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

To: MNorth who wrote (113)	7/11/1999 10:39:00 PM
From: Claude Cormier	Respond to of 585

MNorth, MNorth, the first reality is that the last 20 years have created a major imbalance between gold and other means of storing value (currencies, stocks, etc...) I think gold is a better store of value than money in the bank or T-Bills. Many people believe otherwise, but the truth is that gold has all the characteristic of money. Anyway, lets say that they are right and gold is no money. But it still remains a store of value and a very good one. Ask the people in countries where the local currencies tumbled in recent years, ask them if they had prefer to hold gold rather than paper money. The answer will be Yes. What makes a store of value better than another is its relative scarcity. People think now that gold is plenty and that central bank selling will insure that this continue for decades. But the truth is that central banks have sold very little gold in the last 30 years. IMO, Central Banks will not sell all their gold as they consider it a store of value like they do with the Euro, the $US, the Yen. The question is will Central Banks buy more gold. When you look at the distribution of Japanese, Indian and Chinese CB's reserves, I am betting that more gold will be bought than sold in the years ahead. Some 20 years ago, with gold at $255, above ground gold inventories stood at approximately 95,000 tons. They are now 135,000 tons or some 42% higher. These stocks are worth $US1.1 trillions against 775 billions or so in 1979. The growth rate has been less than 2% per year.Back then, the entire market capitalization of all the stocks in the US was more or less $1 trillions. Well, we still saw gold at $850 in January 1980. Investors demand alone cause this rally. Today the market cap of all US equities is more than $13 trillions, an increase of 1200%. The US money supply is up more than 500%. And this is in the $US alone. Add in the expansion in all other currencies and you get the picture. In other words, there is much more money available now to buy gold that there has been at anytime in our history... as much as 20 times more money, on a relative basis. Look at the growing deficit and the growing fabrication demand, they are really expanding. So despite what you hear, more and more people are buying gold. This in the face of the best bull market ever in equities. ormetal.com Now, we know that it is only a matter of time before this bubble burst and that investors realize that there is no such thing as a "new paradigm" that allows stocks to trade at prices X times above fair value. You will probably say that we had inflation in 1980 and today prices are stable. Well, inflation is a monetary phenomenon. We are going trough it as of we speak. But the prices that are inflated are the stock prices for now. This is about to change.