it makes the most sense to them to seek a loan of Money (Gold) rather than currency in order to finance their new mine construction. But because Caterpillar has its head in the sand, it requires dollar currency for the purchase of its mining equipment, so a Money (Gold) / currency exchange must be made. These arrangements take place in every conceivable fashion, but this example will be representive.
As 1980 arrived, the Saudis still wanted Money (Gold) for thier oil, and the world was low on liquidity. Much wealth had already been transfered to OPEC, leaving many countries struggling to service their own debts, with much of the credit existing as recycled petrodollars. Let the lending continue! Bullion banks would facilitate these deals, and central banks would act in the same capacity as with the G-SE Fannie Mae, guaranteeing ultimate repayment in the event of a borrowers default. In this simple example, the House of Saud could be looked at as the ultimate lender (although the borrower doesn't see this)...lending the currency equivalent of the Money (Gold) borrowed by the mining company for use to pay Caterpillar for equipment to build the mine. Because this is contracted as a Money (Gold) loan, Money (Gold) must be repaid over time. In a sense, it is similar to the Roosa devices where dollars are paid for the bond, with a fixed amount of another currency (in this case, Money (Gold)) expected to be returned upon maturity.
There is nothing sinsister in all of this. The price of Gold has fallen simply because the principle buyer at the Golden "Rotterdam market" has found another avenue in which to obtain the Money (Gold) desired in exchange for oil. This is very much like the Bundesbank offerings that I told you about earlier. Please appreciate the patience in this approach, and the commitment it shows to Money (Gold), knowing full well that for many years it would be getting ever cheaper while you yourself would appear the fool for buying it from the top all the way down. But the big payoff in the end is near, and I'll get to that.
With the simple but vital central bank guarantee against the default of these Money (Gold) loans, the House of Saud, for example, would have not qualms about supplying the cash side, effectively buying not the Gold metal immediately, but rather the rights to receive the borrower's Gold repayments over a span of time. Just like a home loan on the secondary market. And the Money (Gold) of the central bank need not ever move or change ownership unless the borrower defaults on the loan and the CB is obligated to guarantee payment.
Now that you grasp the basics, let's take things up one level. So many Money (Gold) loans were written, that the House of Saud spent down all of their past petrodollar surpluses. What now? It is time for banks to do what banks do best...create new money. This is the typical example I promised you earlier:
The miner approaches a bullion bank for a Money (Gold) loan. Let's assume the current dollar price of Money (Gold) is $400 per ounce, and the miner needs $20 million to pay Caterpillar for equipment. The bullion bank (such as can be found operating in the network of the London Bullion Marketing Association--LBMA) writes the Money (Gold) loan contract specifying the term of repayment of 50,000 ounces of Money (Gold) plus interest. The borrowing miner collateralizes this Money (Gold) loan with company stock, the deed to the mine, etc, and is sent down the road with $20 million in currency for Cat. Where did the cash come from? The bullion bank turned to the House of Saud, which is currently out of currency. However, using their oil in the ground as collateral, the bullion bank is able to write them a cash loan out of thin air (just like banks can do) with which the Saudis purchase the repayment rights on the Money (Gold) loan. They will be recieving future Gold for their future oil!
