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To: BGR who wrote (72053)	10/27/1999 9:01:00 AM
From: accountclosed	Read Replies (1) \| Respond to of 86076

i would think that a non-linear relationship does not mean total non-relation. in a currency panic, hard assets would skyrocket. but that doesn't mean that a one for one correspondence is daily linking inflationary expectations to gold. the relationship can be loose in some ranges and over-tight in others.

To: BGR who wrote (72053)	10/27/1999 9:09:00 AM
From: Terry Whitman	Read Replies (1) \| Respond to of 86076

>>Those who are bearish on gold tend to fall into two camps. The first group are those who believe that gold no longer has monetary (or investment) qualities and does not, therefore, provide an adequate hedge against inflation. The second group believes that the gold price does reflect inflationary and deflationary trends and has been indicative of a dis-inflationary environment for many years. The fact that 100% of official sector gold and around 75% of private sector gold is held for monetary/investment purposes debunks the argument of the first group. During the past several years a portion of the private monetary stock of gold has simply shifted location, moving from the Western World to the Indian sub-continent and the Middle East. As the price of gold continues to rise, a gradual shift in the other direction will most likely take place as the momentum investors of the West increase their purchases relative to the value investors of the East. The argument put forward by the second group is closer to the truth, but with one important flaw. The gold price does not rise as a result of inflation, it rises as a result of declining confidence in overnment and government-sponsored money. Usually inflation leads to the erosion of confidence as people witness the deterioration of their currency's purchasing power, thus prompting increased investment demand for gold and a consequential rise in the gold price. However, when the signs of inflation are hidden from view by a burgeoning current account deficit and a heavily-manipulated consumer price index, confidence in the national currency can be maintained for some considerable time whilst inflation rages in the background. The second group's argument also fails to account for the effect on the gold price of the massive lending of gold over recent years, although we believe the extraordinary growth in gold lending/short selling to be both a cause and an effect of gold's bear market. Without the cooperation of government inflation statistics and a set of conditions that enabled the US to run-up an enormous current account deficit, manipulation of the gold price by an army of short sellers would not have been possible. During the past week gold interest rates continued to ease, indicating that the gold price may continue its normal correction in the near future. Investors should take advantage of any pullbacks in the stock prices of profitable, well-managed, minimally-hedged gold producers to accumulate further positions. >> gold-eagle.com