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To: Al Serrao who wrote (16393)	1/14/1998 12:36:00 PM
From: Lee	Respond to of 50167

Al, If you don't mind, I would suggest that in order to check out your observation, that you plot XAU vs TYX and see if the correlation is evident. IMHO, you can't attach the same importance to Au as previously since significant Central Bank selling has distorted the Supply/Demand fundamentals. Tyx fundamentals are also distorted by "flight to quality" buying of treasuries. So, I guess I'm saying that it would be difficult at best to make this correlation. Just an alternate opinion, FWIW. Regards, Lee

To: Al Serrao who wrote (16393)	1/14/1998 8:35:00 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

AL- that is eaxactly my point in one of my posts on 'yield curve' flattening or even building up some expectations of deflation- suppose if numbers within next few months are not deflationary and show some strong direction I doubt that the yield curve will not resume its more normal shape a rising yield curve at long end now for that to happen we either need short term rates have to go down or long term rates need to go higher- I have atthe moments no reasons to believe that present flattening is justifiable- I see resumption of a normal looking yield curve within next few months once markets stabilise and this 'flight to quality' thingie disappears- Historically gold prices have shown weaknesses in face of deflationary threats- if we assume that we are going to get out of present fix in ASEA by central banks throwing lot of money at it- we may face threats of rising short term rates as inflationary news hit the markets but inflationary news will only come on back of strong economic numbers so again we may see bonds selling and equities rallying- the first stage of this cooling down will be disapearence of rich flight to quality premiums- first stage anyway in your scenerio and mine is resumption of a normal long end of the present yield curve that is a rising yield curve in such a case we may see gold also benefitting with a bounce of lows but fundamentaly it will be money flowing out of bonds that is going to go to equities and other assets- find the right opportunity to enter the bond markets on short side but perhaps every one else is looking at the smae thing so watch out for yen long bond and European bund and Matif once weakness is seen there you may define the top of TB's well- my bet will be equities and not gold once this flight to sensibility begins.