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Strategies & Market Trends : Coming Financial Collapse Moderated -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (735)	5/25/2002 7:37:42 PM
From: Bocor	Respond to of 974

Interesting. Makes me want to increase my already sizeable holdings. Just can't quite get that pullback I want :) Thanks for the prompt reply!

To: TobagoJack who wrote (735)	5/28/2002 4:32:40 AM
From: TobagoJack	Read Replies (2) \| Respond to of 974

Here is a blood chilling piece of reading ... mips1.net LONDON - The present bull market for gold will not stop the "stampede" by central banks and other official holders that has seen them cutting their bullion stocks substantially, warned Andy Smith, analyst at Mitsui Global Precious Metals in London. Ironically, central bank disinvestment from gold was likely to accelerate as gold miners reduce hedging and sell less bullion themselves. "The exit for the central banks has been widened," Smith told delegates. He pointed out that AngloGold was closing its hedge book (effectively buying bullion) at about the same speed at the Swiss National Bank was opening its vaults and selling its gold stocks. "Central banks were a sponge for mine output for 150 years; now the boot is on the other hoof." Smith wondered whether delegates would be willing to bet on AngloGold's buying strength being greater that the Swiss Bank's selling strength. Smith agreed that perhaps the best hope for gold was a revival of official interest in bullion. However, he suggested this was now impossible. The lack of liquidity and market depth "means gold cannot function as a bona fide reserve asset. Gold is no longer tradable, so what use is it [to central banks]?" As usual, it is impossible to convey the flavour and sheer vitality with which Smith delivers his – for the gold bulls – gloomy messages. He bombards his audience's eyes and ears with jokes, literary quotations, big chunks of eye-opening original research and some appalling puns, all presented at a breathless pace. To make things even more entertaining, Smith takes great care will the illustrations he selects. This presentation included, for example, a fetching photo of Kylie Minogue, a portrait of the Mona Lisa and a hideous Salvador Dali painting, as well as part of a menu from the Buckhorn Restaurant in Denver offering Rocky Mountain Oysters with horseradish dippin' sauce [a joke for the miners among the delegates]. However, under all the ebullience, Smith tackled some serious issues and came to some conclusions that will not have delighted the gold bulls present. For example, he insisted that the present bull market so far resulted from "less selling, not more buying". All the excitement in the market gave the impression a great deal was going on but, in fact, there was less and less activity – as clearly indicated by London Bullion Market Association (LBMA) statistics showing volume had been falling away. This helped the market in the short term because it meant a little money went a long way. Smith dismissed the idea that mergers among gold producers would have a beneficial impact on future bullion prices. Even the biggest producer would never have the market power that De Beers had in diamonds or OPEC in the oil business. Neither did it matter much if gold mines closed. "New [gold] supply is marginal to second-hand inventory. Who cares who owns it? Second-hand supply dominates. New supply is a residual," Smith insisted. He suggested that the main reason gold miners had reduced hedging was "a much-reduced incentive to do it and much-reduced ability to do anything at all because of the lack of market depth." To conclude, Smith returned to one of his favourite themes – the possibility that eventually gold would go the way of silver. For many decades central banks used silver as their main physical asset but abandoned the "silver standard" in the late 19th century. "Silver fluctuated since then about a commodity price parity, despite strong official buying from time to time," he pointed out – and despite the efforts of the Hunt brothers and Warren Buffet when they bought big quantities of physical silver. The central banks started seriously to sell their gold stocks late in the 20th century, Smith pointed out. If, as a consequence, gold "catches down" with silver, the price would eventually settle at US$68 an ounce.