The Harry Schultz Letter............
Editor's Note: HSL is written by the world's highest-paid investment consultant, Chevalier Harry Schultz (Guinness Book of Records- International Editions: 1981-2000). The HSL was the leading gold advocate in the early 1970s, when it called the Great Gold Bull market. Interestingly, HSL is again bullish on gold
The International Harry Schultz Letter
Gold
There's good gold news for a change, lots of it! The price has moved up, & while not yet out of the bear woods, is strong enough to take spec positions (with a stop).
China is studying plan to deregulate their gold mkt. China is world's 4 th largest gold consumer, after India, US & Saudi Arabia. India's mkt doubled 2.5 yrs after deregulation. China consumption may triple within 3 yrs.
Venezuelan central banker German Utreras said at a central bankers' meeting: central banks need to form a pact (similar but stronger than the Washington Accord of Sept '99) to reduce gold lending & sales in order to "restore gold's value." This is a mind-blowing event; a central banker telling his mates how silly they've been. He spelled it out: As a result of bank sales/lending, gold had dropped, causing central banks to lose $15bil from sales alone in 2000, & lowered their profit from gold loans to about $30mil profit in 2000.
In effect, he said the emperor has no clothes, something everyone knew, but central bankers seem not to see. GU said central banks have devalued their own assets. This proves to doubters to see that gold's price has been artificially pushed down. And this is aside from the gold-price-capping team headed by Goldman Sachs, who sell gold in NY daily & advise & arrange for miners to sell/hedge gold, which further depresses the price, evidence of which would fill a half empty central bank vault!
The massive physical gold short position is trapped. They can't get out. If they try, they'll elevate the price, a Catch-22 they richly deserve. Note: the shorts in gold shares have suddenly shrunk, a sign of impending panic?
The gold bear mkt has caused many mines to shut, many mines now delisted on stock exchanges, with share prices reduced to pennies. Result: quality gold shares are rising strongly, due to both a rising metal price & very few stks to choose from. Agnico-Eagle & Placer are 2 of the better N.Americans. Since 1985 there were 13 gold rallies. Average rise in bullion price in rallies: 8%. Average rise in TSE gold stock index: 22%. Average Agnico-Eagle rise: 34%. AE is proven outperformer. AE increasing production hugely & lowering cost to $150/oz in 2001. By 2004 to $100.
BobChapman int'l news-letter says: "Rumours abound that Fed is privately buying gold to put US inventory right before new administration takes office. We hear 50 metric tons absent." Zurich & London have big gold volume daily. Press never reports it! Someone buys every oz offered!
Moscow says it'll not buy diamonds in 2000-2001 but instead to buy gold. GATA comment: "West selling gold as East buys it. They forget old motto: He who has the gold makes the rules."
Duplicity
In a seemingly unrelated field, the word went out years ago for Greenspan & govt agencies to "cool the price index & cap the gold price." Not only the US does this. Most nations have a similar need to cap the cost of their retirement payment outflow. It's a silent duplicity that prevents economic justice (especially to those on Soc. Sec or govt/corp pensions) & precludes a free gold mkt. Disgusting? Yes, but it's politics. Just don't kid yourself that the status quo represents true/real/honest economic conditions in the US—or anywhere else! But these capping operations are slowly being exposed/understood. The result could be dramatic. Eg, global short positions in gold bullion that will make the gold price not just rise, but fly—with disastrous effects—as opposed to an orderly rise. The world's leading authority on gold's short position, Frank Veneroso, ex-advisor to many nations' central banks, says the natural equilibrium price for gold was $600/oz in 1997. It would be higher today. He confirms with GATA & HSL that the gold price is being manipulated & because of this artificial capping (like capping a boiling kettle), the demand (which far exceeds production) will force the lid off & the price will exceed the natural price. Especially as the mkt is small.
Given a free mkt (unlike today's), gold always reflects the health of economies. Eg, when gold (correctly) topped out in 1980-82, all world stock mkts began basing, & in '82 started a multi-year bull mkt. All was well; no need for gold alarm bell. But the situation is reversed now. All is not well. Debt (personal, corp, nat'l) in most 1st world nations is high, at worst ever in the US. Money supply is being dangerously inflated, which means it can't be inflated more to help in coming recession. Credit is overextended vs risk. People stopped saving (thus no reserve pool for a cushion). Public exposure to stocks is dangerous, with most now experiencing losses, but unable (psychologically) to sell as they're waiting for the mkt to come back, as it has done in recent years. This time it won't; the mega-bull mkt is over. So the entire middle class can be, if not wiped out, at least robbed of all bull mkt profits. Retirement plans trashed. Cancel the golf club membership.
Robbed? Yes, robbed, because the alarm bells aren't allowed to ring! The public is being misled, deceived, robbed. By who? By the bullion banks (only 3-5 of them) & cooperative fat cat bullion brokers & their masters in a political hierarchy. Their fingerprints are all over the mkt place every day. It's all so obvious if U just remove the rose-tinted glasses. slipping economies, falling stock mkts & quivering currencies, makes this refurbished version of our 10-year Mission suddenly more useful & timely than I realized when it began. Without these structural changes, we haven't the global machinery to fix the problems.
Harry Schultz
ihsl.com
hsl.mentor@skynet.be
Tel +32 (for Belgium) 16 533 684 -- Fax +32 16 535 777
Postal address: HSL, PO Box 622, CH-1001 Lausanne, Switzerland
13 December 2000
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