What does the bullion bank get for all this trouble? First, the central bank gets 1% - 2% for underwriting or guaranteeing the loan. (Just like the underwriting done with Fannie Mae.) The bullion bank then adds on top of this low interest rate an applicable margin for its cost of funds, and establishes the final interest rate for the miner that borrowed the Money (Gold). This rate might run 3% - 5% while currency loans would demand much more. Each year the miner produces Gold, and after paying the required amount of Money (Gold), the remainder of his annual production can be used to meet expenses. Because the big Gold buyer is no longer shopping on the spot market, the pricing pressure has come off, and prices could very well be expected to fall. To protect against this leading to the possible bankruptcy of the miner, and hence his default on the repayment of Gold, the terms of the Loan might also require that the miner lock in a certain amount of future production at the current prices (economists scrutinize the mining plan to ensure that it will be viable at current prices before granting the Loan) at the hedging counter. It should come as no surprize that the House of Saud would also step right up to purchase the delivery side of this hedged production. Enough must be hedged to ensure the mine will remain viable (even at lower prices) at least long enough to repay the Loan. Lets assume this mine is operating today with Money (Gold) at $260 per ounce, while their cost of production is actually $320. The current price of Money (Gold) is not a factor on the Loan repayment..they owe X number of ounces regardless. Any additional production would be sold under the terms of their hedge, at $400 per ounce, and they can pay their bills comfortably and stay in business. Is the House of Saud a fool for paying $400 long ago for the Loaned ounces, and for paying $400 today to honor their hedged ounce agreements? You or I could pay $260 today for that same ounce on the spot market! Has it become clear what you must do now with your currency?
OK, so what else does the bullion bank get out of this, other than the applicable margin mentioned above? It also collects the interest on the currency loan that was written using the 9 0~( H@ F Kx` @}8`pH@ ?|98 ^ @ pMH `(6, L5 x ? Kx @ pR*ch x B f" t @ ?... | BMH F u @ @*h@m'" 48 / :d p "` Q$@ H Bntos S' H S' @" p "@ t < 4 ... 1
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TownCrier
(6/30/99; 9:35:44MDT - Msg ID:8235)
Bankers warn IMF, G7 against market interference
http://biz.yahoo.com/rf/990630/v6.html
Goodonya, beesting, you beat me. In this one, the IMF takes its lumps.
TownCrier
(6/30/99; 9:30:37MDT - Msg ID:8234)
U.S. may need higher rates to sustain growth -- IMF
http://biz.yahoo.com/rf/990630/uq.html
Coming on the final day of the FOMC meeting. That's gutsy.
koan
(6/30/99; 9:29:09MDT - Msg ID:8233)
all the metals performing today
Copper, what a big surprise. Silver continues to march on in a constructive manner making new highs in a breakout mode. Only PAAS and cde participating with hl down and ssc flat, interesting. Gold is listless.
Good program on Frontline last night about HOT MONEY moving around the world smashing small economies and destroying their currencies. The thesis is that their is and international economy with no international rules. I could see how gold may be what is needed to protect these currencies which would mean much higher gold prices; and it gave more credence to the gold carry theory. I still like silver though. If gold goes silver goes. I think this is the big story, but not too much excitement from the bugs yet.
beesting
(6/30/99; 9:27:28MDT - Msg ID:8232)
U.S. may need higher rates to sustain growth-IMF
http://biz.yahoo.com/rf/990630/uq.html
Please read the above news release and understand better why soverign nations resent IMF interference in domestic financial affairs. As an American I was made angry when reading this release simply because the @!!#>>@#@! IMF has no right to tell countries(made up of hard working taxpayers) to work harder, pay more taxes,etc. etc. In my opinion if the IMF was disbanded poor countries wouldn't suffer economic hardships, like they are experiencing right now.
Or maybe this news release was a ploy to rile up the American public because the IMF themselves are in deep financial trouble....We watch together........beesting
USAGOLD
(6/30/99; 9:16:30MDT - Msg ID:8231)
Today's Gold Market Report: On Phoney Surpluses, Imprudent Politicians and the Fed: So What's Going to Happen with Interest Rates?
MARKET REPORT(6/30/99): Gold appeared at bit wobbly in the early going with all
eyes in the financial world glued to the screen awaiting the Fed's decision on interest rates.
The consensus opinion is that the Fed will raise by a quarter point not nearly enough to wet
the bear's whistle. So the defiance of the Greenspan Irrational Exuberance Protocol
continues. If the Chairman were the type to rise up in anger at the rude disregard exhibited
by Wall Street for his concerns about the mania , then perhaps we would get a surprise
today. But he is not so easily driven to anger and, beyond that, the markets don't believe
the Chairman has the stomach to take interest rates where they need to be to quell Great
Stock Market Mania of the Millennium.
