Welcome to the USAGOLD Gold Discussion Archives. Looking to buy gold coins and bullion? The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets. To join the debate request a discussion password here.
The opinions posted by all guests at this forum are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of this forum shall therefore not be construed as equivalent to endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.
ARCHIVED DISCUSSION FROM 1/7/2006 All times are U.S. Mountain Time (Yesterday's Discussion.) Goldilox (1/7/06; 23:24:45MT - usagold.com msg#: 140238) ETFS ARE NOT REAL ASSETS http://www.financialsense.com/fsu/editorials/2006/0106.html snip:An ETF is regulated by the laws of the land. Laws change. What you buy into today may be completely different from what you are owning tomorrow, basically depending on the financial stability of the Nation in question, and at the whim of the legislators or the President, who can change anything and have changed everything in times of great crisis.But you bought that ETF claim, based on some kind of economy that was working when you bought in, a financial system that was working at the beginning, and later, a national currency crisis, banking crisis, market liquidity crisis, or another crisis changes everything, and now all the laws are subject to change, and the best outcome for the ETF would be probably payment in…. you guessed it… in dollars.But you thought you owned a real asset, didn't you?I have another basic objection to an ETF. It is a multi-layered paper/electronic claim. There are layers and layers you have to go through to get anything back. You have layers of laws between you and the asset you think you own. Let me tell you something. Having a claim on something, and actually getting it are two different things……To me, there is no comparison whatsoever with a gold coin and a paper claim on it.-GoldiloxNot gonna get much argument here! Ned (1/7/06; 20:07:46MT - usagold.com msg#: 140237) What? Goldilox (01/07/06; 09:55:21MT - usagold.com msg#: 140217)When Smart Bombs Pop Over Tehran, Gold Will Pop to Over $1000/ozhttp://www.financialsense.com/editorials/murphy/2006/0105.htmlNow that's an ugly story. Its the reason I keep a somewhat far-out ask on all my gold stocks. Let's say "Golden Arches" has a bid/ask on the go for $20/21, I will have a ask in the mix for $28. Just in case 'hell' breaks out. Do you wanna be holding paper, even gold stock paper when 'nukes' are flying? Cavan Man (1/7/06; 18:44:53MT - usagold.com msg#: 140236) monetary evolution (not without pain) Tripartate trending: Americas, Asia, Eurasia = currency zones Goldilox (1/7/06; 17:45:52MT - usagold.com msg#: 140235) Gold Tsunami Judging from the very obvious fundamentals in MK's message, and the support it is receiving from every corner of the financial pundit world, the bullion banks and CBs may need to "give" gold away to keep the price from reacting accordingly.How likely is that? Giving away SUVs when gas prices are rising is not quite the same as gving IT away when all meaningful prices are rising.Should be an exciting quarter. Sundeck (1/7/06; 17:12:48MT - usagold.com msg#: 140234) China, the PBoC, housing and gold Ref Belgian #140212Yes Sir Belgian, it would seem odd that the PBoC would openly admit that it was seeking more physical gold prior to actually trying to acquire it. But then, other CBs have made similar comments...South Africa, Argentina and, I think, Vietnam. (Didn't some treasury official in Japan make a similar comment a year or so ago?) I doubt if they ALL have acquired the amounts to which they publically aspire...and I doubt if China has either.Also, in a similar vein, Russia has openly admitted that it was intending to increase its reserve holdings of Euros (along with other CBs, I believe). True, the market for Euros is likely to be less "tight" than the market for gold, and so the impact upon the "price" of the Euro is likely to be less sensitive than the impact of such announcements by CBs upon the price of gold.On the other hand, China literally may not give a damn about the People's Bank's statements regarding gold purchases and their impact upon price. Even if China were to start from scratch to acquire its 2500 tonnes of metal, at present prices the whole deal would be around $US43.4 Billion...almost a measely amount along-side China's enormous (and growing) US dollar reserves of around $700Billion. China probably knows very well where the price of the metal is headed, and that any purchases are going to reap a tidy profit whether it signals its intent or otherwise. (And, as TC pointed out recently, gold purchases by China may help quiet the yelping about trade imbalances with the USA...especially if China becomes a significant buyer of US gold production...and/or gold reserves!?!?!?)Remember also the PBoC Chairman's comments a few years ago, openly encouraging China's people to invest in gold? (Can you imagine Greenspan or Bernanke saying something like this openly??) I suspect this encouragement by the PBoC is closely akin to the "culturally overt" and tacit encouragement by CBs and commercial banks in the West for their peoples to get into housing in a big way and stay there, as a means to save themselves from the inevitable devaluation of the US dollar and its "derivative currencies".No, I suspect authorities in the populous part of the world (China, India) would be very happy to see the price of gold sky-rocket whereas the authorities in the "priviledged" part of the world (UK, US, Australia, etc) want to see housing maintain its present price-levels no-matter what. They do not want to see a major exodus, or diversion, of funds from housing into gold. However, they will no doubt be able to tolerate a "mini-exodus" into gold...since the housing market in the West is many, many times larger than the gold market; and would probably remain so even in the face of a significant "gold rush". It is for this reason (the scale of the two markets in the West - gold versus housing) that Asian gold can have its way while Westerners can have their way with their houses...AS WELL AS reap the rewards of a rising gold price...if they see the writing on the wall and act upon their convictions.Cheers, Sir Belgian...a Happy New Year to you.:-) MK (1/7/06; 17:04:12MT - usagold.com msg#: 140233) The Gathering Storm and Gold http://www.abcs-of-gold-investing.com/ The following extracts from a Financial Times article headlined "Questions grow over China's forex strategy" with my comments appended. The China strategy no doubt figured largely in yesterday's gold market run-up._____________Financial Times: "The spectre of Asia's central banks deciding to diversify away from their dollar holdings has long threatened a sharp drop in the value of the U.S. currency."MK: A quote from The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold:"Nowhere are the dangers to the world economy more implicit than in the United States’ economic relationship with the two Asian exporting giants, China and Japan. It is estimated that east Asia holds approximately two-thirds of the world's foreign currency reserves. Japan and China alone hold an estimated $800 billion and $400 billion, respectively, in U.S. dollar reserves, about 17 percent of the total U.S. federal debt.