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Gold/Mining/Energy : Bema(Bgo) and Arizona Star -- Ignore unavailable to you. Want to Upgrade?

To: George Mousis who wrote (8004)	10/27/1997 4:24:00 AM
From: Kaena™	Respond to of 10482

George, it is more complicated than that. As you know there is alot of gold sold short. Some estimate 2,000 tons (one year's world supply). But there are others who believe that as much as 8,000 tons are sold short. But closer at hand is the current problem in Asia. The Asian currency turmoil could very well spill over into Europe and then to the US. Saudi Arabia, for several years now, has been demanding gold in addition to US dollar payments for their oil. Gold has been kept down by CB gold loans in order to keep oil prices low and hence inflation low. This has been accomplished by allowing the Saudis to accumulate gold at low prices in addition to the low US dollar payments made. For example, 5 years ago, a barrel was worth say $15 and $15 dollars worth of gold at the depressed price then. Today, the same barrel of oil has gone up to $20 plus $40 worth of gold at todays depressed prices. Because of the nervousness associated with the currency turmoil, it's plausible that the Saudis will insist on an even larger amount of gold in addition to their US dollar payments for the oil. They are sitting on large amounts of US dollars and are eager to replace their dwindling oil reserves with gold reserves. I believe that the recent Asian currency turmoil serves to heighten the Saudis concerns of holding so much of their nation's reserves in US dollars. I believe the flight to quality from Asia to US bonds will be very short lived. It's hard to predict an exact time. It's better to have a position in gold now as it may very well explode to the upside in short order. IMO, the direction of the T-bond market will serve as the bellweather for the strength of the US dollar and the perception of gold. When the bond markets starts to decline and the dollar follows, gold will be once again viewed as the place to hedge.