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Gold/Mining/Energy : Gold Price Monitor

GDXJ 121.59

+2.2%

Dec 26 4:00 PM EST

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To: Ron Schier who wrote (12148)	5/25/1998 12:47:00 PM
From: Terry Rose	Read Replies (1) of 116833

Ron, The strength of the U.S. dollar is due to capital inflows from outside the U.S. and is not due to strong fundamentals since it is backed by 6 trillion dollars worth of debt. Examples of inflows are 1. Asian and European central bank purchases of our debt. 2. Hedge fund spread activity ie. yen/dollar carry trade (borrow yen at .5% and buy treasuries yielding 5-6%) and gold/dollar carry trade (borrow gold at 1-2% and buy treasuries at 5-6%}. One of my main premises in understanding the strength of the dollar, bond market, and stock market is that a lot of it is due to Japan's loose money policy done to prevent deflation which resulted from their own bull market's implosion. In essence their bull market was transferred over here. All parties must come to an end. The latest oasis of a strong dollar and low inflation has weeds sprouting up all over the place. Some of the weeds are 1. Euro haven siphoning off some of cash headed for U.S. dollar 2. Record trade deficit 3. Employment cost index inflation is escalating despite the government's latest fabricated report. Once these weeds get big enough this oasis looses it's water supply and becomes a desert. How will gold do in the cycling down in the value of the dollar? I think it will do well and be the ultimate safe haven. My gut instinct is based on all the media bashing on how poor an investment gold has been. Being a contrarian by nature I think that the big players who influence the media and probably own some of the media are fading the market while they accumulate gold at bargain prices. Terry,

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