Fuller on Gold !!!
Richard Russell
Dow Theory Letters
12 February, 2003
Fullermoney, a top advisory out of London (www.fullermoney.com) starts its January 31 report as follows --
"Why China may swoop on the world's available gold supply. China's foreign currency reserves are soaring as it becomes the global manufacturer of last resort. . . . China's obvious choice is to buy more gold while the price is low. Faced with a declining US dollar and an all but certain upward revaluation of the yuan at some future date, China has been buying gold recently. In December it bought approximately $1 billion in gold, increasing its bullion reserves by 16.08 million ounces in November 2002 to 19.29 million ounces at year-end. Will China buy more gold? Of course. If the country's monetary officials are smart, as I presume. Who wouldn't in their position?
"Could China swap most of its dollar reserves for gold? No, there isn't enough gold available. How much gold could China buy at a reasonable price? That depends on two factors -- what Chinese monetary authorities regard as a reasonable price, and how quickly everyone else catches on to the fact that China wants to boost its bullion reserves significantly. Why should China bother to buy gold at all if it can't buy enough to offset its dollar exposure? Because the price of gold is likely to appreciate significantly in terms of all fiat currencies over the next decade or two, even allowing for interest rates. In contrast, the supply of gold increases very slowly.
"Bullion's advance in the 1970s was fueled by investors, mainly in the US and Europe. Today, they have just begun to buy gold, led by a few private individuals and hedge funds. The main private buyers during gold's new secular bull market, which has only just commenced, will come from the US, Asia, especially Japan, and lastly Europe. However, the greatest demand for gold over the next 10 to 20 years could come from China and other countries with substantial foreign reserves."
Russell Comment -- I have the greatest respect for the writer, David Fuller. I also want subscribers to take in Fuller's very long-term view of gold. He's talking in terms, not of weeks or months, but of years. Therefore, subscribers who buy or own gold should think in the same time period.
Remember, gold is one of our only long-term defenses against the proclivity of the Fed to endlessly grind out billions, even trillions, of fiat dollars.
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