[Addition 1/7/06: China is likely to catch Japan in terms of dollar reserves soon, so the emphasis at the moment is quite naturally on China. At the same time we would be remiss to discount the dollar holdings of Japan and the oil exporting nations -- particularly the Gulf States and Russia.U.S. economic policy in the past could focus principally on Japan (with respect to the dollar overhang. Now American policy-makers have a half dozen nations with which to contend. The United States is quite literally flooding the world with dollars. Needless to say this complicates matters significantly making it difficult for a coherent policy to emerge. Discipline in the dollar-holding ranks could suddenly break setting off a deluge of bond redemptions which in turn could ignite a full blown financial crisis. In other words, we might be a gun shot away from a full stampede. The implied threat imposes itself directly on the private investor who has no resources but his or her own should such a panic were to unfold. If you haven't diversified into gold, now is the time. If you have diversified but still need to add more gold to your holdings, it is better to get the job done now than wait for a price correction. As the past week exemplified, the downturns are shallow with a quick bounce back to the upside. Don't play games with your future as this dangerous situation gathers momentum. -End 1/7/06 addition-]The ABCs: "Recently the Sydney Morning Herald openly questioned dollar policy and its potential impact on the Pacific region.‘Around Asian financial circles, there is growing, if still muted, talk of a looming 'dollar crisis' equivalent to the sterling crises of the 1960s — when London could no longer support the reserve role of the British pound—unless Washington mends its profligate ways and accepts higher interest rate and taxes. A default by the U.S. government is still unthinkable, but not so a unilateral change in the rules of international finance—akin to Richard Nixon's halt to the convertibility of dollars into gold in 1971, or Franklin D. Roosevelt's devaluation and repudiation of gold-denominated contracts.’Under the circumstances, it is not difficult to understand why Japan and China might be interested in increasing their gold reserves. Even a small shift in the Japanese and/or Chinese reserve position toward gold would have major implications for both gold and the dollar.[Addition 1/7/06: It is not just China and Japan that might be interested in increasing their gold reserves. Russia has announced a similar interest and so have several other nation states. It is a long-held belief in the gold market that wealthy Arab oil producers have been quietly building their gold reserves as oil revenues have poured in. I would contend at this juncture, that private attempts to acquire gold will be ,pre successful than the public, official sector type, though the official sector endeavors will have an important psychological effect on the market even if they meet with only limited success. I would not be surprised to find out down the road that in this period wealthy oil money was quietly going about the business of physical gold acquisition, and that this was the underlying current in the gold market that took it to 25 year highs. End 1/7/06 addition.]Richard Duncan, former International Monetary Fund economist, speaks to what this might mean to the world economy of the future:"By accident or by design, Japan is carrying out the most audacious endeavour to conjure wealth out of nothing since John Law sold shares in the Mississippi Company in 1720. So far, the results have been impressive. Japan's monetary alchemy has been the most important factor in allowing the U.S. government to finance a $700 billion deterioration in its budget over the past three years without pushing up U.S. interest rates to levels that would pop the wealth-creating property bubble there…These developments highlight a fundamental question that has been debated repeatedly over centuries: Can governments create money and make the population richer without setting in motion a chain of events that ultimately ends in monetary chaos? We may be about to find out, as Japan tests the hypothesis on an unprecedented and global scale. If this experiment in unorthodox monetary policy succeeds, then we have arrived at a new international monetary paradigm. Governments will have discovered how to finance limitless deficits through the creation of paper money, and we all can look forward to an age of great prosperity. If it fails—as have all past attempts to create wealth from thin air—then the world may not be able to avoid a severe and protracted economic slump as the extraordinary imbalances in the global economy, caused by the explosion of fiat money in recent years, begin to unwind.In mid-2003, economists at the U.S. Federal Reserve published apaper explaining why the Fed was not "out of bullets" despite having cut short-term interest rates to one percent. That paper stated that "the Fed could even implement what is essentially the classic textbook policy of dropping freshly printed money from a helicopter," if necessary, to stimulate the economy. Today, that helicopter is in the air. But, strangely, it is not the Stars and Stripes that is painted on its side, but rather the Rising Sun. That much is clear. What still is not quite discernible, however, is who is actually in the pilot's seat."One of the unhappy consequences of the structural trade deficit is that the Greenback is being held hostage by foreign financial interests. Any of these interests can move against the Greenback at any time by simply selling off their bond holdings. Foreign-held dollar debt has become a weapon in the equivalent of an economic Cold War. Just as nuclear weapons were held for most of the twentieth century like a sword of Damocles over the nations of the world, so now are dollar reserves held over the head of U.S. financial markets. To say the least, this puts U.S. stock and bond investors in a precarious position, and makes gold, the stand-alone asset, a critical holding or those who understand the dangers this tenuous synergy implies."