The fact of the matter is that he probably cannot raise rates to the required level for two
good reasons:
First, the world economies now awash in liquidity would suddenly fall into apoplexy
should that liquidity be removed.
Second, a two point rise, which is probably what is needed to cool this economy would
take federal government interest payments to nearly half of incoming tax receipts -- a level
some would define as a bankruptcy, or at the very least, a bankruptcy waiting to be
declared.
The market knows this, hence the disregard for the chairman's concerns. On we
go.......ever higher stock values in no way associated with underlying corporate profits or
growth prospects. Instead, stocks have a become a new form of money -- mad money, if
you will -- supplied head over heels by the seemingly cornered and trapped Federal
Reserve. All in all, a modest rise in rates and an extravagant statement about future rate
increases seems to be in order. The question is: "Will anybody believe it?"
While we are on the subject of the budget I have a few words of caution for the
goldmeisters about this business of a budget surplus being trumpeted ad nauseum by the
Clinton administration. Interesting that it would begin just as Robert Rubin quietly closes
the door behind him and heads for the cozy confines of his beloved Wall Street. One
wonders if Mr. Rubin truly believes that the surplus exists.
The trumpeting by the Clinton administration along these lines reminds of the young couple
sitting at the dinner table discussing how they would spend their money if the husband's
salary doubled. The plans and the dreams flow in happy conversation, but the minute the
couple goes out and begins to spend this-money-that-doesn't-exist that family as a social
institution becomes threatened. Happily, most American families are not so foolish and
impractical as to spend large amounts of money that does not exist. Unfortunately our
government does not operate under such constraints or prudence for that matter.
Twelve months ago the accumulated national debt stood at $5,599,256,430,419.83 exactly
$51,321,686,860.02 above the $5,547,934,743,559.81 debt figure of one year ago -- in
case that's too many numbers for you, that translates to $51.32 billion of debt added in the
last 12 months. September marks the end of the government's fiscal year and quite often the
debt accumulates at a much faster rate as we approach year end. The add on to the national
debt for the fiscal year 1997 for example was nearly $100 billion. And the politicians from
both parties were telling us then that the budget was in surplus as well.
So when the Clinton administration talks about "spending the surplus" one wonders where
the self-delusion began and just how disingenuous politicians can really be. In Colorado,
where a strong economy has pushed our budget into surplus in reality, the Republican
legislature and governor worked to return that surplus to the people. A number of taxes
imposed in leaner years were wiped off the books, including the sales tax on precious
metals, and the state income tax was lowered by a quarter per cent. This is the way rational
and fair politicians deal with surpluses. Contrast that to this statement pulled from this
morning's New York Times article on the new Clinton Medicaid proposal:
"The economic context for Clinton's proposal could hardly be better. A vibrant economy
has generated a windfall of federal revenue. The White House said this week that it foresaw
surpluses totaling $3 trillion over the next decade. One in eight of those dollars would go to
shore up Medicaid under the president's plan."
Aside from the questions one could raise as to why the New York Times needs an editorial
page when you can blatantly editorialize within the context of a "news" story, one readily
sees the difference between the two approaches. One is designed to return the power of the
purse to the voters; the other is designed to further entrench the statist mentality that has
gotten us into this mess in the first place and, by the way, denies Alan Greenspan and the
Fed the flexibility to properly execute monetary policy. All very clever. What better way to
deal with a sore problem than to remain in denial about it -- and manipulate the people into
believing your delusion is in fact reality. In my view, the reason why the politicians in
neither party proposes to return that money to the taxpayer is that they know it doesn't
exist. And you cannot return money to the people that doesn't exist.
Enough of that for one day, my fellow goldmeisters. I'll leave the last two days' reports up
for further as they speak more directly to goings-on in the gold market where things haven't
changed much since yesterday. We patiently await the July 6 Bank of England auction.
