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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: d:oug who wrote (6269)	6/12/1999 9:58:00 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 81023

Doug, Bill has been seeing smoke for years. Most of it eminates from his ears as he attempts to keep his head from exploding over the declining price of gold..... <VBG> Bill's basic argument is that gold is being manipulated by the CB's to the downside, hurting the mining industry and threatening to disrupt the world financial system. My argument has been that since the late '80's to early '90's, we've been in the midst of a global deflationary pattern with lower prices, the popping of the Japanese equity bubble and resulting liquidity trap, and the resulting Asian contagion derived from lack of investor confidence in emerging Asian markets as their bubble collapsed. Tangental to this has been the manipulative support for the gold market that has been provided by CB's buying 14 years worth of production and removing it from the markets. The CB's have been artifically supporting the POG for decades and now we're seeing the inevitable result of it, CB's selling gold in order to demonetize it. Now with 1/2 the world in recession and the CRB at multi-decade lows, it is just irresponsible to claim that the world is facing major inflationary pressures all of a sudden. It simply isn't true. The US economy has been forced into overdrive in order to prevent the onset of a global recessionary(depressionary?) spiral that would cause irreparable damage to newly developing countries. In order to accomplish this, the US dollar has been kept artifically high in order to achieve a favorable trade exchange rate, and gold sold to compensate. Stockpiling gold is the hammer that the CB's have held in reserve for just such a situation like this. Now they are excercising that hammer and the gold-bugs are crying now that the CB's are no longer willing to subsidize their precious gold market. Gold should have fallen faster than it has given the fact that inflation was infact artificial (due to OPEC's sudden price hikes) and that overproduction of oil resulted in a years long recession in the exploration industry. Gold mining companies also likely will suffer a years long recession until this gold supply has been absorbed. Even if Y2K is a problem, it will be a temporary, AND RECESSIONARY, situation. Business will contract due to credit crunches by Banks, certain commodities may temporarily rise in price due to supply disruptions, but stocks will be hit hard and bonds will rise as the safe haven. All of the gains in global recovery from the past two years will disappear and cash will be king. Gold may see a rally based upon carry trade positions being liquidated, but anything over $290-300 will likely invoke MASSIVE selling by CB's to provide liquidity and help these guys cover their short positions. Again, the POG has been artificially inflated since 1982. Now it is time for the inevitable correction to finalize itself. Of course, minus a global war or some catastrophic disaster, that should be the scenario. It certainly won't be one of major inflation given my expectation of what will happen in Asia this fall in anticipation of Jan 1st. Regards, Ron