-End ABCs quote-Then, Financial Times: ". . .market reaction yesterday to the announcement was limited. China watchers pointed out that the statement on Thursday evening did not come out of the blue, but followed comments by government officials and academics questioning the wisdom of China's reserves management strategy."MK: The reaction in the gold market was not limited by any stretch. In my forecast for 2006 (Available at the Daily Market Report page), I commented on the dominant role central bank gold demand could play in the gold market. Beyond the immediate psychological effects, the real world implications will be felt for a long time in the physical market itself. The enormity of the implied central bank demand is likely to further upset the gold market's already delicate and tenuous balance . Most mainstream commentators -- even those with some understanding of the gold market -- have yet to fully comprehend what is really going on in the gold market. Those who come to this website, however, are well aware of the breach between supply and demand already in place due to a combination of short covering and declining mine production. Now we must factor-in that central banks as a group have become net gold buyers instead of sellers -- altogether a potent brew that could catapult gold into the investment limelight and keep it there for a long time to come. Some of the early reports on Chinese interest in gold suggested a 1500 tonne addition to its reserves. What about Russia? South Africa? The Gulf? India? And don't forget -- European and American investors (perhaps as big a market if not bigger than the others mentioned). The gold market may not be ready for what is about to happen to it. Financial Times: "Last month Yu Yongding, a prominent academic who sits on the central bank's monetary policy committee, warned that China's reserves could be seriously eroded if the US dollar weakened further, a comment interpreted in some circles as a warning against excessive investment in dollar assets. However, Thursday's statement did break new ground: it was a public statement by Safe, rather than comments by individuals." MK: In China policy is often foreshadowed by articles written by key policy makers. China will likely act in its own best interest despite the ramifications to the world economy. Though China's approach is likely to be measured and the policy applied over a protracted period of time, the effects on the market will be immediate. We are talking about quantum changes in the way the world does business -- a shattering of the paradigm. All markets will be affected inlcuding gold. Please see more on this below.Financial Times: "Foreign investors have continued to be willing to finance the US current account deficit at very low interest rates in spite of the foreign exchange losses they suffered during the dollar's decline from 2002-04. This has made it easy for the US to finance its current account deficit, which has risen above 6 per cent of gross domestic product and requires the US to import more than $2bn of capital from abroad every day. But it would not need China to start dumping dollar assets for there to be pressure on the dollar. If China became less willing to continue adding to its holdings of US Treasuries, that itself could put downward pressure on the dollar and upward pressure on US interest rates – particularly if it encouraged other countries to follow suit.Oil-exporting countries have become increasingly important sources of foreign capital, owing to the high oil price, becoming as important as developing Asian countries in financing the US deficit. "MK: The implications to the American economy of those four small paragraphs are alarming. This past summer the world's financial pages were filled with discussion about Alan Greenspan's conundrum -- the fact that interest rates were dropping in the real economy even as the Fed attempted to drive them higher. When Ben Bernanke takes the reins of the Federal Reserve he might very well be confronted with a conundrum of his own. If China indeed begins to diversify out of the dollar (by reducing its purchases of U.S. Treasuries) in any meaningful fashion, the dollar will be the victim and so will easy money in the United States. The Greenspan conundrum came from China and Japan undermining Fed policy by flooding the American economy with dollars from their reserve hoards. A Bernanke conundrum -- as described above (the opposite of the Greenspan conundrum) may cause an early launch of those money dropping helicopters we have all read so much about. China, possibly without realizing it, could precipitate a stagflationary crisis every bit as dangerous as the one tsunamied the Asia economies in the late 1990s (Bernanke's worst nightmare if you've had the occasion to study his speeches and academic papers) -- only this time it will occur in the economy upon which all other economies depend. It is a dangerous business and dangerous times for the world's investors.___________________The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold by Michael J. Kosares can be ordered at the link above.Here is the link to the Financial Times article featured above:http://news.ft.com/cms/s/5413c5d6-7ee7-11da-a6a2-0000779e2340.html Goldendome (1/7/06; 16:45:04MT - usagold.com msg#: 140231) A problem with real estate. The thing memorable, that captured my eyes a couple of weeks ago while lost in the Queen Ann Hill area of Seattle, was not the little old houses spaced about two yards apart, nor the glitzy Audi's, Porches, Bimmers, and Mercedes lined along the curbs as though gathered for a Road and Track magazine photo shoot; No - it was the three houses I saw that had, "Accepting offers" signs on their front lawns.Goldendome, assumed that this meant that the owner was willing to part with his prized dwelling...if the price was right. But that's the thing about real estate, how do you know what it's worth? Goldendome, by this time, had already had his big bofo business property on the market for FOUR years and had only now found the nearly correct pricing point. Yes, two - got that TWO, parties were actually wishing to relieve him of his burdens. But, at a price much, much lower than Goldendome had at first offered it unto the public, and lower still than his final asking price.I thought to myself: Goldendome, here you've wasted all of these years, suffered all of this frustration, and why? Because you just weren't smart enough to put a sign out front that said, "Accepting offers". I could have had the money out years ago. I could have put it all into physical gold, like I remember now, that I was going to do then; and the way the gold market has gone - in retrospect - I'm sure that I would have done, 100%! --Oh, to have the courage in the present that we had in the past, or know that we will have in the future.