321gold.com
Harry Schultz
extracted from HSL #635 October 6, 2003
Posted Oct 27, 2003
Gold
On Oct 1 rumors spread that I had given an all-out gold sell signal. Flames were fanned when it was aired on Jim Sinclair's website. It seemed just clumsy at first. But the rumor spread & some people sold out. Did our GCRU say sell? Yes & No. I urged selling where profits had built up. I also urged putting in buy orders at recommended prices, mostly lower. But that's not unusual for GCRU. What was unusual was how someone exaggerated it into an all-out sell call. Was that clumsy or a plant? Like the article in Barron's last year that sunk Royal Gold, inspired by an admitted short seller.
Jim says he gets a lot of self-appointed pit bulls via email. In the 1970's gold rush, we had rumors seemingly put out by the US govt, & politicians bad-mouthed gold after it rose from $42 to $190, which scared them. A Congressman said gold was only useful for dentists. But all the bad-mouthing couldn't stop gold then, which rose to $850, & it can't stop gold today. Yet they're trying, both private short sellers (who do the same thing with industrial shares) & govt agents/brokers. Govts with big debt don't want a rising gold price; it exposes the system's vulnerability & weakness. So, pay no attention to stories & rumors aimed at pushing gold down. Gold has a life of its own.
At my birthday party, UK analyst Simon Crane said: "U should have one ounce of gold for every day U expect to live, as gold will rise & keep U protected." An apple a day to keep U healthy. An oz of gold a day to keep U wealthy. ··Also at the party I met with Peter Bucher, chairman of Northern Gold of Oz. He's a keen P&F chartist. His 18-yr chart of the FT gold index throws up an interesting pattern. Shows a multi-yr H&S reversal base with a very high price target. But the right shoulder isn't built yet. Gold bullion chart shows a similar pattern.
So one possibility is: gold will probably make $405-415, before or after it soon moves into a trading range for some months, between say 365 & 415. The FT chart is for gold shares, not bullion, so it will likely have wider swings & outperform bullion. If we do have a trading range (his forecast, not mine), it would be ideal for trading gold stks, buying at the bottom of the range & selling at the top. And, of course, there would be outperformers & underperformers. Our Gold Charts R Us would be a popular guide dog. We'll attempt to fine tune this in future. Meantime, be prepared for "volatility" in case Peter's chart is right. ··See Uncle's Notes for comment on Oct 3 gold drop.
Big Picture
I could hardly believe it. On Aug 11, I opened my Int'l Herald Tribune & on pg 1 there were not 1, but 2 stories that linked with the HSL I had put to press the night before:
1. Revelations (at last) that the CIA contacted Iraqi army officers pre-war to get them to not fight. They admitted "substantial sums of money had been paid" to Iraqis to opt out of the war. In my story I gave assumed credit to the Pentagon. The IHT story credits the CIA also. Would be logical. I delayed my story for 6 wks, fearing reader disbelief. U can guess why press & US govt delayed their version. IHT vanilla version omitted details of VIP treatment, flights & bribes given but half a loaf will do. Readers can project truth for themselves. In any case, as I said last time, "better win wars with cash than tanks." (Reagan did same vs the USSR, via outspending)
2. Another IHT page 1 story told of a NY bizman, Alex de Lesseps--who must have read my mind. He said "The only way to solve the problems of poverty & terrorism in the world is through investment." Amen. He advocates mini-loans of a few hundred $'s to whoever needs. In HSL the same day I said "U can't defeat terrorism via guns, jails. But U can begin to stop it by dealing with causes. Build infrastructure in poor nations. Free the Palestinians economically & U probably free them psychologically & politically. Finance books, not bombs."
Make millions of mini-loans to poor people so they can build infrastructure & start shoestring businesses, make money & create jobs. The concept can be traced to Prof. Muhammad Yunus, Bangladesh, 1976, known as banker to the poor. Giving grants to nations, earmarked for job creation, wouldn't be a sin. If we launched Operation Boot Straps, many angry young men who got jobs & money would soon forget the only prior alternative-bomb making & rock throwing. Pour billions here, not mainly into missiles & armies, if U really want to fight terrorism & poverty. If not, don't pretend U want a real solution. The concept: (somewhat tongue in cheek) For instant results, bomb Palestine with paper money from B52's.
Cut back a bit on tank & bomber spending. Use that money more humanely. Some may be wasted, but in a good cause. Exploding bombs & lost legs/arms are a bigger waste. Let's risk erring big time on the side of poor-pampering for a change. Sound naïve? Is killing kids sophisticated? Let's try naïve. If U see a tiny shred of merit here, send this to some politicians, wherever, including the 10 running for US pres. U never know.
