SHOULD WE BUY GOLD? IS THE GOLD STANDARD RETURNING?
This article seems to say (between the lines) that the gold standard that Rayelan and her Sources talk about is just about to return.
Here are some excerpts which are by NO means representative of EVERYTHING that is in the article:
Some investors now say the no-holds-barred belief in
both the dollar and the Federal Reserve is at a
testing point.
"Now the Fed's bailout strategy has gone too far,"
says Hathaway, whose gold mutual fund is up 5 percent
since launch in June 1998. "No longer are the potential
losers from bad investments confined to lenders to foreign countries, bankrupt hedge funds or bad banks. It is
now the American public, which has been suckered into
pouring its life savings into a dangerously overvalued
stock market."
Jude T. Wanniski, president of political consultancy Polyconomics Inc., says central banks will move back
to using gold as an economic indicator.
The Gold Anti-Trust Action Committee, based in
Texas, says it "will reveal proof of the suppression of
the gold price by the U.S. and German governments and
bullion banks." The conference is scheduled for May
10 in Durban, South Africa.
Le Metropole Members,
Just a quick AM note. Acceptances by invited guests to
the GATA African Gold Summit has picked up rather
dramaticially.
Press coverage should be substantial including a German
television crew that is doing a documentary.
Thom Calandra's column below is widely read and mentions
the summit at the end of this column.
THOM CALANDRA'S STOCKWATCH
Where there's gold there's fire
Just above multi-year low, is it ready for bounce?
By Thom Calandra, FT MarketWatch.com
Last Update: 5:11 AM ET May 2, 2001
LONDON (FTMW) - Some professional investors are
questioning the traditional belief that gold - and gold
mining shares - can only rise as the U.S. dollar declines
or as inflation accelerates.
John Hathaway, who manages the $20 million Tocqueville
Gold Fund from New York City (TGLDX: news, msgs, alerts) , says "a protracted bear market in stocks and
financial assets" will sway investors into the metal.
Larry Edelson, managing editor of The Safe Money
Report in Florida and a former commodities trader,
sees a weakening relationship between dollar strength
and gold weakness.
"I believe a split is coming in the normal relationship
between the two," says Edelson. "In other words, a
strong dollar does not necessarily mean lower gold
prices. If the dollar continues to remain strong or
get even stronger, it's a darn good sign there are
big problems elsewhere in the world, problems that
could easily light a fire under gold."
On Wall Street, analysts such as those at Salomon
Smith Barney point to steadily rising demand for the
metal in jewelry. Scientific developments also may boost industrial demand for the metal. Gold is a highly
conductive and soft metal that may find uses in
catalytic converters and in wiring for electronic
writing pads and other embedded computing devices.
Gold use in electronics rose 15 percent to 106 tons
last year, Gold Fields Mineral Services said in an
April report.
The deficit between physical supplies and growing
consumer demand for cheap bullion could be as high
as 25 percent, some mining analysts estimate. Gold
sells for about $265 an ounce, not far from a
multi-year low of $252 set in August 1999. The metal's
price has ranged from $252.80 to $326.25 in the
past year.
Still, it is the lack of investment demand for gold
that is depressing prices of the metal. Repeated central
bank sales of gold across Europe coupled with tame
inflation have battered prices.
Most economists are unwilling to break the link between
the strong dollar and gold. Gold, while it sometimes
changes hands in euros, yen, South African rand and
the Australian dollar, is largely denominated in
dollars. The dollar, and dollar-denominated securities, traditionally have provided investors with a feeling
of comfort and with valuable liquidity during times
of crisis.
In the same way, many modern investors have placed
their belief in the Federal Reserve, which modulates
interest rates and is responsible for managing the U.S.
economy. In the 30 years since U.S. President Richard
Nixon effectively ended the use of gold as a money
standard, the price of gold has only occasionally
risen in reaction to Federal Reserve actions, most
notably in 1980 and 1981. Gold prices back then rose
above $800 an ounce as U.S. interest rates soared.
Gold in those hills
Some investors now say the no-holds-barred belief in
both the dollar and the Federal Reserve is at a
testing point.
"Since the Latin American crises of the early 1980s,
the Federal Reserve's response to market difficulties
has been to bail out anyone who has made a bad investment," Hathaway tells investors in a letter to his fund's
investors.
"Now the Fed's bailout strategy has gone too far,"
says Hathaway, whose gold mutual fund is up 5 percent
since launch in June 1998. "No longer are the potential
losers from bad investments confined to lenders to foreign countries, bankrupt hedge funds or bad banks. It is
now the American public, which has been suckered into
pouring its life savings into a dangerously overvalued
stock market."
Jude T. Wanniski, president of political consultancy Polyconomics Inc., says central banks will move back
to using gold as an economic indicator. "It was Karl
Marx who actually impressed that on me when he proclaimed that 'Gold is the commodity money par excellence.' It
is as good as it gets," says Wanniski, who airs his
beliefs at www.polyconomics.com. "The world is not going
to give it up, no matter what Milton Friedman, the
monetarist, or Yale's James Tobin, the Keynesian, say
about it."
Edelson in Florida notes that gold mining shares as
measured by the Philadelphia Gold and Silver Index
(XAU: news, msgs, alerts) and the CBOE Gold Index
(GOX: news, msgs, alerts) are a fraction below their
highest point since mid-May of last year.
Most gold miners, such as Newmont Mining (NEM: news,
msgs, alerts) , have seen their quarterly profits turn
into losses as gold prices stay stuck in a $260 to
$300-an ounce range. Yet gold mining shares, curiously,
are rising.
Newmont's chief executive, Wayne Murdy, told shareholders
this week that his company, the largest North American
gold producer, has no intention of increasing the amount
of gold it forward-sells, or hedges via the use of
derivatives. Such hedging, while providing extra income
for miners, is seen as a powerful drag on gold prices.
Edelson says the divergence between a flat gold price and
rising gold mining shares is an indication that the metal
may break away from its traditional links with the
dollar and inflation.
"The ideal situation right now would be for mining shares
to hold their own, and gold make a stab at a new low.
That would set up a divergence that would signal a
major bottom in my view," Edelson says.
"As for inflation -- while I do believe it's coming
on a worldwide basis as central banks try to reflate out
of the trillions that have been lost in stocks -- it too
is not needed to get gold going," he says.
One group intends to air its beliefs about governments'
role in gold markets at a South Africa conference next
week. The Gold Anti-Trust Action Committee, based in
Texas, says it "will reveal proof of the suppression of
the gold price by the U.S. and German governments and
bullion banks." The conference is scheduled for May
10 in Durban, South Africa.
Thom Calandra is Editor-in-Chief of CBS MarketWatch and FTMarketWatch.com.
BILL MURPHY
CHAIRMAN
GOLD ANTI-TRUST ACTION COMMITTEE
Le Metropole Cafe
All the best,
Bill Murphy
Le Patron
www.LeMetropoleCafe.com