--So, now, it looks as though Goldendome will be getting some significant dollars out of the place, (not all at once, as I had thought a couple of weeks ago -- as the first accepted offer [that we had thought could not perform] had a right to perform and will). But still some significant dollars to a little pawn that lives out here in the middle of Podunk, Washington. Now, will Goldendome have the courage and confidence to commit a large trove of $ into the gold market (as he had done over the years with smaller amounts), even though the price has moved up over a $100 or $200 an ounce above where he's certain in positive market movement retrospection, he would have made his commitment one, two, three, or four years ago? -- I think so! If anything, things are worse now than then. Goldendome, remembers a sentence that MK used here many weeks back. "Gold is where savings go to stay whole" he said. With the state of the on-going deficits and underfunded liabilities...city, state, and national; the prospects for paper dollars and currencies appear grim. Barring some unforeseen glitch, Goldendome's deal should close in early February. --Oh, to have the courage then.-- Goldilox (1/7/06; 16:36:45MT - usagold.com msg#: 140230) Web Bots eerily right, again http://urbansurvival.com/week.htm snip:As we've warned before, expect economic pandemonium this spring and a transition from a meta data period of militancy to something far worse by mid-late summer. Go read our story earlier this week on the "war counsel" which we've heard this weekend from highly placed sources is uncomfortably accurate about where things are going. As reports that the Iraq war alone could cost over $2-trillion show up, repudiation of the dollar externally becomes almost a foregone conclusion. Thus the market can rally on a paper basis but the gap between the Dow and gold is likely now to rapidly close.-GoldiloxI'll keep the qoute on the economic side. Go to George's site for the detail . . USAGOLD / Centennial Precious Metals, Inc. (1/7/06; 15:47:09MT - usagold.com msg#: 140229) A world of gold is at your fingertips... http://www.usagold.com/buy-gold-coins.html Caradoc (1/7/06; 14:49:00MT - usagold.com msg#: 140228) Great discussion of peak oil http://www.financialsense.com/Experts/2005/Simmons.html Well worth listening to. -Caradoc Caradoc (1/7/06; 14:10:11MT - usagold.com msg#: 140227) @Goldilox, more on China dumping dollar, etc. http://news.ft.com/cms/s/0c18ea82-7f22-11da-a6a2-0000779e2340.html Link is today's assessment of the Chinese angle from Financial Times.Hey, Goldilox! Great series of posts today. We could be in for an interesting week.Looking at both the posts on Asian housing priced in parallel with gold versus the US housing bubble prompts a few thoughts...* Recent price growth for US housing is on top of the 70 or 80% increase resulting from FHA's 1973 decision that spouse's income should be considered in deciding how much debt a couple could swing. (Two incomes per couple competing for most everything on the market drove prices up so that by late 70s the typical single-income family had been priced out of the market.)* With the end of cheap energy saying that food will be more expensive to grow and to ship and that the same applies to commuting and and home heating expenses, it's easy to figure that difficult-to-heat McMansions (large houses on small lots 50 miles away from work) will tumble in value.* Big difference from the 1930s is that then most Americans rural roots to which they could return (the skills at least, if not Mom in her apron and Dad in his overalls expecting them.) Today, with most family farms having been bought up by agribusness, most people won't have a place to go. And even if you're lucky enough to have the family farm still in the family, you'd be more welcome if you could show up with a pickup and a rototiller than with an SUV and a Miata.* Given what seems to lie ahead, any US housing that comes with a few acres and an independent water supply should be in for a healthy increase in value no matter whether nubucks are issued at ratio of 100:1 or 1000:1. It's no coincidence that the fellow who hosts the urbansurvival.com site that Goldilox occasionally visits has relocated from Los Angeles to east Texas. Focusing in a bit on drinking water as a pending shortage and that shortage's investment implications, Jim Puplava's "Blue Gold" article from Nov 2004 is the quickest intro to the subject: http://www.financialsense.com/Market/archive/2004/1122.htmlI've mentioned before that if you have a well, two solar panels and a 24-volt pump will let you retain flush plumbing and drip irrigation for as long as the sun shines. Not bad, but my hunch is that, instead of that approach, having an artesian spring with gravity flow downhill to the house will be good for an additional price delta that will exceed what could be raised by selling 2 or 3 McMansions.Regards to all,Caradoc Flatliner (1/7/06; 12:54:05MT - usagold.com msg#: 140226) Hyper-inflation and the price of gold. http://www.infomine.com/investment/metalschart.asp?c=gold&u=oz&x=zwd&r=1y&submit1.x=44&submit1.y=7 Thanks Sundeck for the pointer to infomine.com and their graphs. Anyone wonder what the PoG looks like in a hyper-inflationary environment? Graph gold against the Zimbabwe Dollar. Wow. Flatliner (01/07/06; 11:18:10MT - usagold.com msg#: 140225) @"Tarnished Name" You bring up a good point and the future will educate people. In the past, people would just walk away and start over again. Sure, they got a tarnished name, but they could still live, even though it was a little harder. But, times have changed haven't they? Do people really understand how the rules have changed? To you and I, we see that the laws have been changed so that if you have the ability to pay, you will. But, we haven't had a slowdown have we? Thus, do people understand that you just can't walk away? I would submit that the general public does not understand this new concept. People are acting today as if they could just walk away. They do not take seriously the responsibility that they have acquired with signing their name. In time, people will learn (what you already know). But, I am still torn with regards to the pain that it will cause people. By today's standards (assuming that all things stay the same), acquiring a half million dollar debt for 30 years would surly mean 30 years of slavery. The puzzling part is that things are not staying the same. Particularly with the money supply! It may be that making a half million dollars a month may be something in our not-to-distant future. Thus, paying