Five minutes after writing the above, Gerhard Schroeder of Germany told the UN: "To fight violence we must fight poverty. Let us treat the causes of terrorism, not the symptoms." ···All the above is a departure from my usual Big Picture but seems fitting to work for a shrinking violence future (in every respect) since that's where we'll spend the rest of our lives.
Now to the relatively smaller Big Picture topics. As our pg 1 cartoonist, Reggie, has correctly shown (above), economic & currency uncertainties are hanging over our heads & helping to drive gold higher. Forecasts on the US economy range widely & each seems to sport a different agenda. Consider the source! I still think the lead-dog US economy will be up nicely in the 4th quarter, but now think it will drop sharply in 1st qtr '04.
More clear-cut & equally critical is the Currency Cloud! The US$ broke significant chart support & put fears of a freefall in the air. But, dear reader, it is providing grand opportunities. Not only is the US$ fall throwing up fabulous trading profit options (eg, the rocketing yen, on which I made my most profitable trade of the year last wk), but it is providing currency choices that didn't exist before. Suddenly it is smart & sound to divide one's cash (time deposits), not just into the usual big 3 currencies, but into 6 or 8 of them, all sound, with bullish charts, & paying better interest than the US$. Forget the invalid concept fostered by certain vested interest mega banks that the only real choices are the euro, US$ & yen. It's a new world! This is the untold story of the year, just flowering (see Currencies, pg 7, for details on which, & how to juggle).
The other side of the Currency Cloud is gold, which is more good news. Economic uncertainty + Iraq agonies + a falling US$ have recently combined to push gold up to one new yearly high after another. $400 is likely to be hit before year-end. Higher numbers later. The gold bull mkt is still a pup. The yellow brick road will roll on for many years (with big bumps enroute).
Since last HSL, China confirmed my forecast of last time, (Chinese Stirfry, pg 3) that revaluing their currency was out of the question, "too silly to discuss" (except by T-man Snow, the strawman, snowman, fated to front for the foibles of fact-free, financially feeble incumbents). PS: China has big internal bank problems, so rocking traditional Chinese junks is sosollynocando. ··Note Chinese factory output is up 17% from yr ago. One should have an investment foot in China. Monty Guild & I like: Netease.com, Sohu.com & PetroChina. ··I also favour Japan stk mkt. We like Sumitomo Mitsui & Financial Group.
The world flounders because there's always an election "around the corner" for some key nation that prevents proper action, global & local. So the world limps along, from election to election, never getting its act together, ever more feeble as opinion poll proliferation prevents proper political positioning. We have democracies instead of republics, so mob rule prevails. Politicians pander; they don't lead. Their job: get re-elected. A prototype of proper govt form (ie, a republic) was given the US by its Founding Fathers. It lasted about 140 yrs & then crumbled into a democracy, ie, mob rule. Some other nations adopted parts of the republic format, but many also gave them up when the US did. The 1-man 1-vote mantra is an easy sell.
So is free lunch. As political morality slid, politics has become entertainment. They promise this but do that. Almost without exception. FX analyst Barbara Rockefeller says: "Average voter has less respect for politicians than any profession, excepting lawyers. As so many polis are also lawyers, that makes them the least-liked people in the US. It spread elsewhere. Film stars are fun. Who cares if he is qualified & who says Buffett is qualified at govt? In short, it's candy & circuses." HSL says: be your own country; fend for yourself. Nobody else is really looking after U. The contrary. Become a PT, to whatever extent U can, in stages. Be self-contained!
Whoops! The Oil Weapon has just been taken out of its sheath. Not used since the 70's. OPEC, world's prime monopoly (never prosecuted for anti-trust violation) has cut oil production, & be assured there is more to come. OPEC is run by largely anti-West, anti-US nations. Here's their chance to make money & get back at the West/US. Look for higher oil for a long time. This may be the trick that turns current deflation impetus into inflation, which I expect to climb in any case over '04 & maybe dangerously in '05. ·High oil will boost cheaper nat'l gas. Monty & I like Ultra Petroleum & Chesapeake Energy.
WTO's meeting was a disgrace. Fat cats Japan/US/EU won't give up govt charity to biz/farmers, as usual. So the poor stay poor & the rich stay rich. Nothing changes. ··When U see employment numbers, discount them by say 10% (in take-home cash terms) to allow for those who moved from good jobs to hamburger-flipper jobs. Numbers hide as much as they reveal (As if U didn't know!). |
