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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (191)	8/19/2001 8:51:37 AM
From: Frank Pembleton	Read Replies (1) \| Respond to of 36161

Gold's Not Glistening By TIM WHITEHEAD A friend of mine is both an underwriter of gold shares and an incorrigible forwarder of e-mail jokes. Over time, I’ve noticed that the frequency of his emails is inversely related to the state of the gold market: when gold is on a rebound, there are fewer jokes because he gets busier with prospective deals. The flow of jokes has been fairly steady for most of the last couple of years, needless to say. Gold bugs are only too aware of the sad state of the yellow metal. Over the last while, bullion has had a few flurries of interest – the month of May saw one such episode – but its price in U.S. dollars has been less than, well, golden. The accompanying chart shows the monthly average price (London close) for gold in U.S. dollars and in constant 1982-84 U.S. dollars. The annualized return for gold in U.S. dollars was –2.4 per cent from the beginning of the 1980s to now. That almost makes Nortel look good. Prices are always relative, however, and with an investment like gold it is worthwhile to consider it from a number of different perspectives. The largest market for gold is India – the country accounted for a quarter of the worldwide demand for bullion from 1996 to 2000. From 1980 to now, the price of gold in rupees rose at an annualized rate of 5.9 per cent. Not sensational, perhaps, but not bad either as a poor man’s hedge against the vagaries of the Indian rupee. The difference between Sam’s and Rajiv’s experiences with gold is, of course, the relative performance of the U.S. dollar and the Indian rupee. The Indian rupee has lost ground against the greenback at the annualized rate of more than eight per cent over the last two decades. It has, therefore, shrunk faster against the U.S. dollar than gold has. Now, put the whole equation on its head. We’re accustomed to thinking of gold’s price falling but it would be just as accurate to think of the price of the U.S. dollar rising in terms of gold. (As I said, prices are always relative.) If, as many Americans argue – and manufacturers scream and Treasury Secretary Paul O’Neill mutters – the U.S. dollar is overvalued, then it could be equally said that gold is undervalued. Indeed, over the last five years, the trade-weighted value of the U.S. dollar appreciated by about thirty per cent, while the price of gold in U.S. dollars fell by almost the same amount. It’s this sort of thinking that has gold bugs watching the U.S. economy. Continued weakness there could mean (a) more interest-rate cuts at the Federal Reserve and (b) a slowing of foreign capital flows into the United States. Either (or both) might weaken the U.S. dollar. And that’s another way of saying that either (or both) could strengthen the price of gold. That’s why the quarterly analysis from the World Gold Council devotes considerable attention to the state of the U.S. economy in general and Federal-Reserve policy in particular. Gold investors see the best prospects for bullion to lie in the worst prospects for the U.S. dollar. Even so, expert opinion is not anticipating a surge in bullion prices. At the end of a good review of the factors affecting the gold market, TD Bank economists forecast that ‘gold prices are likely to trend only gradually higher, reaching US$290 at the end of 2002 and rising to US$320 in 2004’. If true, that wouldn’t make gold an outstanding investment, but it would be an improvement over the experience of the last few years. And it would cut down on the joke-emails coming from my friend on Bay Street. MINORITY INTEREST The early betting on next week’s Federal Reserve meeting is that we’ll see another quarter-point cut in rates. Daniel Grombacher of the Chicago Board of Trade has translated the futures’ market for U.S. interest rates into probabilities of a rate cut. The latest result: an 88 per cent chance of a quarter-point cut and a 12 per cent chance of a half-point cut. Economist/author Tim Whitehead operates a consulting firm, Left Bank Economics Inc., near Paris, Ontario. canoe.ca

To: Frank Pembleton who wrote (191)	8/19/2001 3:44:47 PM
From: isopatch	Read Replies (2) \| Respond to of 36161

THE FED, CBs, W.S.'s Role >> Liberal/Socialist N.W. Order First. Good article, Frank. Ya got me going!! So look out everybody, Iso's commin' to getcha!!<lol> During his Fed regime, the Pumpster has consistently tipped off the small circle of big W.S. houses in advance of almost every major monetary decision. Even the very flattering AG book by liberal apologist Bob Woodward, MAESTRO - Greenspan's Fed and the American Boom more than hints at this pattern of informing his W.S. allies. Think about it, folks!! The Fed and each Admin owe the tight circle of big W.S. houses (G.S., ML, et al) big time for services rendered on crisis mgt ala the Long Term Capital rescue, and many other episodes too numerous to get into even in a series of posts. But perhaps the biggest longest running heavy lifting support operation of all? The one that really guarantee the select group of big W.S. houses get tipped off before every big Fed decision??? Hands down! It's the whoring those major houses has done with the Fed and other CBs to protect the anti-gold - buy the votes of the clueless proletariat<lol> agenda liberal/socialist governments use to perpetuate their political power!!! Believe it. THIS my friends is major and essential outside the box thinking!! I find it just incredible that only a handful of us ornery mental mavericks at the right extreme of the I.Q. Bell curve have seen through this charade for years. And pieced together the mechanics of how it works economically AND politically!! WAKE UP OUT THERE AMERICA!! "Freedom" ISN'T fostered by liberal/socialist political hacks buying dead beat votes with fiat money to win elections so they can tax and regulate the producers of society while increasing the %age of governments share of GDP decade after decade. It fosters Big Government intrusion and control at the expense of YOUR freedom and liberty. Believe it!! UH...do we see a trend here that connects politics with our financial well being???!!! It make ole Iso's opposition to Alpha Al Gore last year take on a different perspective? Sure. No question, Bush is only be a lessor of evils choice. But I'm practical enough to take what I can get in the real world and not kid myself about it.<G> GO Gold! Free Willy!! Killer Whale to liberal/socialists. Intelligent Orcha and key player in the ecological balance and order of the seas... Be a "FINANCIAL ECOLOGIST" !! They can't keep Golden Willy a prisoner any longer. All they can do is slow him down. It isn't too late to be a major buyer. The gold stocks are STILL in the early phase of A WHALE of a cyclical Bull Market!! And all fiat confetti currencies are all going to get burned by comparison! GAR-UN-T'd !<g> How much gold ya got?!<GGG> Isopatch