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

To: Alex who wrote (68525)	5/1/2001 10:05:41 AM
From: Rarebird	Respond to of 116915

The most significant indicator yet is the fact that this past Friday Gold opened gap up on a day when the $US index surged. Technically, there is no doubt that Gold is MUCH better placed for an upside surge than is the U.S. Dollar. The South American financial systems are in NO condition to absorb U.S. Dollars, as Europe and Japan did in the past. Nor are they in any condition to absorb more flows of U.S. Treasury or U.S. corporate debt. This means that the U.S. is faced with having greatly curtailed - or NO external credit. Something has to give, and, already, several things have. First, the U.S. Comex reported that their Gold inventory had contracted by 10% on April 23. Yes, on that one day! Second, the U.S. yield curve is steepening fast. The Fed's money pumping can really only have an effect upon short- term U.S. market rates. Yields on the longer end, which the Fed cannot directly control, are storming higher. This means that the U.S. bond markets are pricing in future bad times for commercial as well as U.S. Treasury bonds. Over time, there are really only two main economic items that can affect bond values drastically: A surge in internal U.S. prices (the conventional idea of inflation) - and/or - a falling U.S. Dollar. Clearly, the Bond Market wasn't surprised that the GDP Price Deflator was up 3.3% from 1.9% in the last quarter of 2000. Many in the U.S. are still anticipating much higher prices. What is growing in the U.S. economy is the supply of corporate debt and housing finance debt. Corporate bond issues in the first quarter of 2001 totalled $US 150 Billion - TRIPLE the rate of the first quarter of 2000. However, while $US 150 Billion in new bonds were issued, $US 20 Billion worth of existing bonds defaulted in the first quarter of 2001, and HALF of these were investment grade bonds. For the numbers on U.S. housing finance, take a look at the growth of the Federal Home Loan Bank system (FHLB). At the end of 2000, the FHLB held total assets to the tune of $US 654 Billion. This total is up 123.2% in the three years since the end of 1997. The borrowing is continuing unabated, as illustrated by the fact that average home prices across the U.S. increased by 2.9% in the MONTH of March. On the other side, U.S. personal savings totalled MINUS $US 74.3 Billion for the first quarter of 2001, a jump of 44% from the last quarter of 2000. It only remains now for U.S. investors and Wall Street to wake up to the ramifications of the U.S. and Europe agreeing to go their separate ways on interest rates. Got Gold? Got Guns? Got Guts?