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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Alex who wrote (35743)	6/23/1999 12:52:00 PM
From: Follies	Read Replies (2) \| Respond to of 117013

If gold is being manipulated to the downside, why is it so overvalued relative to silver? Traditionally (over 2000 years) the silver to gold ratio has been 15 to 65 with an average of about 25 to 1. At $5.00 silver, 25/1 yields only $125.00/oz for gold. Is someone manipulating silver?

To: Alex who wrote (35743)	6/23/1999 2:36:00 PM
From: hunchback	Respond to of 117013

Thanks, it was a good read during lunch. Daily Economic Commentary Tuesday, June 22, 1999 Whatever Happened To The 1998 Real Fed Funds Rate Argument? You remember this one, don't you? The FOMC had implicitly tightened policy through the first nine months of 1998 by holding the nominal fed funds rate constant in the face of declining consumer inflation. This pushed up the real fed funds rate. For all of 1997, the real fed funds rate - defined here as the nominal funds rate minus the y/y% change in the all-items CPI - averaged 3.12%. Over the first nine months of 1998, the real fed funds rate averaged 3.97% -- 85 b.p. higher than in 1997. But as the chart below shows, despite this hefty rise in the real fed funds rate, real GDP growth hardly missed a beat, except for the GM-strike effect in 1998:Q2. You might argue, I suppose, that had the real fed funds rate not risen, real GDP growth would have been even stronger. But that wasn't the argument being made by the Fed and many of the economic forecasting cognoscenti at the time. They were arguing that real economic growth was going to slow absolutely, not relatively, because of the rise in the real fed funds rate brought about by lower inflation. How many times did you read last year that the economy was going to slow because Fed policy was getting tighter by virtue of a falling consumer inflation rate? As of May, the real fed funds rate stood at 2.65% -- 132 b.p. lower than its average over the first nine months of 1998, and its lowest since March 1997. If you still are a believer in the real fed funds rate indicator of monetary policy, then you ought to be forecasting an increase in the real fed funds rate - through some combination of a higher nominal funds rate and/or a lower inflation rate - in excess of 132 b.p. if you also believe that Greenspan is serious about slowing economic growth to 3%. All else the same, a falling inflation rate not only increases the real fed funds rate, but also the real M2 money supply. The last time I looked, real M2 was a component of the index of leading economic indicators. The real fed funds rate was not. On an annual average basis, CPI-adjusted M2 was up 5.74% in 1998 vs. its 2.56% increase in 1997. The 1998 CPI-adjusted M2 increase was the largest since 1986. In 1998, the behavior of real M2 seemed to be more consistent with the behavior of real GDP than did that of the real fed funds rate. In fact, if one ever took the time to actually test the GDP-forecasting ability of real M2 and the real fed funds rate, one would find that the real M2 beats the real fed funds rate hands down. (Go to the link if you like charts) ntrs.com hunchback

To: Alex who wrote (35743)	6/23/1999 3:42:00 PM
From: Exsrch	Read Replies (1) \| Respond to of 117013

I.V. Holtzman, I like your article. I agree with your assesment of Mining stocks. I see NEM as group B and Barrick as Group D and yes if gold stays low for an extended period it would would help all the D's. Contrary to your point, I would say $10,000/oz of gold is possible (maybe not probable and if so for a short period) under the following events: - US economy continues to grow where GDP growth is supported by consumer spending as an outgrowth of Capital gains from financial assest - Money supply increases to support GDP (if no one is saving than Feds must be printing it) - Financial assest prices collapse and banks are threatened - As with LTCM, feds will come to the rescue by creating liquitity (on a grand scale) - The fed liquitity or increased money supply to cover banks will create increased inflation (hyper?) and it might take US$10,000 to buy an ounce. I agree this is not likely; however, it could be possible. One analysis is to go back to 1929 and see exactly how much liquidity the feds needed to supply to support the banking systems and than calculate the inflation that would have created. Let me know what you think. Cheers, Exsrch

To: Alex who wrote (35743)	6/23/1999 10:47:00 PM
From: Hawkmoon	Respond to of 117013

Gold may rebound in the mid term rather than in the near term. Here now in June 99, I find little likelihood of Y2K lifting spot gold during the rest of 99 or early 00, since at this stage I tend to think Y2K will be an annoyance, maybe even a year-long hindrance to business as usual, but probably not a single abrupt disaster. Going back to that business of inevitability, the guardians of fiat have gone to great lengths to reassure the population. In fact, they've said Y2K so often that Joe American will numbly tolerate a dud ATM or a day's power outage here and there. I presume Europeans are getting a similar lecture, though frankly they're more concerned over the already present problem of a descending euro. Expected result: the U.S. dollar will probably continue to grow stronger at the expense of POG, the Euro, the Yen, and pretty much everything on the planet with the exception of the price of oil. It will continue to strengthen until it begins to weaken. Glib but realistic. Since I can't time the sea change, I have to trade in anticipation of it, gently moving from U.S. dollar-denominated wealth to something else... or several somethings else. Someone else who believes that any Y2K disruptions will be recessionary, inflationary, and thus bearish for gold and bullish for cash and bonds. Thanks for the link Alex!! Regards, Ron