Clint H
(6/30/99; 7:06:30MDT - Msg ID:8230)
Sorry!
Sorry, I only ment to repost FOA on Confiscation but the others are good anyway.
Clint H
(6/30/99; 7:02:31MDT - Msg ID:8229)
Cavan Man #8227
This is the best I have seen on the subject of confiscation.
FOA (5/21/99; 11:50:51MDT - Msg ID:6572)
Further Comment
ALL: If you follow my logic in #6570, then you can also under stand why the US can never call in gold from it's citizens again! As long as they are using "dollars", the same dollars that were exchangeable into gold in the 30s, they cannot Replace it with gold. To reverse that decision
would open the American government up to lawsuits from local dollar holders to return gold at 41 (or whatever price). If they again, called in local gold, prior to re-backing the dollar, Everyone would demand, first the exchange of gold at the old price, then they would send in that gold! The
Government would "Never" risk it! Yes, they could call the dollar "dead" and issue a new gold backed currency for "internal use". See my last post to understand why a new
currency would be unacceptable "externally". But, that money would not function, as it could have no ties to outside transactions. Nothing would be gained. As noted before, they would most likely encourage gold holding by citizens while taxing the local gold industry and private transactions. Still, a dyeing dollar will spell massive gold increases
in value for private bullion holders as this proceeds. FOA
Technician
(6/30/99; 6:51:03MDT - Msg ID:8228)
Too much competition
Gold has had to compete with 300 dow points and collapsing CRB.
1) Dow rally is likely to end today since today is day it has been waiting for.
2) Consider that gold has shown strength not weakness in context of last few days.
3) wait for todays close before making decisions on liquidating any gold.
Cavan Man
(6/30/99; 6:07:59MDT - Msg ID:8227)
beesting 8213
Actually, I was hoping to elicit some discussion on the subject of confiscation from you and the other Knights and Ladies. I do believe it (confiscation) is a real possibility; at least in the US because of precedent and the unsavory character of our political institutions. With regards to patriotism; when I attend a sporting event and place my hand over my heart to sing the national anthem, a chill goes down my spine; everytime. I love this country dearly but I, like you put family first. I also strongly believe in individualism and not collectivism and will not be worrying about the collective in the age to come. Good day to all, and, the next time you are at a sporting event in the US and you are standing near an individual who will not doff his ballcap when the SSB is played, kindly suggest that he remove his cap and show some respect.
SteveH
(6/30/99; 5:21:55MDT - Msg ID:8226)
Aug. gold now...
$262.80.
Usul
(06/30/99; 01:52:47MDT - Msg ID:8225)
Fall of the moneylenders, Part 2
After a short interval of contemplation the wise old
gentleman came to a decision. He would bring to the
market a new source of funds for the people of the
neighbourhood, one which would not inexorably lead to a
piling up of debt that would let the whole market fail over
the imprudence of one moneylender, and one which would
not lead to the whittling away of the value of money. He
gathered some of the traders about him one day and
spoke:
"My friends, it is said that in ancient times this piling up of
debt was relieved by a 'Jubilee' which took place every 50
years. It should not be lost on you that this is to say, in
effect, 'once a generation'. All who were burdened by
debt were then freed. Now, even in modern times, there
are destructions of debt that come 'once a generation', but
as the more fortunate of us live for longer, it may be longer
than 50 years. These crises are not planned, as was
the Jubilee. In fact, our lords and masters do all in their
power to prevent it- but always, in the end, the economic
reality prevails. Sooner or later, the piles of debt and other
financial obligations become so great that any untoward
event that topples one of the moneylenders,
who owes obligations to another moneylender, topples the
next one, and the crisis soon passes down the line to
topple them all."
"Friends, you remain in need of funds for trade. But how
can you regain your trust in moneylenders? Would you
deposit your gold with any, knowing how they have fallen?
Would you take loans from any, knowing how they raise
charges and call in their loans before the agreed time,
when times are hard? I have given much thought to this
and will soon have more to discuss with you."
