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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Michael who wrote (7726)	2/20/1998 6:22:00 AM
From: Gabriela Neri	Read Replies (2) \| Respond to of 116762

Personally, I think this oil for gold logic is utterly specious. However, I completely agree that the POG is somewhat manipulated by the central bank hacks so it doesnt interfere with their master schemes. No doubt it is a politically sensitive commodity because , due to its pure simplicity as a store of value, it potentially undermines and threatens the role of paper money. And, IMHO, some day coming up, many people will become sorely aware of the difference between paper money and tangible assets. Maybe after the Dows takes a small correction here, rockets up to between 8500-9000, and then proceeds to fall towards 6000.

To: Michael who wrote (7726)	2/21/1998 1:18:00 AM
From: PaulM	Read Replies (1) \| Respond to of 116762

Michael, there's a lot in there. Re: the money supply expansion and its failure to cause prices other than oil and gold to rise........that's not exactly true. Oil and gold are currently priced in nominal dollar terms about where they were in 1979! There's been 20 years of inflation since then. See if the sticker on your auto or the price of a head of lettuce hasn't changed in that time. If anything, ANOTHER's theory explains a somewhat puzzling phenomenon: huge increases in money supply in the 80's and 90's hasn't resulted in 70's style inflation. Some have said this is because money flowed into the stock market instead of goods and services. A better explanation mentioned sometimes is that despite all those money increases, foreigners have a seemingly insatiable demand for these constantly created dollars and have provided cheap goods in return. But what no one has explained is WHY? Why are foreigners willing to hold so much greenback? One possible answer is that the the dollar is the only currency backed by somethign real: Oil. So long as I can redeem a barrel of oil with $16 (i.e. so long as the dollar is on the Oil standard) it makes sense to hold dollars. When the price of gold (and therefore oil) begin to run away in dollar terms, the dollar is again unbacked paper. My main problem with the theory is that it's an inefficient payoff. Why not just give the Saudis the gold directly. By driving the price of gold down instead, everyone else can take advantage of the "payoff," eventually the price goes up, putting an end to the sweet deal.

To: Michael who wrote (7726)	2/21/1998 3:35:00 AM
From: PaulM	Read Replies (2) \| Respond to of 116762

Just for fun, here are a few more points in support: 1. Money supply increases generally correlate with gold price increases. Makes sense. Money supply up, dollar value down, gold (in dollars) up. But in recent years, M-3 and POG have actually gone in opposite directions (I'll post a link with a chart if you like). One possible explanation: the higher the money supply goes, the less a dollar is worth, the more "payoff" needed to maintain a stable nominal oil price in dollars, the lower the POG has to go. 2. The anonymous one said that gold could never stay below $280 for a significant time. Below $280, the Cb's become the main suppliers as many mines are uneconomic and minign co's are in trouble. The CB's wouldn't allow under $280 gold because they knew that the oil producers would bid the price up otherwise to ensure the CB's dont become the only suppliers. For the most part this price prediction held true. 3. We were told the paper gold market is more inflated than the physical. Because the paper gold purchased by the oil producers includes many years of future production, and becuase the Cb's want to hold onto some physical of their own, only the paper held by the oil producers will be honored ultimately. Accordingly, we were told, "Oil" has now "locked" the Cb's and IMF's gold from physical sales of significance (to anyone else that is). Interesting in this regard were Rubin's comments, when asking for IMF money before Congress, that the IMF could not sell its gold because that was to ensure its creditworthiness. Yet, we all know the IMF sold a good deal of gold a few years back. 4. Accordingly, we were told CB activity would now wind down (because what physical there is belongs to the oil producers or must be kept by the CB's). And in fact, CB selling activity seems to have ceased since January (some think because of an EU deadline). (We were also told that CB's would now have to sell into a rising market when they do sell). Again just a theory. But IMO shoudl not be dismissed out of hand.