off that debt may be possible and even relatively easy. Thus, the pain of holding house debt may not be all that bad – in the short run. (But, I've glossed over all the other problems that this type of inflation would cause!)Sorry for bringing so many more words into the forum. Ned (01/07/06; 11:06:20MT - usagold.com msg#: 140224) Very interesting angle............. Haven't seen or heard of this before but I was watching "Tout-TV" yesterday and the analyst who was asked about gold's stellar performance had a new angle.He surmises that Asian countries who have never had their currencies and economies exposed to a severe bout of inflation are 'hedging their bets' and buying pallets of physical gold.So not so much as a western demise, a western economic crisis or dollar deval. but more so a hedge against Asian ('eastern') inflation.Interesting angle....bring it on!!Have a golden weekend. Goldilox (01/07/06; 10:27:58MT - usagold.com msg#: 140223) "Tarnished Name" @ Flatliner,With the US becoming more and more a "credit-based" economy, and the institution of new bankruptcy laws, I submit that foreclosure brings more grief than just a "tarnished name", as cost of participation in the credit "merry-go-round" rises dramatically.I don't think your intent was to minimize this, but your analogy of "just walking away" only applies to those well-heeled and perhaps "trust-protected" so they have a secure destination for their credit "walk-about".Maybe I'm focusing on the opposite extreme? Goldilox (01/07/06; 10:15:44MT - usagold.com msg#: 140222) Inflation, cont. (See previous post) snip:"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. The abandonment of the gold standard made it possible for welfare statists to use the banking system as a means to an unlimited expansion of credit (debt creation)" - Alan Greenspan (#8), 1966"It was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, has allowed a persistent over issuance of money. As recently as a decade ago, central bankers, having witnessed more than a half-century of chronic inflation, appeared to confirm that a fiat currency was inherently subject to excess." - Chairman Alan Greenspan Before the Economic Club of New York, December 19, 2002 "Issues for Monetary Policy"-Goldilox,I usually refrain from postin two quotes from a source, but these were too juicy to pass up! Flatliner (01/07/06; 10:13:11MT - usagold.com msg#: 140221) @Vietnam housing and gold Goldnovice, Thank you for your time. To all others, I do hope this thread hasn't diminished the value of this forum. I do hope to get back to the value concept discussed here at some future date. It seems to me that house prices in the west have even less value today then they did before this conversation took place. You see, if the price of a house falls in the west, the owner of the home only stands to lose his equity (the equivalent of very few gold coins) along with his good name (he gets a tarnished mark on this debt servicing record). Losing equity or getting a tarnished record really does not mean much to the owners here, for every time the economy turns south, many people simply walk away from their obligation. Could you imagine someone walking away from a gold coin? Yeah, right, I don't think that would happen. Goldilox (01/07/06; 10:12:12MT - usagold.com msg#: 140220) INFLATION - WHO SAYS IT'S DEAD? http://www.financialsense.com/editorials/hodges/2006/0106.html snip:Inflation in my adult years increased average prices 1,000% or more: a postage stamp in the 1950s cost 3 cents; today's cost is 39 cents - 1,300% inflation; a gallon of full-service gasoline cost 18 cents before; today it is $2.28 for self-service - 1,267 % inflation; a new house in 1959 averaged $14,900; today it's $282,300 - 1,795% inflation (+1,510% if quality-adjusted); a dental crown used to cost $40; today it's $740 - 1,750% inflation; an ice cream cone in 1950 cost 5 cents; today its $2.50 - 4,900% inflation; monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $88.50 - 1,664% inflation; several generations ago a person worked 1.4 months per year to pay for government; he now works 5 months. and in the past, one wage-earner families lived well and built savings with minimal debt, many paying off their home and college-educating children without loans. How about today?Few citizens know that a few years ago government changed how they measure and report inflation, as if that would stop it - - but families know better when they pay their bills for food, medical costs, energy, property taxes, insurance and try to buy a house.Is inflation a threat to society, beside the prices we pay and the fact fewer children have a full-time mother at home? Consider this famous quote:"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."Lord John Maynard Keynes (1883-1946), renowned British economist.DEFINITION OF INFLATION:Inflation is the loss of a constant purchasing value of the dollar,caused by an increase out of 'thin air' of the supply of money and debt creation by the financial system.-GoldiloxOK, "one more for the road'. Michael Hodges offers a scathing, if rather lengthy, analysis of "covert inflation" and its causes. Goldilox (01/07/06; 10:06:34MT - usagold.com msg#: 140219) (No Subject) http://www.financialsense.com/fsu/editorials/willie/2006/0106.html snip:When the December Federal Reserve Open Market Committee meeting minutes came out on Tuesday afternoon, it was akin to a starter gun shot at the beginning of a race. Debate will persist on interpretation. Regardless, the year 2006 has begun with a bang. The S&P500 loved it. The SPX rose 18 points, sensing an end to restrictive money. Gold loved it. The metal rose $15 per ounce. Crude oil loved it. The black tea rose almost $3 per barrel, surely aided by the Russian & Ukrainian skirmishes. The euro currency loved it. The EU "stock" rose almost 200 basis points in two days. Wow!!! The clowns on the financial networks cannot even properly interpret events. Did gold rise in sympathy to the Gazprom extortion maneuver on the energy front? Or did gold rise from expected lost pillar to the USDollar and the world monetary foundation? Did crude oil rise from rattling sabers in Eastern Europe? Or did oil rise from expected lost pillar to the USDollar and the world monetary foundation. These media harlots (perhaps only incompetent) attribute higher USDollar exchange rates to robust (they are exaggerated) economic growth, when support for the clownbuck owes primarily to bond arbitrage carry trades feeding off the higher US Treasury yields over Europe and Japan. The lost pillar of higher US interest rates will have a profound effect on the USDollar, gold, and crude oil in the new year 2006. Perhaps they should listen