Aragorn III
(06/30/99; 01:35:33MDT - Msg ID:8224)
SteveH, it is an interesting exercise in math to be sure
Somebody, not nobody, SOMEBODY will be writing off 60 - 90 billion dollars in non-performing loans. I hope you have been reading the recent work of Aristotle. He explains where much of this money originated.
So on one side, somebody "eats" this bad meal of many billions of dollars, but on the other side of the table this dish is being seasoned with a small amount of gold (an amount the world *thinks* is worth only 3 billion dollars). An idea should begin to take shape that money is not what you always thought it was.
got gold?
Aragorn III
(06/30/99; 01:19:35MDT - Msg ID:8223)
Thoughts for Al Fulchino
http://biz.yahoo.com/rf/990629/bck.html
Your image of the young boy being beaten is a good one to stir up sympathies, leaving little desire for us to investigate the circumstances that lead to that incident.
I recall you are at the downstream end of the oil market? In that postion, would you not find it easier to relate to your customers than to the producers? Your gas will flow cheaply to happy drivers, while the oil comes from "who knows where"?
You may enjoy reading the response of Mexico in the link I have provided. Please also read the the story being delivered by my good friend, Aristotle. The international cost of production and the Texas Railroad Commission might show your beaten boy to be something other than an innocent victim...the class bully taken down by the laws of nature.
Gold is not so easy to come by that we should wish to part with more than necessary to subsidize bad production, do you agree? If my neighbor may offer something more cheaply than I can create for myself, am I not best served to accept it?
Why do we not see these same countries complain of the cheap computers offered by the U.S.?
You are indeed right to believe in the free market and in good will. There may in truth be bad will, as you say, but perhaps in this case it is "bad production" that brings the bad will from those bringing forth the petition. Let the customer decide. Thank you for sharing your thoughts. This issue of free trade has room for very many opinions, and yet I have given more questions than comments. Life is about learning, is it not?
got gold?
SteveH
(06/30/99; 01:01:35MDT - Msg ID:8222)
Center pole
Aragorn,
Seems like all of these players are dancing around the center pole but nobody wants to directly address the issue, to wit: physical gold is needed to cover in the market and unless we get this gold, some of these houses are in deep do-do.
Senator Saxton seems to say, ok, you want your gold, here...but you can't use it for what you aren't telling me you really want it for.
Gold for debt relief is pure spin-doctoring, nothing more.
Unless...consider this...gold were much, much, much higher. Say gold were at $1,000 or higher per ounce and then they sold some. Oweeeee...then they might be able to pay off some debt, eh? No...(scratching head)...it would have to be at $10K per ounce or more to relieve debt. So maybe all this spin-doctoring is to pave the way to loosen up gold so gold can be raised in price so it can be sold to pay off debt. Nahhh, couldn't be, could it? Whose got that razor (Osscam?) when you need it. Simplest theories are best, but nothing about this seems simple. Anyway back to the dance floor (and bed).
SteveH
(06/30/99; 00:35:52MDT - Msg ID:8221)
longj
Triple bottom on that base-builder. TA is showing signs of a bottom with enough possible good news for gold to help fuel the boost, eh?
Aragorn III
(06/30/99; 00:33:55MDT - Msg ID:8220)
Farfel and USAGOLD
Farfel, You took issue with MK on this topic:
"plans to introduce legislation as early as this week that would prevent the IMF from selling its gold reserves unless it sells them back to the countries that contributed to its reserve. [an idea suggested long ago at USAGOLD!!]"
I do follow this forum closely, and offer additional thoughts for your consideration before you suggest that it is MK that has a poor suggestion. From my recollection of past posts, you have misinterpreted the meaning of the TownCrier. This idea was suggested weeks ago (by me) AT the USAGOLD forum, not specifically BY the host of USAGOLD. So on the surface, your issue lies at my feet. And although MK provided a very good response that could stand well on its own, let me share the context of the original remarks I made.
