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

To: Rarebird who wrote (37251)	7/17/1999 11:40:00 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 116763

Rarebird Yardeni has a good record but has been disastrously wrong in 1999. If he really believes the totally manipulated gold price is telling us anything about inflation or bond yields he is even more off track than I thought. I much prefer Morgan Stanley's Steve Roach who has been right on the money this year. Sees bond yields pausing around 6% for a few months then headed for 7% by early next year as the global recovery continues and inflation pressures build. Yardeni apparently knows nothing about the oil market either. All it took was a modest OPEC cutback to quickly erase the glut and send prices back to $20. The big upmove in oil prices probably is near an end because OPEC will hike output if prices climb much further. But anyone expecting a big drop in oil prices from here will have a LONG wait. Just as OPEC will hike output to keep prices from going up much further, so they will cut output if necessary to prevent a sharp price drop. Yardeni is an ideologically committed deflationist. This was all well and food when Asia was tanking. But in a period of global healing, those who tailor their portfolios according to deflationist axioms will suffer huge losses.

To: Rarebird who wrote (37251)	7/17/1999 1:19:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116763

Rarebird, The biggest problem I see is that there still considerable production of commodities out there as debtor nations continue to try to export their way out of recession. However, the key to their recovery is restoring liquidity to their banks and spurring domestic demand. Demand is what is required. It's there in a latent form since only a an idiot wouldn't want a better existence and some luxury in their life. But the means to stimulate and finance that demand properly eludes these nations. Demand requires jobs paying decent wages. It requires nations to invest in rational infrastruce projects that create or facilitate additional economic growth. Now if the monetary mechanisms are mustered to accomplish this demand improvement, there may be a movement in gold to the upside, but then again, the CBs may try to prevent this since they require their monetary resources to support control of their currencies. So what I think Yardeni is forcasting through the price of gold is that it is being sold and money is being created instead (selling gold effectively infuses money into the system since it is converted into another currency). Why else would gold price declines precede lower interest rates?? But then gold could increase afterward depending on the success of any reinflationary efforts. As for oil... I can see your point about trying to hike prices upward again, but it's a different world than 1973 or 1980. Y2K may cause a shortage of oil and thus a price hike, but if the problem is that bad in the oil industry, then we can assume that consumers of that oil will be disrupted as well, thus dropping demand. I see producers of oil cranking up all unaffected or working production platforms to max capacity which from what is current underproduction. Exacerbating an economic crisis through high oil prices will not serve anyone's interests, especially Europe's (I would anticipate that Venezuela would seek to gain market share to the US). Also, the strategic petroleum reserve would likely be untapped for use, acting as a control mechanism similiar to CBs selling gold into the marketplace. High oil prices result in higher production/exploration, which then leads to lower oil prices down the road from market competition. And given the recessionary pressures that Y2K will likely create if it is as disruptive as some fear, demand will slacken to a greater extent than what occured two years ago with Asia's economic turmoil. But I certainly understand your scenario and have considered it as plausible.. But only if they can maintain solidarity in the face of extreme international pressure. And part of me would I actually welcome the oil producers trying to play their economic blackmail game again. Maybe this time around we'll finally learn that dependence on foreign oil undermines our national security, giving political relevance to regimes who's population or politican/economic significance hardly rate our risking national treasure to defend. Regards, Ron