to Rick Santelli more often. He gets it. He has smelled something rotten from the inverted yield curve signal. But does not connect the dots to conclude a weak USEconomy and declare an invalid GDP statistic.It is my opinion that the big stories this year will bethe end of the USFed tightening of interest ratesthe slowing housing market, and drag on the economythe worldwide scramble for energy, complete with raging violent conflictsMy full expectation is for a very tumultuous year. US economists will receive a wakeup call on how dependent the USEconomy actually is on the housing sector, and especially home equity loans. Fully 50% of domestic growth is tied to the housing boom (aka bubble). In the first week, we have been treated to a nice preview of the financial stir of its cauldron. Expect more pyrotechnics in the next few months.Absurd talk continues of USEconomic robust strength. It is really robust philandering corruption distortion and deception in the calculation of all major economic statistics. A mere 12-yrold kid can unmask the lies on the statistics. Gee, wages will rise to catch up to strong productivity! Well, the benefits of this imported productivity are in Asia. Gee, robust performance with "full employment" is the mindless manipulated mantra. Well, such a boast requires not counting those who no longer receive jobless insurance benefits. Gee, low price inflation has returned to our shores. Well, let's stop driving, shipping, heating, and eating for that matter, and ignore asset bubbles.-GoldiloxNever one to mince words, Jim Willie also predicts some major chaos upcoming. Goldilox (01/07/06; 10:01:58MT - usagold.com msg#: 140218) IN MEMORY OF "A Market Gem" http://www.financialsense.com/editorials/gammage/2005/0104.html snip:Jim and I were shocked to learn that Kennedy Gammage passed away yesterday. Our heart-felt condolences are sent to his family. Personally, we will miss his humor, his kindness, and his wonderful spirit. He was a gentleman at all times, an astute technician, a market scholar, and a fountain of wisdom. Truly, this was a life lived well. He will really be missed by many. - Jim & Mary PuplavaBrief Bio and Editorial ArchiveFinancial Sense Newshour Broadcasts11/01/2003 FSN Roundtable: Goldbugs & the 5 Bears with Kennedy Gammage, Robert Prechter, Peter Eliades, and Tim Wood06/28/2003 FSN Roundtable: A Technical Perspective of the Markets & Gold with Kennedy Gammage, Richard Russell, Peter Eliades, and Tim Wood-GoldiloxTo honor the passing of Kennedy Gammage, Mary has posted links to some of his gold roundtable participations at the memorial URL. Goldilox (01/07/06; 09:55:21MT - usagold.com msg#: 140217) When Smart Bombs Pop Over Tehran, Gold Will Pop to Over $1000/oz http://www.financialsense.com/editorials/murphy/2006/0105.html snip:A melt down is on the near horizon, far exceeding that of Chernobyl Ukraine, but this time, will be intentionally done, probably by summer, and Gold will pop to over $1000/oz, virtually over night, and maybe to $1500/oz. With moderate-of-late Sharon out of the political picture with a stroke, it will be difficult for Perez to hold the middle ground in Israel's politics to secure a centrist political party victory supporting Palestinian statehood and unilateral withdraw and moderation, as the Likud party chief, and former Prime Minister, Benjamin Netanyahu resurfaces from the shadow's of the parting Sharon. It wont take long either after the March Israeli election.Netanyahu wont mess around with Iran by begging for useless endless negotiations as are the EU-3 presently doing with Iran. Israel is relatively immune to Iran's threaten oil price increases, and will strike from the get go. Israel already has a massive stock pile of 2000 bunkerbusters and has a vast array of anti-missile batteries to counter the Salaam III 1500-mile range Iranian missiles. It wont matter what Iran says, truth or not, Israel will defend itself from being "wiped off the map". The Israeli knows that a vote for Deputy Prime Minister Ehud Olmer, Sharon's present 2nd, now tainted with the middle of the road tact, is too dangerous, in the presence of being threaten to be "wiped off the map", as the Iranian President has recently proposed. With Israel in fear of growing threats and extinction from Iran, Israelis will fall back on the old warrior, Netanyahu, as a necessary vote to defang Iran and preserve Israel.Based on history, Netanyahu will act and act quickly, before summer. With multiple wars, oil supply uncertainty, vast fiat money printing, and global moves by central banks to buy gold in a supply deficit market, it is a no-brainer where gold will go this year. Gold will be in the four digits by July 4th, but initiated with a more impressive fire work show than that ever seen in a USA ballpark. The hard line Likud chief, Benjamin Netanyahune, will move as the bold man he is. Is there really any choice? Is there really any doubt?-GoldiloxI know this is leaning toward over-policizing, but coming from leMetropoleCafe via FSO, this "one-man's opinion" is worth a look. When sabres rattle, paper markets get the jitters, and those seeking safety run for the cover of bullion. Goldilox (01/07/06; 09:45:05MT - usagold.com msg#: 140216) Market thoughts http://www.jsmineset.com/ snip:The US dollar broke down below its second power uptrend and as Dan points out it is well below its 100 day moving average considered so important to traders. I am always amused at the financial TV seers who are willing to make fools of themselves by telling you exactly what the Federal Reserve is going to do at each meeting. They were coming out of the woodwork today.The dollar's decline was measured as the President lauded the creation of jobs in the past year in the face of national weather disasters (which means rebuilding or repairing homes) and increased fuel prices, most of which has found its way to credit card balances.Who says the oil companies were stupid when they converted gas pumps to credit card machines? American consumption of gasoline was the highest rate in 16 years during December. The American public will spend money as fast as they can borrow it with no thought or concern for tomorrow or that eventual rainy day. It is probable that this is a product of the demise of almost all of those traumatized by the 1930s. The new bunch thinks that economies never turn down or if they do only a wee bit.I once again ask you to see the movie "Enemy of the State" as it is almost PROPHETIC in terms of understanding the world we live in. A combination of "Wag the Dog," "Bulworth," and "Enemy of the State" will give you a better understanding of the factors underpinning the gold market than any gold site.The old high of this gold bull market is clearly in the crosshairs of today's gold price. The move above $529 is still alive and well regardless of those who pronounce otherwise. The market is the only advisor and the use of trend lines for the general public is a good way to understand the language of markets. The more you listen to market and the less you listen to advisors, the better you will do.