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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: Crimson Ghost who wrote (2572)12/12/1998 11:45:00 AM
From: Bill Murphy  Read Replies (1) of 81084
 
George,
It is such an expensive question, because the answer is so illusive and I do not think anyone can give the answer.
I can give you my thoughts on what should happen and I will report on it in Midas.
The dollar is going down. Announcements of severe problems ( default type of things ) should hit the scene too. I think the stock markets finally really get hit ( The Dow already cannot stay above 9,000 ).
As you said, interest rates have got to come down. The strain ( credit spreads is there ).The credit situation is much worse than most understand. Earnings are worsening already. How can this be good for stocks?
When the interest rates come down, gold loans will gradually become less and less attractive as the price risk grows and the contango shrinks. Specs and producers are less likely to borrow. This will reduce gold supply.
Demand - We know the Asian official sector is standing there with a big bucket saying thank you very much. As the defaults grow, fear will set in about paper and paper markets. Demand for gold will grow. It is likely that the combo of all this overtakes the goon squad and they have to cave. Either that or change the rules. The rule change ( sell Fort Knox gold ) would cause a big stink.
It makes no sense at some point to defend gold here if worldwide market forces prove to be that considerable. Let gold pop $40, let a little sticker shock set in and they can try again.
In the mean time they may want to show that deflation is not such a big problem. They could point to gold rising and play that game.
With all the deflation that is going on and commodity prices down 10 to 60% this year, the price of gold is still higher on the year. Money supply is growing by leaps and bounds all over. The price of gold is going higher next year, much higher.
My thoughts for the weekend.

Bill
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