Many weeks ago when the comment was made, there was much doubt regarding this IMF sale, the agenda pushing it through, and notably Germany's reluctance to support the proposition. I suggested that the movement of this gold would not be a free-for-all for all comers, but that a specific recipient was perhaps in mind. Further, to make the sale palatable to the objecting members, of the total gold offered restitution of any objector nation's quota could be made as necessary. This seems to be close to the idea as presented in the report you have cited, and is likely the cause of the TownCrier's comment. Do I understand that you prefer IMF control of gold? That is a notable position of its own, and worthy of much debate. I prefer to hold what is mine.
MK,
I was able to find this from a previous post, though not from the one referred to above.
"Of its 182 member nations today, the EMU 11 represent 22.4% of the voting shares, while notably the U.K. has 5%, the U.S. has 17.5%, Switzerland has 1.6% and Saudi Arabia has 3.3%."
Please recognize that the voting shares indicated are in line with the gold subscription quotas. Of the EMU 11 countries, Germany would own over 6% and France would own over 5% of any IMF gold offered for sale. We are in agreement on this. I, too, see any gold restitution to these countries as a safe bet that this gold would not soon find its way into other hands.
longj
(06/30/99; 00:22:59MDT - Msg ID:8219)
base building
http://www.quoteline.com/cfxtemp/CFT0630_08094134B.gif
BTW this is a classic basebuilding curve if ever ther was one... I'd not be surprised to see the little yellow balls of fire costing a bit over 2.764x10^-21 a piece next week.
SteveH
(06/30/99; 00:17:14MDT - Msg ID:8218)
TA
www.stockman-forum.com/ta-def.htm
(BOL-C) Bollinger Band Crossover
John Bollinger observed that if Trading Bands were constructed based on Volatility of price, they would would contract and expand according to market forces, more precisely matching the price movement and identify overbought and oversold levels on the basis of observed volatility.
Construction:
In the construction of Bollinger Bands, Standard Deviation of price (SD) is used as the measure of volatility. SD is determined in the following manner:
If:
P = Number of Periods considered and
Nsd = Number of Standard Deviations used
Then:
MA = P-Period Exp Moving Average of current bar's Close
SUM = (Close, - MA)2 + (Close 2 - MA)2 + ... + (Closep - MA)2
SD = (Square Root of SUM)/P
Plot a P-Period Exp Moving Average of the Close. For each bar, plot MA + (Nsd * SD) to derive the upper band. For each bar, plot MA - (Nsd * SD) to derive the lower band. MetaStock and other programs use High and Low rather than Close in the calculation for MA to yield MA high and MA low. This also yields a separate SD value for both the upper and lower bands; SD high and SD low. SD high is then added to the MA high and SD low is subtracted from MA low to yield the upper and lower bands, respectively. This appears to yield slightly better results.
Parameters:
Periods: (P) The number of periods used in the Moving Average and Standard Deviations. Deviations (NSD): The number of Standard Deviations used in the calculation.
Trading System:
Bollinger observed that price moves originating at one band will usually travel to the other band. The Bollinger Band System trades when the Close enters the band (similar to the Trading Band system discussed previously).
The bands expand and tighten according to higher and lower volatility levels. This system also shows strong moves in which price originated at one band and moved decisively to the other band. This is the type of signal the system is attempting to identify. As with the Trading Band system, the Bollinger Band system works well in Trading Range markets.
-end-
Current range on weekly bollinger POG chart is $304 on the high and $261 on the low. The POG is looking at a bounce, technically speaking. Politics removed.
SteveH
(06/30/99; 00:09:51MDT - Msg ID:8217)
TA
http://www.the-privateer.com/g-bottom/g-bottom.html
From a purely technical standpoint, using the bollinger band theory of analysis, I would be remiss to point out that technically the gold price could very well gap up and move $20.00 very quickly in the next two weeks.