-GoldiloxSinclair's latest observations Goldilox (01/07/06; 09:39:52MT - usagold.com msg#: 140215) Not Presactly a Breakout http://urbansurvival.com/week.htm snip:A number of readers have written in saying things like "Where's your Crash?" Damn good question. While I am not especially anxious to see it come, let's have a little reality check. First, we have to look back on Friday's news events and see what was happening to give the market such confidence:The Chinese, as we reported, are diversifying out of US Mal-Bucks now and are looking for something better. Ticks off Treasury Secretary Snow, but he doesn't run China.Democrats (reports the Drudge Report) are planning to ambush the Sam Alito nomination to the Supreme Court.Not a hanging party for the DeLay folks in CONgress, but with Abramoff & friends about to rat out other members of CONgress, it doesn't seem to inspire much confidence in the political system.George "Here, have some free lunch" Bush was speaking in Chicago about tax cuts.The "deal" with the street is pretty simple: When George and/or Snow speak, the market rallies. Got it? The Fed turns on the easy money, and off we go on a tear. Of course, the observant reader will notice gold popped nearly $13, too. So while no, "my crash" hasn't shown up yet, let's look at things in a comparative manner and see where the Dow should have gone if it had increased on Friday at the same rate as gold. Gold opened Friday at around $526.20 and closed around $538.80 (at least by the Kitco.com chart above, and no, let's not quibble about the small differences between dealers and buy/sell spreads, for the sake of this discussion, OK? That's a 2.414% gain in one day. Now, if we look at the Dow, we see it gained 0.71%. If the Dow had kept up with gold, it should have closed the week at 11,144.84 - a 262 point gain for the day. Instead we got this weakish 77.16 point gain - there's 185 points that didn't show up. While I'm pleased to report "my crash" didn't show up this week, let's try to keep in mind that the Dow is underperforming gold (by a huge margin) over the past several years. I don't wish any ill toward my beloved country, but when we are living on OPM/CM (that's Other People's Money - China's money to be precise) the sober-as-a-judge call we have to make is that pump and hype aside, our Fed is between a rock and a hard place that looks to me to be moving more toward toward nuts in a vice than paradise. Goldnovice (01/07/06; 08:36:47MT - usagold.com msg#: 140214) Housing & gold in Vietnam Sundeck:Quote: "it seems housing and gold retain an approximately fixed relationship to one another over time...that is, as prices change in terms of dong, both housing and gold track the changes in the currency at comparable rates. This is what one might expect of two "things" that retain their perceived "value" in a society. And from what you say, it seems clear that both gold and houses have been deeply treasured by the Vietnamese over long periods."Precisely, but the concept was so different from the West that it took me nearly ten years to figure out (and we even bought two properties in that time!). That was an interesting comment from Marc Faber - good idea to buy property in SE Asia (but hard to do). And yes, I agree that housing prices in the West have a high "inflation" component. Caradoc (1/7/06; 07:38:46MT - usagold.com msg#: 140213) @Belgian Congratulations on increasing your stash by that huge percentage!I'm up this week by only a few ounces, ~1/3 of the profit from selling January calls in one of my favorite miners. Another 1/3 went into slightly out-of-the-money calls for July and next January, and the final 1/3 I plan to squander on the luxury of a paved driveway.I won't be surprised if/when the day comes that "all paper will burn" and, yes, options are only paper that gives the right to buy more paper, but in the meanwhile -- once your stash of physical gold in hand approaches comfort level -- the realm of paper is a strange place where you can gamble a few ounces worth of FRN greenies and maybe generate enough greenies to take possession of those ounces, roll the gamble forward, and have greenies left over for other purposes.Regards,Caradoc Belgian (1/7/06; 06:40:15MT - usagold.com msg#: 140212) Caradoc -plus- Read the alinea >>> It is a subtle but clear signal that...Maybe China (PBoC) has already the 2,500 tonnes they suggested to accumulate !?Simply because I find it very unusual that CBs (SA/Russia/China) announce/trumpet their intention to accumulate more gold-reserves. I want gold...means, less gold for more dollars (reserves).If there is no goldmetal available anymore for redistribution...the value of physical gold can run away from its papergold pricing. We have CBs that are increasingly reluctant to let goldmetal go and CBs who want some more ! When there's no more goldmetal moving...the price of the metal can lift off. A goldprice decline means that metal is still moving.Belgian bullion private uptake is up 25%. Caradoc (1/7/06; 06:17:55MT - usagold.com msg#: 140211) Trigger? http://news.ft.com/cms/s/f39fa8e4-7e25-11da-8ef9-0000779e2340.html This forum has previously addressed various possible "triggers" that could launch a major move in gold. If over the next few days gold breaks past resistance at $547/ $548, a quick look backwards will indicate that the trigger for the move was China's 5 Jan signal that it could switch its foreign exchange reserves away from the US dollar.The link above was updated as of 6 January.***snip***Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves – currently accumulating at about $15bn (€12.4bn) a month – it could put heavy downward pressure on the greenback.