First, the weekly gold chart shows that the POG (price of gold) is breaking away from a declining lower bollinger band. As I have said at the stockman forum many times, this is the single most powerful bounce indicator I have studied. See the above link. Find 1985 and not the three weeks of prices then the gap, same with 1982. Then look at 1999. Do you see the pattern and how it is quite similar?
Eventhough the above graphs don't show the bollinger, I believe the bollinger plot would have been quite similar to right now.
So, from a pure technical point of view, it could gap and move $20 any day now. If it doesn't, I will write it off to the scapegoat called manipulation. But you have to admit, awfully compelling techinicals, eh?
longj
(06/30/99; 00:05:36MDT - Msg ID:8216)
dribble and shoot off my mouth
Suppose:
a) Interest rates are raised %.
b) The BOE sale does in fact take place, but is not for the shorts benefit.
This scenario will produce a fall in the POG, because the interest rate contango that driving force for gold shorts increases. The increase will be fueled by a better return in the bond markets, and an increased supply of gold. The increased supply of gold will drive down the lease rates and increase the contango. This is confirmed by the fact that short term lease rates have risen dramatically this week. Speculators are shorting the piss out of the yellow.
Suppose:
a) Interest rates are raised %.
b) BOE sale is a sale to cover existing short positions, but takes place as scheduled.
This scenario will produce little change in the POG. The gold is already spoken for and will have little effect on the open market lease rates. Interest rate raises will not be exploited by the gold shorts, as they will be relieved to be free of the double whammy of a short position in gold and a long treasury position. Look for bond prices to fall and yields to rise as confirmation of this scenario, as the shorts liquidate USD bonds as well.
Suppose:
a) Interest rates are raised %.
b) BOE sale is a sale to cover existing short positions, but takes place as scheduled.
This is a sign of a deeper problem for the shorts and demonstrates a commited, shift in the FED bias. This will produce a significant reaction from the stock market, and bonds will rally significantly. This will be a sign of an impending intention of the fed to roll the bull, gold will move lower, as shorts will not feel the need to cover, and the stock market will react to the prospect of a slowing economy. This will be a deflationary predictor, and an overreaction by the fed.
Suppose:
c) Interest rates are raised %.
d) The BOE sale is a head fake.
Look for the POG to rise significantly as the lease rates have risen already in short sale speculation an borrowing on the knowledge that post sale prices will be higher. This is moderately bullish, and will lead to a short covering rally in the $10-$16 dollar range.
Suppose:
a) Interest rates are raised %.
b) The BOE sale is a head fake
Look for the POG to rise significantly as the lease rates have risen already in short sale speculation an borrowing on the knowledge that post sale prices will be higher. This is bullish, and will lead to a short covering rally in the $15-$21 dollar range. This is confirmation by the fed that money supply expansion has led to a significant need to protect the dollar from inflation. This will mean that a significant measure of gold borrowing was done to evade falling equity prices and a future weakening dollar.
Suppose:
a) Interest rates unchanged.
b) BOE auction goes off as scheduled.
This would be an indicator that the FED has let go of the helm. Expect a significant stock rally, bond prices to fall and a small rally in gold as short positions are unwound, and the proceeds move into foreign currencies, as the dollar weakens. This would be a short term gold rally
Suppose:
a) Interest rates unchanged.
b) BOE auction is a head fake.
This would be a killer bull situation for gold. Contango would go down short term as shorts are forced to cover and possibly borrow to do so. They would likely be forced to liquidate other positions to settle short contracts. This would be augmented by a weakening dollar, with bond and equitiy sales. If the sharp rise in lending rates was the result of hoarders and not shorters we will enjoy some shift in metals market sentiment. Not the most likely scenario but it still gets a smile on my face.
JOPO, and an ignorant one at that.
Click Here to view yesterday's discussion.
Permission to reprint is hereby granted where the USAGOLD name is cited along with our web address, mailing address and phone number. For electronic reproductions, citing the post heading and the http://www.usagold.com/cpmforum/ website address as the source is sufficient.
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