***end of snip***Sticking with the trigger metaphor, the pistol was cocked by Iran's plan to begin selling oil in Euros two months from now.Could be a good time to add a few ounces to your stash.Caradoc Sundeck (1/7/06; 04:17:38MT - usagold.com msg#: 140210) Vietnam housing and gold Ref Goldnovice #140209Thanks, Sir Goldnovice, that is a helpful description of the housing scene in Vietnam.What I was wondering about in my earlier post #140202, although not stating very clearly, was the relative appreciation over time (in terms of dong) of housing and gold in Vietnam. You have largely answered my "wonderings" by the following passage from your #140209:"For example, during the urban property boom in Vietnam when gold was at its nadir several years ago, we were offered 2,000 taels of gold for a four-story house that we own in the heart of Saigon..... Now the POG has doubled but the building's value is still 2,000 taels (we wouldn't think of selling for less), hence double the cash it would have sold for before."On this (admitedly) small sample of one, it seems housing and gold retain an approximately fixed relationship to one another over time...that is, as prices change in terms of dong, both housing and gold track the changes in the currency at comparable rates. This is what one might expect of two "things" that retain their perceived "value" in a society. And from what you say, it seems clear that both gold and houses have been deeply treasured by the Vietnamese over long periods.This is in contrast to the UK, US or Australia where housing prices have increased around 50-60 times since about 1970, while the price of gold has increased only about 15 times. If one were (foolishly) to equate "price" with "value" (as many people do), one might think that housing in the Western psyche has become significantly more valuable than gold...and perhaps that is the Western perception!! But I rather feel that housing prices in the West have a significant speculative component built into them, which is intertwined with the Western tradition of debt-financing, and the many years of easy money. I suspect we are seeing inflation manifesting in the housing sector and gold has not yet caught up. In other words, lending ( = money creation) has favoured housing in the West and housing prices have outstripped other inflation indicators (gold, CPI). At face value, housing prices have to fall (anathema to debt-ridden Australians and Americans) or gold prices must rise...As an aside, I remember Marc Faber commenting recently on this issue. He said something like: "Western investors should sell housing in places like Australia and the US and buy housing in SE Asia." This would tend to lower housing prices in the West (something Western Central Banks will fight tooth and nail) and raise housing prices in SE Asia. Given what you say about gold and housing (in Vietnam, at least) being coupled together in fixed-value relationships over time, the corollary is that the price of gold must also rise...Interesting information, Sir Goldnovice... Thank you for bringing it to The Table...:-) Goldnovice (1/7/06; 02:00:38MT - usagold.com msg#: 140209) Vietnam again! Flatliner, SundeckHave just caught up with the forum since leaving last night. Please excuse my poor explanations. I'm new to this game and nervous about posting.Flatliner, the idea of borrowing against your home is alien to the Vietnamese people. I explained it to my Vietnamese wife, who is a foreign-trained economist, and she was appalled. Over here most everyone lives in a house owned outright by the family, a house that will probably stay in the family after the elders have died.It's an entirely different culture - not too much of this moving from house to house, buying and selling as you go through life. They are not "stuck" in their house for years - they live in it. It's their home. Often they were born there. If the house gets too small and they have the money, it's common for the old place to come down and a three to six-storey residence go up in its place, even eight or nine floors. Putting a property on the market can be a sign of desperation.Sundeck, it seems to me that depositing gold in a Vietnamese bank is similar to having unallocated gold in a Western bullion bank. Perhaps I should have added the word "bullion" when I mentioned banks in the rest of the world. Now from my understanding, unallocated gold in a bullion bank is part of that bank's reserves and can be sold if need be. The bullion banker OWES you that gold, which earns no interest and is not covered by federal insurance - a really bum deal.Let me explain property prices again. The Vietnamese value property in terms of a QUANTITY of gold, and the unit they use is the tael (roughly 1.2 oz.) There's no regulation, it's a cultural thing and the government plays no part.If they want to sell a house, the quote a price in gold taels, not in cash. Unless they are desperate to sell, the quantity will be that which they value the house in.For example, during the urban property boom in Vietnam when gold was at its nadir several years ago, we were offered 2,000 taels of gold for a four-story house that we own in the heart of Saigon and let out to a retailer. We refused but that's neither here nor there. Now the POG has doubled but the building's value is still 2,000 taels (we wouldn't think of selling for less), hence double the cash it would have sold for before.What will happen in the future as gold keeps climbing I don't know, but I think the property market will stay dormant unless there's an economic collapse and people are forced to sell their homes to survive.Partly because of this gold link, property in Hanoi and Ho Chi Minh City is among the most expensive in the world. The house mentioned above measures 22x4 metres (it has four storeys) and, like most urban buildings in Vietnam, it takes up all the land.Actually a homeowner holds the land-use rights to the land, which is owned by the state. Since these rights are perpetual and can be bought, sold, inherited or donated, the effect is the same as owning the land. Oh, and my name appears with my wife's on the title deeds to our properties only because she is Vietnamese. A foreigner cannot own land outright, or should I say "land-use rights".One more thing about this place: silver and platinum are okay for some jewelry, but gold is THE precious metal. When I asked my wife about buying a small stash of silver, she responded "Where? How? Impossible!". Bullion over here means GOLD.Well, that was all over the place. I've been living in a Vietnamese household for ten years (as is usual, we have relatives living with us) so communicating in English is sometimes a bit harder than it used to be. Most of the posters in this forum seem to be very erudite, and knowledgable. Goldilox (1/7/06; 00:16:00MT - usagold.com msg#: 140208) Gold predictions @ MK,I'd be interested to know what fundamentals you think Mr. Sinclair missed to explain your higher estimate of $760? LOLReading the web bots, which are not to be reproduced in violation of their proprietary nature, "fundamentals" are certainly in place for more of Gandy's dollar waterfalls, but we are seeing many of them here already.For non-sunscribers, George Ure has permission to reprint some of the web bot findings at his urbansurvival.com site. ViewYesterday'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.